Update 5/14/2020: Since this post was originally published, SBA’s website has clarified when SBA Certification will be available and when Self-Certification will end. The post has been updated to reflect this information.
On Monday, the Small Business Administration will publish a Final Rule updating the certification methods for businesses applying for and participating in the Women-Owned Small Business program. The new Rule will also impose new thresholds for demonstrating economic disadvantage, impacting applicants not only for the WOSB program, but also the 8(a) Business Development program.
We reported almost a year ago that the SBA was working on implementing big changes to the WOSB program. On May 14, 2019, the SBA issued a proposed amendment, soliciting public feedback on its plans to finally do away with WOSB self-certification in accordance with Congress’ 2015 NDAA and to update the thresholds for economic disadvantage.
Though the SBA’s website currently states that it “expects that the regulations enacting the [new] statutory requirement will be published on June 30, 2020, and will be effective 30 days later,” the SBA seems to be ahead of the game, as publication of the Final Rule is happening more than a month ahead of schedule.
In response to the proposed amendment, the SBA received “898 comments from 307 commenters.” Because our previous coverage provided a relatively robust overview of the proposed rule, in this post we’ll only highlight some of the more significant points and updates included in the final version of the rule.
8(a) Eligibility Economic Disadvantage Updates
A large percentage of the comments supported the SBA’s proposal to increase the 8(a) program’s economic disadvantage eligibility threshold for net worth, income, and fair market value. As a result, the SBA has decided to stay the course and update the 8(a) economic disadvantage eligibility requirements as anticipated.
The initial net worth threshold will increase from $250,000 to a net worth of $750,000, matching the EDWOSB program threshold. The gross income threshold will increase to $350,000 from the current $250,000. While the fair market value threshold will increase to $6 million from the current $4 million.
This means initial and continuing 8(a) eligibility will be based on the same dollar amount for net worth, income, and fair market value. In addition, to rectify a concern we raised on the blog, “retirement accounts will now be excluded from calculations of an economically disadvantaged individual’s net worth, irrespective of the individual’s age.”
WOSB/EDWOSB Certification Updates
In addition to comments on the 8(a) eligibility updates, a majority of the comments discussed the significant proposed changes to the WOSB application procedures. Most supported replacing self-certification with a certification process overseen by the SBA, but wanted to ensure that SBA certification and third-party certification would remain equal in SBA’s eyes. As a result, the final rule clarifies that “there is no distinction between ‘Certification by SBA’ and ‘Certification by Third Party[.]'”
Further, the initial proposed changes would only have required WOSB re-certification every three years. Based on commenter concerns and “[i]n an effort to more closely align the WOSB Program regulations with other SBA regulations,” the Final Rule will require WOSBs and EDWOSBs to “annually attest to SBA that they meet the Program requirements, and undergo a full program examination and recertification every three years.” This matches the timing for the recent HUBZone rule updates, for instance.
The Final Rule also updates standards for long-term contracts held by WOSBs. If a concern received a long-term contract as a WOSB or EDWOSB set-aside, but “cannot recertify as a WOSB or EDWOSB by the end of the fifth year of a long-term contract, the procuring agency can no longer count awards made pursuant to that contract as WOSB/EDWOSB awards.” This is similar to SBA’s current size re-certification requirements for long-term contracts set aside for small businesses.
When will the Final Rule be Effective?
Many of the changes included in the Final Rule will be effective on July 15 of this year–including the new economic disadvantage thresholds for 8(a) eligibility.
Some of the regulatory changes concerning WOSB certification directly through the SBA will also go into effect on July 15 (including provisions stating that “a WOSB or EDWOSB may apply to SBA for certification via https://certify.sba.gov” and outlining the required documentation for SBA certification). Curiously, however, most of the changes related to SBA certification (including the regulations differentiating the SBA and third-part certification processes, describing certification application processing, and others), won’t go into effect until October 15. Thus, it’s not entirely clear based on the Rule when WOSBs can start applying for certification through the SBA.
Fortunately, SBA’s website offers some clarity. It explains that:
- Self-certification will remain available for firms until October 15
- The current WOSB Program Repository in certify.sba.gov is going away July 15- so you should download any of your documents from the Repository before then if you need them
- On July 15, businesses can begin submitting applications under the new certification process through certify.sba.gov for initial processing
- On October 15, SBA will begin issuing certification decisions for applicants pursuing certification directly through the SBA
Finally, the Final Rule says that the additional regulatory provision defining how the SBA will “ensure that approved third-party certifiers are meeting the requirements” is “delayed indefinitely.” While the SBA did not provide a reason why implementing this regulation is on hold, it may mean that we will see more changes made to it in the future.
This new Final Rule is likely to impact many new applicants to the WOSB, EDWOSB, and 8(a) programs. If you have any questions about the new Rule, or its impact on your eligibility, email us or give us a call at 785-200-8919.
Update 5/14/2020: Since this post was originally published, SBA’s website has clarified when SBA certification will be available and when self-certification will end. The post has been updated to reflect this information.