When it comes to the 8(a) program, you might want to quit your day job.
The 8(a) Business Development Program, similar to other SBA socioeconomic programs such as the service-disabled veteran-owned small business program, requires the disadvantaged individual owner to work full-time at the business during normal business hours of similar firms. If an owner has a second job outside the main company, that can create problems, as it did in a recent OHA decision.
An 8(a) Program participant was terminated from the 8(a) Program for failing to pay a subcontractor.
According to the SBA, the non-payment reflected poorly on the 8(a) company’s character–and “good character” is a prerequisite for 8(a) Program participation.
Participants in the SBA’s 8(a) Program must timely submit their annual review packages to the SBA.
In a recent decision, the SBA Office of Hearings and Appeals held that the SBA may terminate a participant from the 8(a) Program for failing to provide the required information–even if the 8(a) company’s owner has had personal difficulties that contributed to the failure.
SBA’s regulations provide that an 8(a) program participant that no longer is owned or controlled by socially and economically disadvantaged person can be terminated from the 8(a) program. But the decision to terminate is not one to be made lightly: SBA must make sure that it not only has evidence in support of its termination decision, it must also explain how that evidence demonstrates its conclusions.
This requirement was at issue in a recent court decision that found an SBA 8(a) program termination decision to be based on “numerous erroneous assumptions” and “unsupported conclusions, not substantial evidence.”
An honest mistake made in a company’s 8(a) Program application may not support termination of the company from the 8(a) Program.
In a recent decision, the SBA’s Office of Hearings and Appeals held that the SBA could not validly terminate an 8(a) participant for submitting false information in the 8(a) application because the SBA had not considered whether the 8(a) participant honestly, and reasonably, believed that she was not required to report the information.
A participant in the SBA’s 8(a) program must obtain the SBA’s prior approval before switching its business structure–or else.
Case in point: recently, an 8(a) participant was terminated from the 8(a) program because it switched its corporate structure from a corporation to a limited liability company without the SBA’s prior approval.
When it comes to the regulations governing small government contractors, lateness can lead to tough consequences. For instance, responding late to a small business size protest might cause the SBA to conclude that the contractor is a large business, and a late proposal submission can get a bid tossed out.
Lateness can also lead to severe consequences within the SBA 8(a) program. In a recent decision, the SBA Office of Hearings and Appeals held that the SBA properly terminated an 8(a) program participant because the participant had failed to submit a complete 8(a) annual report–months after the deadline had passed.