8(a) Program: Lack Of Business Development Effort Results In Termination

An 8(a) firm’s failure to actively pursue its business has caused the SBA to terminate the firm from the 8(a) program.

Upholding the termination, the SBA Office of Hearings and Appeals noted that if an 8(a) firm’s fails to make substantial and sustained efforts to obtain business, the SBA is justified in kicking the firm out of the 8(a) program.

SBA OHA 8(a) appeal decision in SPARCcom & Associates, BDPT-501 (2013) involved the 8(a) certification of SPARCcom & Associates.  SPARCcom was certified as an 8(a) program participant in 2006.

In 2012, the SBA notified SPARCcom’s owner that the SBA planned to terminate SPARCcom from the 8(a) program.  The SBA stated that the company’s tax returns and annual review form indicated that the company was no longer in business or, alternatively, had failed to pursue competitive business or develop to achieve competitive viability.  The SBA later issued a formal termination letter.

SPARCcom filed an 8(a) appeal with SBA OHA.  SPARCcom stated that it had generated revenues from 2006 through 2009, but that the revenues had been reduced beginning in 2010 primarily due to changes in the economy.  SPARCcom alleged that it had been “enthusiastically pursuing commercial business.”  However, SPARCcom did not provide any specific information about the contracts it supposedly bid on in 2010 and 2011, and forecast that it would only earn $8.00 in revenues in 2012.

SBA OHA noted that under the SBA 8(a) program regulations, an 8(a) participant may be terminated “where the firm makes no good faith efforts to obtain non-8(a) revenues” and/or where it fails to pursue competitive and commercial business in accordance with its business plan.  SBA OHA wrote that SPARCcom had not demonstrated ongoing efforts to reasonably pursue business and develop its competitive viability.  SBA OHA upheld the SBA’s decision to terminate SPARCcom from the 8(a) program.

It is important to note that the SPARCcom decision does not mean that the SBA will necessarily terminate an 8(a) firm simply because that firm does not generate revenues.  Indeed, it often takes a year or two in the program (or perhaps even longer) for an 8(a) firm to generate substantial revenues, and the SBA is well-aware of that fact.  However, the SPARCcom case does show that if an 8(a) firm appears to have given up, and cannot demonstrate that it is engaged in significant ongoing business development efforts, the SBA can (and may) terminate the firm from the 8(a) program.

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