8(a) Program Participants Must Submit Narratives to Prove Social Disadvantage

Last week, I wrote an article detailing the SBA pause on 8(a) program applications in response to a court ruling that rebuttable presumption cannot be used to establish a company’s social disadvantage status in the 8(a) program by minority groups such as Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, Subcontinent Asian Americans.

Since then, the SBA issued interim guidance to current 8(a) program participants requiring those that received eligibility with the presumption of social disadvantage must now present narratives to continue eligibility in the small business program. The narratives, to be submitted through the Certify.sba.gov site, “will allow SBA to determine whether that the individual upon whom eligibility is based has established personal social disadvantage,” according to the guidance. Requested narrative activities are based on the process already put in place at the agency for other types of small businesses seeking entry into the 8(a) program.

Those that attained social disadvantage status with the previous submission of a narrative were sent direct communication from the SBA on August 21st to state that social disadvantage requirements have been met and that those organizations may continue receiving 8(a) federal contract awards. Note that entity-owned 8(a) firms such as Alaska Native Corporations are also not affected by the guidance and do not need to submit narratives.

According to the SBA’s “how to” guide for narratives, small businesses must ideally describe two incidents of bias that led to chronic and social disadvantage. The incidents may include those of education (denied access to higher education institutions), employment (unequal treatment in professional advancement), and/or business history (unequal access to capital and resources for growth).

Just how many 8(a) program participants are impacted by the latest guidance? While it’s hard to pinpoint an exact number of those affected, the below charts provide an overview and scope for the SBA’s 8(a) program for background context, pulled from Deltek’s Small Business: IT Contract Trends and Issues report and the GovWin IQ database.

Sources: SBA, DSBS

Sources: Deltek, FPDS

Given all of this, the SBA’s recent actions leave several unanswered questions in my mind.

1. Will the turn of events in the 8(a) program affect fourth quarter spending trends for businesses in the program? Historically, 8a participants typically saw an uptick in awards at the end of the fiscal year. According to the SBA, a separate interim guidance was sent to agencies on August 21st on how to continue issuing 8(a) contract awards. Though some agencies may pause to consider strategies for setting aside requirements as 8(a) as program developments evolve, the SBA guidance states that the 8(a) program remains open for business to federal agencies to meet needs.
2. What will become of the 8(a) status for businesses unable to effectively prove social disadvantage through narrative? Given some businesses were originally admitted to the 8(a) program without submitting evidence of social disadvantage, it is a possibility that some may not be able to backtrack and provide evidence of social disadvantage. In its guidance, the SBA does not provide an explanation for what will happen in that scenario, leaving the status of some participants in limbo.
3. Will companies closer to graduation of the 8(a) program be allowed to complete the program if the social disadvantage status is taken away? An 8(a) certification can last up to nine years, with the first four years considered the development stage and the last five years as transitional. Given that those businesses at the tail end of the transitional stage who are close to graduating the program must submit narratives due to the newest guidance, will they be prevented from completing the program if the narrative does not provide the requested evidence?
4. Will the SBA have the resources and proper training in place to assess the new narrative submissions? Though the SBA already required narratives from submissions outside of the listed minority groups, the agency’s latest guidance will produce a large number of additional narratives to review, possibly challenging SBA staffing and budget resources. Furthermore, the narratives must supply evidence of social disadvantage from minority groups that have not previously needed to submit such evidence, assumingly leaving the SBA to promptly train personnel to review and establish eligibility on narratives without precedent.  
5. Could 8(a) program developments change the mission and scope of other federal minority-serving programs such as the Minority Business Development Agency (MBDA)? Located under the Department of Commerce, the MBDA mission is “dedicated to the growth and global competitiveness of minority business enterprises,” according to its website. Specifically, the MBDA helps these enterprises access capital, secure public and private contracts, and expand their global footprint. Given that the changes under SBA’s program could lead to a decrease in 8(a) participation by minority-led businesses, programs such as the MBDA may find themselves inundated with new businesses needing assistance.
6. Will additional challenges to the 8(a) program arise? Given the plaintiff’s victory in the court case that set the 8(a) program changes in motion, it is a wonder if other businesses outside of the 8(a) program will raise additional challenges to the small business program.
7.  Will recent court findings compel the SBA to set specific goals in the 8(a) program to remedy past racial discrimination in federal contracting? Court documents in the Ultima Servs. Corp. v. United States Dep't of Agric. case reveal that while the SBA has the authority to determine social disadvantage, the small business agency does not have specific goals set within the 8(a) program to measure the effects of remedying past racial discrimination in federal contracting. The court also found that the defendants in the case, “Do not examine whether any racial group is underrepresented in a particular industry relevant to a specific contract in the 8(a) program.” The result of these findings may lead the SBA to set specific goals in the 8(a) program to measure and ascertain the benefits of social disadvantage.

Small businesses must stay tuned to the changes and impacts of these latest 8(a) program eligibility requirements. The SBA stated it is currently developing a new narrative process. However, a timeline for the new process was not released. In addition, an August 31st meeting remains scheduled among parties of the court case to discuss further remedies.