The SBA has cut the waiting period for reapplying to the 8(a) Program from 12 months to only 90 days.
In a final rule effective November 16, the SBA explains that the shorter period should reduce the need for sometimes-costly appeals of denied 8(a) Program applications.
Applying to the 8(a) Program can be a rather arduous process. Sometimes, even relatively strong applicants don’t succeed on their first try. Under the current 8(a) Program application rules, if a company’s 8(a) Program application is denied, the company has three options.
First, it can do nothing, effectively accepting the denial. This starts a 12-month clock ticking; after 12 months have passed, the company can submit a new 8(a) application.
Second, the company can “fix” the problems the SBA identified and request reconsideration of the initial application. While every 8(a) application is different, my colleagues and I have often recommended pursuing reconsideration. There generally is little downside (other than the effort involved in preparing the request for reconsideration), and many successful 8(a) companies are admitted based on a request for reconsideration, not their original applications. But if the SBA denies a request for reconsideration, and the company does not (or cannot) appeal that decision, the 12-month reapplication clock starts ticking.
Third, in some cases, the company can file an appeal with the SBA Office of Hearings and Appeals. Usually, an appeal follows an unsuccessful request for reconsideration, but a company can skip the reconsideration process if it prefers to appeal the initial denial. (Skipping a request for reconsideration isn’t something we usually recommend, but again, every application is different). Not every 8(a) Program denial is appealable, so sometimes a request for reconsideration is the only option. If SBA OHA denies an appeal, the 12-month reapplication clock starts.
Now, in its new rule, SBA has reduced the 12-month clock to a mere 90 days. In commentary accompanying the new rule, SBA says it “believes that this change will reduce the number of appeals to [OHA] and greatly reduce the costs associated with appeals borne by disappointed applicants.”
However, the shortened deadline comes at the expense of the separate reconsideration process, which SBA has eliminated. In its commentary, SBA explains that it “believes reducing the timeframe to address identified deficits and reapply from one year to 90 days will obviate the need for a separate, possibly drawn-out reconsideration process.” SBA reiterates that it will “continue to explain as specifically as possible the shortcomings in any declined application” to allow denied applicants to “fix” those issues in their reapplications.
I agree with SBA that cutting the reapplication clock to 90 days is likely to reduce SBA OHA appeals and the accompanying expense. Under the new 90-day reapplication clock, many companies may choose to simply wait and file a new application instead of pursuing an appeal. That said, a successful appeal is still likely to be the quicker option to obtain an 8(a) certification–but now, perhaps by a matter of weeks or a couple months, instead of much longer.
Appeals will continue to be important in other cases, too. If, for instance, an applicant believes that SBA’s 8(a) analysts have misread or misapplied the 8(a) regulations, it may be difficult to convince those same analysts to change their minds in a reapplication. In cases like these, an appeal may still be the best route.
On balance, I’m cautiously optimistic that the changes will be positive for 8(a) applicants. My colleagues and I will keep you posted as the new rule takes effect.
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