.
The “8(a) Program” for Small Businesses
Owned and Controlled by the Socially and
Economically Disadvantaged: Legal
Requirements and Issues
Kate M. Manuel
Legislative Attorney
John R. Luckey
Legislative Attorney
October 12, 2012November 26, 2014
Congressional Research Service
7-5700
www.crs.gov
R40744
CRS Report for Congress
Prepared for Members and Committees of Congressc11173008
The “8(a) Program” for Small Businesses
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Summary
Commonly known as the “8(a) Program,” the Minority Small Business and Capital Ownership
Development Program is one of several federal contracting programs for small businesses. The
8(a) Program provides participating small businesses with training, technical assistance, and
contracting opportunities in the form of set-asides and sole-source awards. A “set-aside” is an
acquisition in which only certain contractors may compete, while a sole-source award is a
contract awarded, or proposed for award, without competition. In FY2011FY2013, the federal
government spent $16.714 billion on contracts and subcontracts with 8(a) firms. Other programs
provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone).
Eligibility for the 8(a) Program is generally limited to small businesses “unconditionally owned
and controlled by one or more socially and economically disadvantaged individuals who are of
good character and citizens of the United States” that demonstrate “potential for success.” Each of
these terms is further defined by the Small Business Act, regulations promulgated by the Small
Business Administration (SBA), and judicial and administrative decisions.
A “business” is generally a for-profit entity that has a place of business located in the United
States and operates primarily within the United States or makes a significant contribution to the
U.S. economy by paying taxes or using American products, materials, or labor. A business is
“small” if it is independently owned and operated; is not dominant in its field of operations; and
meets any definitions or standards established by the Administrator of Small Business. Ownership
is “unconditional” when it is not subject to any conditions precedent or subsequent, executory
agreements, or similar limitations. “Control” is not the same as ownership and includes both
strategic policy setting and day-to-day administration of business operations.
Members of certain racial and ethnic groups are presumed to be socially disadvantaged, although
individuals who do not belong to these groups may prove they are also socially disadvantaged. To
be economically disadvantaged, an individual must have a net worth of less than $250,000
(excluding ownership in the 8(a) firm and equity in one’s primary residence) at the time of entry
into the 8(a) Programprogram. This amount increases to $750,000 for continuing eligibility. In
determining determining
whether an applicant has good character, SBA looks for criminal conduct, violations
of SBA
regulations, or current debarment or suspension from federal contracting. For a firm to
have demonstrated have “potential for
success,” it generally must have been in business in the field of
its primary industry classification for at least
for two years immediately prior to applying to the 8(a)
Programprogram. However, small businesses owned by
Indian tribes, Alaska Native Corporations
(ANCs), Native Hawaiian Organizations (NHOs), and Community
Development Corporations
(CDCs) are eligible for the 8(a) Program under somewhat different terms.
The 8(a) Program has periodically been challenged on the grounds that the presumption that
members of certain racial and ethnic groups are disadvantaged violates the constitutional
guarantee of equal protection. The outcomes in early challenges to the program varied, with some
courts finding that plaintiffs lacked standing because they were not economically disadvantaged.
Most recently, a federal district court found that the program is not unconstitutional on its face
because “breaking down barriers to minority business development created by discrimination”
constitutedconstitutes a compelling government interest, and the government had a strong basis in evidence
for concluding that race-based action was necessary to further this interest. However, the court
found that the program was unconstitutional as applied in the military simulation and training
industry because there was no evidence of public- or private-sector discrimination in this industry.
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The “8(a) Program” for Small Businesses
Contents
Introduction...................................................................................................................................... 1discrimination in this industry. The district court’s
decision on the facial challenge has been appealed, and other challenges are pending.
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Contents
Historical Development ................................................................................................................... 2
Origins of the 8(a) Program ....................................................................................................... 2
Federal Programs for Small Businesses .............................................................................. 2
Federal Programs for Minorities ......................................................................................... 3
1978 Amendments to the Small Business Act and Subsequent Regulations....................... 4
Expansion of the 8(a) Program to Include “Disadvantaged” Groups ........................................ 6
Current Requirements ...................................................................................................................... 7
Requirements In General ........................................................................................................... 7
Eligibility for the 8(a) Program ........................................................................................... 7
Set-Asides and Sole-Source Awards Under Section 8(a) .................................................. 11
Other Requirements........................................................................................................... 14
Requirements for Tribally, ANC-, NHO-, and CDC-Owned Firms ........................................ 16
Eligibility for the 8(a) Program ......................................................................................... 16
Set-Asides and Sole-Source Awards ................................................................................. 20
Other Requirements........................................................................................................... 20
Constitutionality of the 8(a) Program ............................................................................................ 21
Figures
Figure 1. Acquisition Methods at Various Price Thresholds .......................................................... 14
Tables
Table 1. Groups Presumed to Be Socially Disadvantaged ............................................................... 5
Appendixes
Appendix. Comparison of the Requirements Pertaining to 8(a) Businesses Generally,
Tribally Owned Businesses, ANC-Owned Businesses, and OthersDifferent Types of 8(a) Firms ........... 25
Contacts
Author Contact Information........................................................................................................... 25
Contacts
Author Contact Information30
Acknowledgments ......................................................................................................................... 30
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Introduction
Commonly.
C
ommonly known as the “8(a) Program,” the Minority Small Business and Capital Ownership
Ownership Development Program is one of several federal contracting programs for small
businesses.1 The
8(a) Program provides participating small businesses with training,
technical assistance, and
contracting opportunities in the form of set-asides and sole-source
awards. A “set-aside” is an
acquisition in which only certain contractors may compete, while a
sole-source award is a
contract awarded, or proposed for award, without competition. Eligibility
for the 8(a) Program is
generally limited to small businesses “unconditionally owned and
controlled by one or more
socially and economically disadvantaged individuals who are of good
character and citizens of
the United States” that demonstrate “potential for success.”2 However,
small businesses owned by
Indian tribes, Alaska Native Corporations (ANCs), Native Hawaiian
Organizations (NHOs), and
Community Development Corporations (CDCs) are eligible for the
8(a) Program under somewhat
different terms. In FY2011FY2013, the federal government spent $16.7 14
billion on contracts and
subcontracts with 8(a) firms.23 Other programs provide similar assistance
to other types of small
businesses (e.g., women-owned, HUBZone).
The 8(a) and other programs for small businesses are of perennial interest to Congress, given that:
It is the declared policy of the Congress that the Government should aid, counsel, assist, and
protect, insofar as is possible, the interests of small-business concerns in order to preserve
free competitive enterprise, to insure that a fair proportion of the total purchases and
contracts or subcontracts for property and services for the Government (including but not
limited to contracts or subcontracts for maintenance, repair, and construction) be placed with
small-business enterprises, to insure that a fair proportion of the total sales of Government
property be made to such enterprises, and to maintain and strengthen the overall economy of
the Nation.34
However, recent Congresses have had particular interest in the 8(a) Program because of the
recession of 2007-2009,45 its effects on minority-owned small businesses,56 and small businesses’
role in job creation.6
1
7
This report provides a brief history of the 8(a) Program, summarizes key requirements, and
discusses legal challenges alleging that the program’s presumption that members of certain racial
1
See generally CRS Report R41945, Small Business Set-Aside Programs: An Overview and Recent Developments in
the Law, by Kate M. Manuel and Erika K. Lunder. The 8(a) Program takes its name from one of the sections of the
Small Business Act that authorizes it. The program is also governed by Section 7(j) of the act.
2
13 C.F.R. §124.101.
3
See Small Business Goaling Report: Fiscal Year 20112013, available at https://www.fpds.gov/downloads/top_requests/
FPDSNG_SB_Goaling_FY_2011FPDSNG_SB_Goaling_FY_2013.pdf. The report on FY2012FY2014 has not yet been compiled.
34
Small Business Act of 1958, P.L. 85-536, §2(a), 72 Stat. 384 (July 18, 1958) (codified at 15 U.S.C. §631(a)).
45
See, e.g., Phil Izzo, Recession Over in June 2009, Wall Street J., September 20, 2010, available at
http://blogs.wsj.com/ economics/2010/09/20/nber-recession-ended-in-june-2009/ (discussing the recession of 20072009).
56
See, e.g., Small Bus. Admin., The Small Business Economy: A Report to the President 3 (2009), available at
http://www.sba.gov/ADVO/research/sb_econ2009.pdf (“The credit freeze in the short-term funding market had a
devastating effect on the economy and small firms.”); John Rosenthal, Tough Times Often Even Tougher on Minority
Biz, Chicago Business, November 30, 2009, available at http://www.chicagobusiness.com/cgibin/mag/article.pl?
articleId=32738&seenIt=1.
67
See, e.g., Mark Trumbull, Why Obama Job Creation Plan Focuses on Small Business, The Christian Science Monitor,
December 8, 2009, available at http://features.csmonitor.com/politics/2009/12/08/why-obama-job-creation-planfocuses-on-small-business (noting that small businesses are reported to have created 65% of all new jobs in the United
States over the past 15 years).
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This report provides a brief history of the 8(a) Program, summarizes key requirements, and
discusses legal challenges alleging that the program’s presumption that members of certain racial
.
and ethnic groups are socially disadvantaged violates the constitutional guarantee of equal
protection. A separate report, CRS Report R42390R43573, Federal Contracting and Subcontracting with
Small Businesses: IssuesLegislation in the 112th113th Congress, by Kate M. Manuel, and Erika K. Lunder,
discusses recently
enacted or introduced legislation regarding the 8(a) Program.
Historical Development
Origins of the 8(a) Program
The current 8(a) Program resulted from the merger of two distinct types of federal programs:
those seeking to assist small businesses in general and those seeking to assist racial and ethnic
minorities. This merger first occurred, as a matter of executive branch practice, in 1967 and was
given a statutory basis in 1978.
Federal Programs for Small Businesses
Congress first authorized a federal agency to enter into prime contracts with other agencies and
subcontract with small businesses for the performance of these contracts in 1942. The agency was
the Smaller War Plants Corporation (SWPC), which was created partly for this purpose, and
Congress gave it these powers in order to ameliorate small businesses’ financial difficulties while
also “mobiliz[ing] the productive facilities of small business in the interest of successful
prosecution of the war.”78 The SWPC’s subcontracting authority expired along with the SWPC at
the end of the World War II. However, in 1951, at the start of the Korean War, Congress created
the Small Defense Plants Administration (SDPA), which was generally given the same powers
that the SWPC had exercised.89 Two years later, in 1953, Congress transferred the SDPA’s
subcontracting authorities, among others, to the newly created Small Business Administration,910
with the intent that the SBA would exercise these powers in peacetime, as well as in wartime.1011
When the Small Business Act of 1958 transformed the SBA into a permanent independent
agency, this subcontracting authority was included in Section 8(a) of the act.1112 At its inception,
the SBA’s subcontracting authority was not limited to small businesses owned and controlled by
the socially and economically disadvantaged. Under the original Section 8(a), the SBA could
contract with any “small-business concerns or others,”1213 but the SBA seldom, if ever, employed
this subcontracting authority, focusing instead upon its loan and other programs.13
714
8
Small Business Mobilization Act, P.L. 77-603, §4(f), 56 Stat. 351 (June 11, 1942).
Act of July 31, 1951, P.L. 82-96, §110, 65 Stat. 131.
910
P.L. 83-163, §207(c)-(d), 67 Stat. 230 (July 30, 1953).
1011
See, e.g., H.Rept. 494, 83rd Cong., 1st sess., at 2 (1953) (stating that the SBA would “continue many of the functions
of the [SDPA] in the present mobilization period and in addition would be given powers and duties to encourage and
assist small-business enterprises in peacetime as well as in any future war or mobilization period”); S.Rept. 1714, 85th
Cong., 2nd sess., at 9-10 (1958) (stating that the act would “put[] the procurement assistance program on a peacetime
basis”).
1112
P.L. 85-536, §8(a)(1)-(2), 72 Stat. 384 (July 18, 1958).
1213
Id.
1314
Thomas Jefferson Hasty, III, Minority Business Enterprise Development and the Small Business Administration’s
8(a) Program: Past, Present, and (Is There a) Future? 145 Mil. L. Rev. 1, 8 (1994) (“[B]ecause the SBA believed that
the efforts to start and operate an 8(a) program would not be worthwhile in terms of developing small business, the
(continued...)
9
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Federal Programs for Minorities
Federal programs for minorities began developing at approximately the same time as those for
small businesses, although there was initially no explicit overlap between them. The earliest
programs were created by executive orders, beginning with President Franklin Roosevelt’s order
on June 25, 1941, requiring that all federal agencies include a clause in defense-related contracts
prohibiting contractors from discriminating on the basis of “race, creed, color, or national
origin.14
”15 Subsequent Presidents followed Roosevelt’s example, issuing a number of executive orders
orders seeking to improve the employment opportunities of “Negroes, Spanish-Americans, Orientals,
Indians, Jews, Puerto Ricans, etc.”15members of various racial and ethnic
groups.16 These executive branch initiatives took on new importance
after the Kerner
Commission’s report on the causes of the urban riots of 1966 concluded that
African Americans
would need “special encouragement” to enter the economic mainstream.1617
Presidents Lyndon Johnson and Richard Nixon laid the foundations for the present 8(a) Program
in the hope of providing such “encouragement.” Johnson created the President’s Test Cities
Program (PTCP), which involved a small-scale use of the SBA’s authority under Section 8(a) to
award contracts to firms willing to locate in urban areas and hire unemployed individuals, largely
African Americans, or sponsor minority-owned businesses by providing capital or management
assistance.1718 However, under the PTCP, small businesses did not have to be minority-owned to
receive subcontracts under Section 8(a).1819 Nixon’s program was larger and focused more
specifically on minority-owned small businesses.1920 During the Nixon Administration, the SBA
promulgated its earliest regulations for the 8(a) Program. In 1970, the first of these regulations
articulated the SBA’s policy of using Section 8(a) to “assist small concerns owned by
disadvantaged persons to become self-sufficient, viable businesses capable of competing
effectively in the market place.”2021 A later regulation, promulgated in 1973, defined
“disadvantaged persons” as including, but not limited to, “black Americans, Spanish-Americans,
oriental Americans, Eskimos, and Aleuts.”2122 However, the SBA lacked explicit statutory authority
for focusing its 8(a) Program on minority-owned businesses until 1978,2223 although courts
(...continued)
8(a) Program: Past, Present, and (Is There a) Future? 145 Mil. L. Rev. 1, 8 (1994) (“[B]ecause the SBA believed that
the efforts to start and operate an 8(a) program would not be worthwhile in terms of developing small business, the
(...continued)
SBA’s power to contract with other government agencies essentially went unused. The program actually lay dormant
for about fifteen years until the racial atmosphere of the 1960s provided the impetus to wrestle the SBA’s 8(a) authority
from its dormant state.”).
1415
Exec. Order No. 8802, 6 Federal Register 3,109 (June 25, 1941). Similar requirements were later imposed on nondefense contracts. See Exec. Order No. 9346, 8 Federal Register 7,182 (May 29, 1943).
1516
See, e.g., Exec. Order No. 10308, 16 Federal Register 12,303 (December 3, 1951) (Truman); Exec. Order No. 10557,
19 Federal Register 5,655 (September 3, 1954) (Eisenhower); Exec. Order No. 10925, 26 Federal Register 1,977
(March 6, 1961) (Kennedy); Exec. Order No. 11458, 34 Federal Register 4,937 (March 7, 1969) (Nixon).
1617
Report of the National Advisory Commission on Civil Disorders 21 (1968).
1718
See, e.g., Hasty, supra note 1314, at 11-12.
1819
See, e.g., Jonathan J. Bean, Big Government and Affirmative Action: The Scandalous History of the Small Business
Administration 66 (2001).
19BIG GOVERNMENT AND AFFIRMATIVE ACTION: THE SCANDALOUS HISTORY OF THE SMALL
BUSINESS ADMINISTRATION 66 (2001).
20
See Exec. Order No. 1625, 36 Federal Register 19,967 (October 13, 1971).
2021
13 C.F.R. §124.8-1(b) (1970).
2122
13 C.F.R. §124.8(c) (1973).
2223
S. Rep. No. 95-1070, 95th Cong., 2nd sess., at 14 (1978) (“One of the underlying reasons for the failure of this effort is
that the program has no legislative basis.”); H.Rept. 95-949, 95th Cong., 2nd sess., at 4 (1978) (“Congress has never
extended legislative control over the activities of the 8(a) program, save through indirect appropriations, thereby
permitting program operations.… [The] program is not as successful as it could be.”).
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generally rejected challenges alleging that SBA’s implementation of the program was
unauthorized because it was “not specifically mentioned in statute.”2324
1978 Amendments to the Small Business Act and Subsequent Regulations
In 1978, Congress amended the Small Business Act to give the SBA statutory authority for its
8(a) Program for minority-owned businesses.2425 Under the 1978 amendments, SBA can only
subcontract under Section 8(a) with “socially and economically disadvantaged small business
concerns,”2526 or businesses which are least 51% owned by one or more socially and economically
disadvantaged individuals and whose management and daily operations are controlled by such
individual(s).2627
The 1978 amendments established a basic definition of “socially disadvantaged individuals,”
which included those who have been “subjected to racial or ethnic prejudice or cultural bias
because of their identity as a member of a group without regard to their individual qualities.”2728
They also included congressional findings that “Black Americans, Hispanic Americans, Native
Americans, and other minorities” are socially disadvantaged.2829 Thus, if an individual was a
2324
See, e.g., Ray Billie Trash Hauling, Inc. v. Kleppe, 477 F.2d 696, 703-04 (5th Cir. 1973). In this case, the court
particularly noted that the SBA’s program was supported by congressional and presidential mandates issued after
enactment of the Small Business Act in 1958. Id. at 705.
2425
P.L. 95-507, 92 Stat. 1757 (October 24, 1978).
2526
Id. at §202.
2627
Id. (codified at 15 U.S.C. §637(a)(4)(A)-(B)). Firms that are owned and controlled by Indian tribes, ANCs, or NHOs
were later included within the definition of a “socially and economically disadvantaged small business concern.” See
infra notes 36-43 and accompanying text.
2728
Id. (codified at 15 U.S.C. §637(a)(5)).
2829
Id. at §201 (codified at 15 U.S.C. §631(f)(1)(C)). The meaning of “socially disadvantaged individuals” was the
subject of much debate at the time of the 1978 amendments. Some Members of Congress, perhaps focusing on the
SBA’s use of its authority under §8(a) in 1968-1970, viewed the 8(a) Program as a program for African Americans and
would have defined “social disadvantage” accordingly. See, e.g., Parren J. Mitchell, Federal Affirmative Action for
MBE’s: An Historical Analysis, 1 Nat’l Bar Ass’n Mag. 46 (1983). Mitchell was a Member of the U.S. House of
Representatives and leader of the Black Caucus when the 1978 amendments were enacted. Others favored a somewhat
broader view, including both African Americans and Native Americans on the grounds that only those who did not
come to the United States seeking the “American dream” should be deemed socially disadvantaged. See, e.g.,
Testimony Before the House Comm. on Small Bus., Subcomm. on General Oversight & Minority Enter., Task Force
on Minority Enter., 96th Cong., at 21 (1979). Yet others suggested that groups that are not racial or ethnic minorities
should be able to qualify as “socially disadvantaged,” or that individuals ought to be able to prove they are personally
socially disadvantaged even if they are not racial or ethnic minorities. See, e.g., H.Rept. 95-949, 95th Cong., 2nd sess., at
9 (1978) (“[T]he committee intends that the SBA give most serious consideration to, among others, women business
owners” when determining which groups are socially disadvantaged.... [T]he bill does recognize that persons falling
outside of the racial and ethnic groups presumed to be disadvantaged, may nevertheless be disadvantaged.”). The bill
that passed the House defined “socially disadvantaged individuals,” in part, by establishing a rebuttable presumption
that African Americans and Hispanic Americans are socially disadvantaged, while the bill that passed the Senate did
not reference any racial or ethnic groups in defining “social disadvantage.” See, e.g., H.R. Conf. Rep. No. 95-1714, 95th
Cong., 2nd sess., at 20 (1978); S.Rept. 95-1070, 95th Cong., 2nd sess., at 13-16 (1978). The conference committee
reconciling the House and Senate versions ultimately arrived at a definition of “socially disadvantaged individuals” that
was broader than the definition used in the SBA’s 1973 regulation and included “those who have been subjected to
racial or ethic prejudice or cultural bias because of their identity as a member of a group.” P.L. 95-507, at §202. This
definition did not incorporate the rebuttable presumption that members of certain groups are socially disadvantaged
included in the House bill. However, the conference bill included congressional findings that “Black Americans,
Hispanic Americans, Native Americans, and other minorities” are socially disadvantaged, thereby arguably achieving
similar effect. Id. at §201.
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member of one of these groups, he or she was presumed to be socially disadvantaged. Otherwise,
the amendments granted the SBA broad discretion to recognize additional groups or individuals
as socially disadvantaged based upon criteria promulgated in regulations.2930 Under these
regulations, which include a three-part test for determining whether minority groups not
mentioned in the amendment’s findings are disadvantaged,3031 the SBA recognized the racial or
ethnic groups listed in Table 1 as socially disadvantaged for purposes of the 8(a) Program.3132 The
regulations also established standards of evidence to be met by individuals demonstrating
personal disadvantage and procedures for rebutting the presumption of social disadvantage
accorded to members of recognized minority groups.3233
Table 1. Groups Presumed to Be Socially Disadvantaged
Group
Countries of Origin Included Within Group
Black Americans
n/a
Hispanic Americans
n/a
Native Americans
(including American
Indians, Eskimos,
Aleuts, Native
Hawaiians)
n/a
Asian Pacific
Americans
Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China
(including Hong Kong), Taiwan, Laos, Cambodia, Vietnam, Korea, The
Philippines, U.S. Trust Territory of the Pacific Islands (Republic of
Palau), Republic of the Marshall Islands, Federated States of
Micronesia, Commonwealth of the Northern Mariana Islands, Guam,
Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, Nauru
Subcontinent Asian
Americans
India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands,
Nepal
Source: Congressional Research Service, based on 13 C.F.R. §124.103(b).
The 1978 amendments also defined “economically disadvantaged individuals,” for purposes of
the 8(a) Program, as “those socially disadvantaged individuals whose ability to compete in the
free enterprise system has been impaired … as compared to others in the same business area who
2930
P.L. 95-507, at §202 (granting the SBA’s Associate Administrator for Minority Small Business and Capital
Ownership Development authority to make determinations regarding which other groups are socially disadvantaged);
H.Rept. 95-949, supra note 2829, at 9 (expressing the view that Sections 201 and 202 of the bill provide “sufficient
discretion … to allow SBA to designate any other additional minority group or persons it believes should be afforded
the presumption of social … disadvantage”).
3031
See 13 C.F.R. §124.103(d)(2)(i)-(iii)(1980).
3132
13 C.F.R. §124.103(b). Different groups are sometimes recognized as socially disadvantaged for purposes of other
programs, such as those of the Department of Commerce’s Minority Business Development Agency (MBDA). See 15
C.F.R. §1400.1(ab). The SBA has rejected petitions from certain groups, including Hasidic Jews, women, disabled
veterans, and Iranian-Americans. See, e.g., George R. La Noue & John C. Sullivan, Gross Presumptions: Determining
Group Eligibility for Federal Procurement Preferences, 41 Santa Clara L. Rev. 103, 127-29 (2000). However, Hasidic
Jews are eligible to receive assistance from the MBDA, while women are deemed to be disadvantaged for purposes of
the Department of Transportation’s Disadvantaged Business Enterprise (DBE) program. See 49 U.S.C. §47113(a)(2)
(DBE program); 15 C.F.R. §1400.1(c) (MBDA program).
3233
13 C.F.R. §124.103(c)(2) (standards of evidence for showing personal disadvantage); 13 C.F.R. §124.103(b)(3)
(mechanisms for rebuttingovercoming the presumption of social disadvantage).
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are not socially disadvantaged.”3334 Later, the SBA established by regulation that personal net
worth of less than $250,000 at the time of entry into the 8(a) Program ($750,000 for continuing
eligibility) constitutes economic disadvantage.3435
Expansion of the 8(a) Program to Include “Disadvantaged” Groups
Although the 8(a) Program was originally established for the benefit of disadvantaged
individuals, in the 1980s, Congress expanded the program to include small businesses owned by
four “disadvantaged” groups.
The first owner-group to be included was Community Development Corporations (CDCs). A
CDC is:
a nonprofit organization responsible to residents of the area it serves which is receiving
financial assistance under part 1 [42 USCS §§9805 et seq.] and any organization more than
50 percent of which is owned by such an organization, or otherwise controlled by such an
organization, or designated by such an organization for the purpose of this subchapter [42
USCS §§9801 et seq.].3536
Congress created CDCs with the Community Development Act of 198136198137 and instructed the SBA
to issue regulations ensuring that CDCs could participate in the 8(a) Program.3738
In 1986, two additional owner-groups, —Indian tribes and Alaska Native Corporations, —became
eligible for the 8(a) Program when Congress passed legislation providing that firms owned by
Indian tribes, which included Alaskan Native Corporations (ANCs),3839 were to be deemed
“socially disadvantaged” for purposes of the 8(a) Program.3940 In 1992, ANCs were further deemed
to be “economically disadvantaged.”40
33
P.L. 95-507, §202.
13 C.F.R. §124.104(c)(2). Some commentators estimate41
34
P.L. 95-507, §202.
See Small Bus. Admin., Minority Small Business and Capital Ownership Development Program: Final Rule, 54
Federal Register 34,692 (August 21, 1989) (codified, as amended, at 13 C.F.R. §124.104(c)). Some commentators have
estimated that 80 to 90% of Americans are economically
disadvantaged under the SBA’s net-worth requirements. See,
e.g., La Noue & Sullivan, supra note 3132, at 108.
3536
42 U.S.C. §9802.
3637
P.L. 97-35, Ch. 8, Subch. A, 95 Stat. 489 (1981) (codified at 42 U.S.C. §§9801 et seq.).
3738
Id. at §626, 95 Stat. 496 (codified at 42 U.S.C. §9815).
3839
P.L. 99-272, §18015, 100 Stat. 370 (1986) (codified at 15 U.S.C.§637(a)(13)) (defining “Indian tribe” to include
“any Indian tribe, band, nation, or other organized group or community of Indians, including any Alaska Native village
or regional or village corporation (within the meaning of the Alaska Native Claims Settlement Act (43 U.S.C.§1606))
which— (A) is recognized as eligible for the special programs and services provided by the United States to Indians
because of their status as Indians, or (B) is recognized as such by the State in which such tribe, band, nation, group, or
community resides.”). An Alaska Native Corporation is “any Regional Corporation, Village Corporation, Urban
Corporation, or Group Corporation organized under the laws of the State of Alaska in accordance with the Alaska
Native Claims
Settlement Act.” 13 C.F.R. §124.3. An Alaska Native is any “citizen of the United States who is a
person of one-fourth
degree or more Alaskan Indian …, Eskimo, or Aleut blood, or a combination of those bloodlines.
The term includes, in
the absence of proof of a minimum blood quantum, any citizen whom a Native village or Native
group regards as an
Alaska Native if their father or mother is regarded as an Alaska Native.” 13 C.F.R. §124.3.
3940
P.L. 99-272, §18015, 100 Stat. 370 (codified at 15 U.S.C. §637(a)(4)).
4041
P.L. 102-415, §10, 106 Stat. 2115 (1992) (codified at 43 U.S.C. §1626(e)).
3435
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.
The final owner-group, that of Native Hawaiian Organizations (NHOs), was recognized in
1988.4142 An NHO was defined as:
any community service organization serving Native Hawaiians in the State of Hawaii
which—(A) is a nonprofit corporation that has filed articles of incorporation with the
director (or the designee thereof) of the Hawaii Department of Commerce and Consumer
Affairs, or any successor agency, (B) is controlled by Native Hawaiians, and (C) whose
business activities will principally benefit such Native Hawaiians.4243
Current Requirements
Under the current 8(a) Program, participating firms are eligible for set-asides or sole-source
awards of federal contracts, as well as training and technical assistance from SBA. Detailed
statutory and regulatory requirements govern eligibility for the Program; set-asides and solesource awards to 8(a) firms; and related issues. These requirements are generally the same for all
participants in the 8(a) Program, although there are instances where there are “special rules” for
8(a) firms owned by groups.4344 An Appendix compares the requirements applicable to individual
owners of 8(a) firms to those applicable to groups owning 8(a) firms (i.e., Alaska Native
Corporations, Indian tribes, Native Hawaiian Organizations, and Community Development
Corporations).4445
Requirements In General
Eligibility for the 8(a) Program
Eligibility for the 8(a) Program is limited to “small business[es] which [are] unconditionally
owned and controlled by one or more socially and economically disadvantaged individuals who
are of good character and citizens of and residing in the United States, and which demonstrate[]
potential for success.”4546 Each of these terms is further defined by the Small Business Act;
regulations that the SBA has promulgated to implement Section 8(a); and judicial and
administrative decisions.4647 The eligibility requirements are the same at the time of entry into the
8(a) Program and throughout the Program unless otherwise noted.47
4148
42
P.L. 100-656, §207, 102 Stat. 3861 (1988) (codified at 15 U.S.C. §637(a)(4)).
Id. (codified at 15 U.S.C. §637(a)(15)). A “Native Hawaiian” is “any individual whose ancestors were natives, prior
to 1778, of the area which now comprises the stateState of Hawaii.” 13 C.F.R. §124.3.
4344
See, e.g., 13 C.F.R. §124.109(a) (“Special rules for ANCs. Small business concerns owned and controlled by ANCs
are eligible for participation in the 8(a) program and must meet the eligibility criteria set forth in §124.112 to the extent
the criteria are not inconsistent with this section.”) (emphasis in original).
4445
See also archived CRS Report R40855, Contracting Programs for Alaska Native Corporations: Historical
Development and
Legal Authorities, by Kate M. Manuel, John R. Luckey, and Jane M. Smith (discussing contracting with ANC-owned
firms through the 8(a) Program and other programs).
4546
13 C.F.R. §124.101. The Office of Legal Counsel at the Department of Justice has opined that SBA regulations
limiting eligibility for the 8(a) Program to citizens do not deprive resident aliens of due process in violation of the Fifth
Amendment to the U.S. Constitution. See U.S. Dep’t of Justice, Office of Legal Counsel, Constitutionality of 13 C.F.R.
§124.103 Establishing Citizenship Requirement for Participation in 8(a) Program, March 4, 1996, available at
http://www.justice.gov/olc/sba8.htm.
4647
The SBA’s Office of Hearings and Appeals has, for example, developed a seven-part test for determining whether a
(continued...)
4243
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.
“Business”
Except for small agricultural cooperatives, a “business” is a for-profit entity that has a place of
business located in the United States and operates primarily within the United States or makes a
significant contribution to the U.S. economy by paying taxes or using American products,
materials, or labor.4849 For purposes of the 8(a) Program, businesses may take the form of
individual proprietorships, partnerships, limited liability companies, corporations, joint ventures,
associations, trusts, or cooperatives.4950
“Small”
A business is “small” if it is independently owned and operated; is not dominant in its field of
operations; and meets any definitions or standards established by the Administrator of the SBA.5051
These standards focus primarily upon the size of the business as measured by the number of
employees or its gross income, but they also take into account the size of other businesses within
the same industry.5152 For example, businesses in the field of “scheduled passenger air
transportation” are “small” if they have fewer than 1,500 employees, while those in the data
processing field are “small” if they have a gross income of less than $2532.5 million.5253
Affiliations between businesses, or relationships allowing one party control or the power of
control over another,5354 generally count in size determinations, with the SBA considering “the
receipts, employees, or other measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.”5455
Businesses can thus be determined to be other than small because of their involvement in joint
ventures,5556 subcontracting arrangements,5657 or franchise or license agreements,5758 among other
(...continued)
small business is “unusually reliant” on a contractor that is used in determining affiliation. See Valenzuela Eng’g, Inc.
& Curry Contracting Co., Inc., SBA-4151 (1996).
4748
See 13 C.F.R. §124.112 (a) (“In order for a concern ... to remain eligible for 8(a) ... program participation, it must
continue to meet all eligibility criteria contained in [Section] 124.101 through [Section] 124.108.”).
4849
13 C.F.R. §121.105(a)(1). “Business” is separately defined for small agricultural cooperatives. See 13 C.F.R.
§121.105(a)(2).
4950
13 C.F.R. §121.105(b).
5051
15 U.S.C. §632(a)(1)-(2)(A).
5152
13 C.F.R. §§121.101-121.108109. The number of employees is the average of each pay period for the preceding twelve
calendar months. Gross income is based on the average for the last three completed fiscal years. It includes all
revenues, not just those from the firm’s primary industry. See IMDT, Inc., SBA-4121 (1995).
5253
13 C.F.R. §121.201.
5354
13 C.F.R. §121.103(a)(1). Control, or the power of control, need only exist. It need not be exercised for affiliation to
be found.
5455
13 C.F.R. §121.103(a)(6).
5556
13 C.F.R. §121.103(h) (“[A] specific joint venture entity generally may not be awarded more than three contracts
over a two year period, starting from the date of the award of the first contract, without the partners to the joint venture
being deemed affiliated for all purposes.”).
5657
13 C.F.R. §121.103(h)(4) (“A contractor and its ostensible subcontractor are treated as joint venturers, and therefore
affiliates, for size determination purposes. An ostensible subcontractor is a subcontractor that performs primary and
vital requirements of a contract, or of an order under a multiple award schedule contract, or a subcontractor upon which
the prime contractor is unusually reliant.”).
5758
13 C.F.R. §121.103(i) (“Affiliation may arise ... through ... common ownership, common management or excessive
(continued...)
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things, provided that their income or personnel numbers, plus those of their affiliate(s), are over
the pertinent size threshold.
“Unconditionally owned and controlled”
Participants in the 8(a) Program must be “at least 51% unconditionally and directly owned by one
or more socially and economically disadvantaged individuals who are citizens of the United
States” unless they are owned by an Indian tribe, Alaska Native Corporation (ANC), Native
Hawaiian Organization (NHO), or Community Development Corporation (CDC).5859 Ownership is
“unconditional” when it is not subject to any conditions precedent or subsequent, executory
agreements, voting trusts, restrictions on assignmentor assignments of voting rights, or other arrangements that
that could cause the benefits of ownership to go to another entity.5960 Ownership is “direct” when the
the disadvantaged individuals own the business in their own right and not through an intermediary
intermediary (e.g., ownership by another business entity or by a trust that is owned and controlled
by one or
more disadvantaged individuals).6061 Non-disadvantaged individuals and non-participant businesses
businesses that own at least 10% of an 8(a) business may generally own no more than 10 to 20%
of any other
8(a) firm.6162 Non-participant businesses that earn the majority of their revenue in the
same or
similar line of business are likewise barred from owning more than 10 to 20%% (increasing to
20%-30% in certain circumstances) of another 8(a)
firm.6263
Participants must also be controlled by one or more disadvantaged individuals.6364 “Control is not
the same as ownership” and includes both strategic policy setting and day-to-day management
and administration of business operations.6465 Management and daily business operations must also
be conducted by one or more disadvantaged individuals unless the 8(a) business is owned by an
Indian tribe, ANC, NHO, or CDC.6566 These individuals must have managerial experience “of the
extent and complexity needed to run the concern” and generally must devote themselves full-time
to the business “during the normal working hours of firms in the same or similar line of
business.”6667 A disadvantaged individual must hold the highest officer position within the
business.6768 Non-disadvantaged individuals may otherwise be involved in the management of an
8(a) business, or may be stockholders, partners, limited liability members, officers, or directors of
an 8(a) business.69 However, they may not exercise actual control or have power to control the
(...continued)
restrictions on the sale of the franchise interest.”).
5859
15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring at least 51% unconditional ownership);. See also 13 C.F.R. §124.105.
5960
13 C.F.R. §124.3.
6061
13 C.F.R. §124.105(a).
6162
13 C.F.R. §124.105(h)(1). Ownership is limited to 10% when the 8(a) firm in is the “developmental stage” of the
8(a) Program and 20% when it is in the “transitional stage.” Id. For more on the developmental and transitional stages,
see infra notes 109-111110-112 and accompanying text.
6263
13 C.F.R. §124.105(h)(2).
6364
15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring control of management and daily business operations); 13 C.F.R.
§124.106.
6465
13 C.F.R. §124.106.
6566
Id.
6667
13 C.F.R. §124.106 & §124.106(a)(3).
67
13 C.F.R. §124.106(a)(2).
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an 8(a) business.68 However, they may not exercise actual control or have power to control, or
68
13 C.F.R. §124.106(a)(2).The individual must also be physically located in the United States. Id.
69
13 C.F.R. §124.106(e).
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person or firm, or receive compensation greater than that of the highest-paid officer without SBA
approval.6970
“Socially disadvantaged individual”
Socially disadvantaged individuals are “those who have been subjected to racial or ethnic
prejudice or cultural bias within American society because of their identities as members of
groups and without regard to their individual qualities.”7071 Members of designated groups, listed in
Table 1, are entitled to a rebuttable presumption of social disadvantage for purposes of the 8(a)
Program,7172 although this presumption can be overcome with “credible evidence to the contrary.”7273
Individuals who are not members of designated groups must prove they are socially
disadvantaged by a preponderance of the evidence.7374 Such individuals must show (1) at least one
objective distinguishing feature that has contributed to social disadvantage (e.g., race, ethnic
origin, gender, physical handicap, long-term residence in an environment isolated from
mainstream American society); (2) personal experiences of substantial and chronic social
disadvantage in American society; and (3) negative impact on entry into or advancement in the
business world.7475 In assessing the third factor, the SBA will consider all relevant evidence
produced by the applicant, but must consider the applicant’s education, employment, and business
history to see if the totality of the circumstances shows disadvantage.7576 Groups not included in
Table 1 may obtain listing by demonstrating disadvantage by a preponderance of the evidence.7677
“Economically disadvantaged individual”
Economically disadvantaged individuals are “socially disadvantaged individuals whose ability to
compete in the free enterprise system has been impaired due to diminished financial capital and
credit credit
opportunities as compared to others in the same or similar line of business who are not
socially socially
disadvantaged.”7778 Individuals claiming economic disadvantage must describe it in a
personal personal
statement and submit financial documentation.7879 The SBA will examine their personal
income for
the past three years, their personal net worth, and the fair market value of the assets
they own.79 80
However, principal ownership in a prospective or current 8(a) business is generally
68
13 C.F.R. §124.106(e).
excluded
when calculating net worth, as is equity in individuals’ primary residence.81 For initial eligibility,
70
13 C.F.R. §124.106(e)(1) & (3).
70
13 C.F.R. §124.103(a). See also 15 U.S.C. §637(a)(5).
7172
13 C.F.R. §124.103(b)(1). If required by the SBA, individuals claiming membership in these groups must
demonstrate that they held themselves out and are recognized by others as members of the designated group(s). 13
C.F.R. §124.103(b)(2).
7273
13 C.F.R. §124.103(b)(3).
7374
13 C.F.R. §124.103(c)(1).
7475
13 C.F.R. §124.103(c)(2)(i)-(iii).
7576
13 C.F.R. §124.103(c)(2)(iii).
7677
13 C.F.R. §124.103(d)(4). Groups petitioning for recognition as socially disadvantaged do not always obtain it. Over
the years, the SBA has rejected petitions from Hasidic Jews, women, disabled veterans, and Iranian-Americans. See
supra note 31.
7732.
78
13 C.F.R. §124.104(a). See also 15 U.S.C. §637(a)(6)(A).
7879
13 C.F.R. §124.104(b)(1).
7980
13 C.F.R. §124.104(c). See also 15 U.S.C. §637(a)(6)(E)(i)-(ii).
69
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excluded when calculating net worth, as is equity in individuals’ primary residence.80 For initial
eligibility, 81
13 C.F.R. §124.104(c)(2).
71
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applicants to the 8(a) Program must have a net worth of less than $250,000.81 For
continued 82 For continued
eligibility, net worth must be less than $750,000.8283
“Good character”
In determining whether an applicant to, or participant in, the 8(a) Program possesses “good
character,” the SBA looks for criminal conduct; violations of SBA regulations; current debarment
or suspension from government contracting; managers or key employees who lack business
integrity; and the knowing submission of false information to the SBA.8384
“Demonstrated potential for success”
For a firm to have demonstrated potential for success, it generally must have been in business in
the field of its primary industry classification for at least two full years immediately prior to the
date of its application to the 8(a) Program.8485 However, the SBA may grant a waiver allowing
firms that have been in business for less than two years to enter the 8(a) Program when (1) the
disadvantaged individuals upon whom eligibility is based have substantial business management
experience; (2) the business has demonstrated the technical experience necessary to carry out its
business plan with a substantial likelihood of success; (3) the firm has adequate capital to sustain
its operations and carry out its business plan; (4) the firm has a record of successful performance
on contracts in its primary field of operations; and (5) the firm presently has, or can demonstrate
its ability to timely obtain, the personnel, facilities, equipment, and other resources necessary to
perform contracts under Section 8(a).8586
Set-Asides and Sole-Source Awards Under Section 8(a)
Section 8(a) of the Small Business Act authorizes agencies to award contracts for goods or
services, or to perform construction work, to the SBA for subcontracting to small businesses
participating in the 8(a) Program.8687 A “set-aside” is an acquisition in which only certain
contractors may compete, while a sole-source award is a contract awarded, or proposed for
award, without competition.8788 Although the Competition in Contracting Act (CICA) generally
requires that agencies obtain “full and open competition through the use of competitive
procedures” when procuring goods or services, set-asides and sole-source awards are both
80
13 C.F.R. §124.104(c)(2).
Id.
82
Id.
83
permissible under CICA. In fact, an 8(a) set-aside is a recognized competitive procedure.89
82
Id.
Id.
84
13 C.F.R. §124.108(a)(1)-(5). For more on debarment and suspension, see CRS Report RL34753, Debarment and
Suspension of Government Contractors: An Overview of the Law Including Recently Enacted and Proposed
AmendmentsA Legal Overview, by Kate M. Manuel.
8485
13 C.F.R. §124.107. Specifically, “[i]ncome tax returns for each of the two previous tax years must show operating
revenues in the primary industry in which the applicant is seeking 8(a) ... certification.” 13 C.F.R. §124.107(a).
8586
15 U.S.C. §637(a)(7)(A) (“reasonable prospects for success”); 13 C.F.R. §124.107(b)(1)(i)-(v).
8687
SBA may delegate the function of executing contracts to the procuring agencies and often does so. See 13 C.F.R.
§124.501(a).
87
Set-asides may be total or partial. See 48 C.F.R. §19.502-3(a).
81
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permissible under CICA. In fact, an 8(a) set-aside is a recognized competitive procedure.88
; Partnership Agreement Between the U.S. Small Business Administration and the U.S. Department of
Defense, January 7, 2013, available at http://www.sba.gov/sites/default/files/files/Department%20of%20Defense.pdf.
88
Set-asides may be total or partial. See 48 C.F.R. §19.502-3(a).
89
15 U.S.C. §644(a) (describing when set-asides for small businesses are permissible); 41 U.S.C. §3303(b) (CICA
provision authorizing set-asides for small businesses); 48 C.F.R. §§6.203-6.207 (set-asides for small business
generally, 8(a) small businesses, Historically Underutilized Business Zone (HUBZone) small businesses, service(continued...)
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Agencies are effectively encouraged to subcontract through the 8(a) Program because there are
government-wide and agency-specific goals regarding the percentage of procurement dollars
awarded to “small disadvantaged businesses,” among others.8990 Awards made via set-asides or on a
sole-source basis count toward these goals,9091 and businesses participating in the 8(a) Program are
considered small disadvantaged businesses.9192
Discretion to Subcontract Through the 8(a) Program
There are few limits on agency discretion to subcontract through the 8(a) Program.9293 However,
the SBA is prohibited by regulation from accepting procurements for award under Section 8(a)
when
1. the procuring agency issued a solicitation for or otherwise expressed publicly a
clear intent to reserve the procurement as a set-aside for small businesses not
participating in the 8(a) Program prior to offering the requirement to SBA for
award as an 8(a) contract;9394
2. the procuring agency competed the requirement among 8(a) firms prior to
offering the requirement to SBA and receiving SBA’s acceptance of it;9495 or
3. the SBA makes a written determination that “acceptance of the procurement for
8(a) award would have an adverse impact on an individual small business, a
88
15 U.S.C. §644(a) (describing when set-asides for small businesses are permissible); 41 U.S.C. §3303(b) (CICA
provision authorizing set-asides for small businesses); 48 C.F.R. §§6.203-6.206 (set-asides for small business
generally, 8(a) small businesses, Historically Underutilized Business Zone (HUBZone) small businesses, and servicedisabled veterangroup of small businesses located in a specific geographical location, or other
small business programs.”96
(...continued)
disabled veteran-owned small businesses, and women-owned small businesses). CICA authorizes competitions
excluding all sources other than small
businesses when such competitions assure that a “fair proportion of the total
purchases and contracts for property and
services for the Federal Government shall be placed with small business
concerns.” 41 U.S.C. §3104. CICA also
permits sole-source awards when such awards are made pursuant to a
procedure expressly authorized by statute, or
when special circumstances exist (e.g., urgent and compelling
circumstances). See 10 U.S.C. §2304(c)(1) (defense
agency procurements) & 41 U.S.C. §§3301 & 3304(a)(3)(A) (civilian
agency procurements). For more on competition
in federal contracting, see CRS Report R40516, Competition in
Federal Contracting: An Overview of the Legal
RequirementsA Legal Overview, by Kate M. Manuel.
8990
15 U.S.C. §644(g)(1)-(2).
9091
They also count toward a separate goal for the percentage of federal procurement dollars awarded to small businesses
generally. Currently, the government-wide goal is that 5% of all federal contract and subcontract dollars be spent with
small disadvantaged businesses, including 8(a) businesses. Most agencies also have a 5% goal. See Small Business
Goaling Report, supra note 73. The government-wide goal was met in FY2011FY2013, the most recent year for which
information is available, when 7.678.6% of all federal procurement dollars was spent with small disadvantaged businesses.
Id. Performance by the large procuring agencies varies, from 1.92.6% (Department of Energy) to 47.43% (SBA). Id.
9192
See 13 C.F.R. §124.1002 (defining “small disadvantaged business”).
9293
See, e.g., AHNTECH, Inc., B-401092 (April 22, 2009) (“The [Small Business] Act affords the SBA and contracting
agencies broad discretion in selecting procurements for the 8(a) program.”).
9394
Even in this situation, SBA may accept the requirement under “extraordinary circumstances.” 13 C.F.R. §124.504(a);
Madison Servs., Inc., B-400615 (December 11, 2008) (finding that extraordinary circumstances existed when the
agency’s initial small business set-aside was erroneous and did not reflect its intentions).
9495
However, offers of requirements below the simplified acquisition threshold (generally $150,000) are “assume[d]” to
have been accepted at the time they are made, and the agency may proceed with the award if it does not receive a reply
from SBA within two days of sending the offer. 13 C.F.R. §124.503(a)(4)(i). See also Eagle Collaborative Computing
Servs., Inc., B-401043.3 (January 28, 2011) (finding that an agency properly awarded a sole-source contract valued
below the simplified acquisition threshold even though SBA never formally accepted the requirements).
96
13 C.F.R. §124.504(a)-(c). The third provision applies only to preexisting requirements. It does not apply to new
(continued...)
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accepted the requirements).
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group of small businesses located in a specific geographical location, or other
small business programs.”95
Additionally, SBA is barred from awarding an 8(a) contract, either via a set-aside or on a solesource basis, “if the price of the contract results in a cost to the contracting agency which exceeds
a fair market price.”9697
Otherwise, agency officials may offer contracts to the SBA “in [their] discretion,” and the SBA
may accept requirements for the 8(a) Program “whenever it determines such action is necessary
or appropriate.”9798 The courts and the Government Accountability Office (GAO) will generally not
hear protests of agencies’ determinations regarding whether to procure specific requirements
through the 8(a) Program unless it can be shown that government officials acted in bad faith or
contrary to federal law.9899
Monetary Thresholds and Subcontracting Mechanism Under 8(a)
Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded either
through a set-aside or on a sole-source basis, with the amount of the contract generally
determining the acquisition method used, as Figure 1 illustrates. When the anticipated total value
of the contract, including any options, is less than $4 million ($6.5 million for manufacturing
contracts), the contract is normally awarded without competition.99100 In contrast, when the
anticipated value of the contract exceeds $4 million ($6.5 million for manufacturing contracts),
95
13 C.F.R. §124.504(a)-(c). The third provision applies only to preexisting requirements. It does not apply to newthe contract generally must be awarded via a set-aside with competition limited to 8(a) firms so
long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will
(...continued)
contracts, follow-on or renewal contracts, or procurements under $150,000. Id. Also, conducted using simplified acquisition procedures. Id. Also,
under its regulations, SBA must
presume an adverse impact when:
(A) The small business concern has performed the specific requirement for at least 24 months;
(B) The small business is performing the requirement at the time it is offered to the 8(a) ... program,
or its performance of the requirement ended within 30 days of the procuring activity’s offer of the
requirement to the 8(a) ... program; and
(C) The dollar value of the requirement that the small business is or was performing is 25 percent
or more of its most recent annual gross sales (including those of its affiliates).
13 C.F.R. §124.504(c)(1)(i)(A)-(C).
9697
15 U.S.C. §637(a)(1)(A); 48 C.F.R. §19.806(b). Fair market price is estimated by looking at recent prices for similar
items or work, in the case of repeat purchases, or by considering commercial prices for similar products or services,
available in-house cost estimates, cost or pricing data submitted by the contractor, or data from other government
agencies, in the case of new purchases. 15 U.S.C. §637(a)(3)(B)(i)-(iii); 48 C.F.R. §19.807(b) & (c).
9798
15 U.S.C. §637(a)(1)(A). See also Totolo v. United States, 87 Fed. Cl. 680, 695 (2009) (“The manner in which [an
agency] assesses its needs is a business judgment and lies within its own discretionary domain.”); JT Constr. Co., B254257 (December 6, 1993) (stating that it is a business judgment, within the contracting officer’s discretion, to decide
not to set aside a competition for small businesses). For a time in 2008-2010, the federal courts and the Government
Accountability Office (GAO) found that set-asides for Historically Underutilized Business Zone (HUBZone) small
businesses had “precedence” over set-asides for 8(a) firms. See generally archived CRS Report R40591, Set-Asides for Small
Small Businesses: Recent Developments in the Law Regarding Precedence Among the Set-Aside Programs and Set-Asides
SetAsides Under Indefinite-Delivery/Indefinite-Quantity Contracts, by Kate M. Manuel. However, the Small Business Act was
was amended on September 27, 2010, to remove the language that formed the basis for these decisions. Small Business Jobs
Jobs Act of 2010, P.L. 111-240, §1347,124 Stat. 2546-47 (September 27, 2010).
9899
See, e.g., Rothe Computer Solutions, LLC, B-299452 (May 9, 2007).
99100
15 U.S.C. §637(a)(16)(A). A noncompetitive award may be made under this authority so long as (1) the firm is
determined to be a responsible contractor for performance of the contract; (2) the award of the contract would be
consistent with the firm’s business plan; and (3) award of the contract would not result in the firm exceeding the
percentage of revenue from 8(a) sources forecast in its annual business plan. 15 U.S.C. §637(a)(16)(A)(i)-(iii).
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the contract generally must be awarded via a set-aside with competition limited to 8(a) firms so
long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will
.
submit offers and the award can be made at fair market price.100101 Sole-source awards of contracts
valued at $4 million ($6.5 million or more for manufacturing contracts) may only be made when
(1) there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will
submit offers at a fair market price, or (2) the SBA accepts the requirement on behalf of an 8(a)
firm owned by an Indian tribe, an ANC or, in the case of Department of Defense contracts, an
NHO.101102 Requirements valued at more than $4 million ($6.5 million for manufacturing contracts)
cannot be divided into several acquisitions at lesser amounts in order to make sole-source
awards.102103
Figure 1. Acquisition Methods at Various Price Thresholds
Source: Congressional Research Service.
Other Requirements
Other key requirements of the 8(a) Program include the following:
•
Inability to protest an 8(a) firm’s eligibility for an award: When the SBA makes
or proposes an award to an 8(a) firm, that firm’s eligibility for the award cannot
be challenged or protested as part of the solicitation or proposed contract award.
Instead, information concerning a firm’s eligibility for the 8(a) Program must be
submitted to SBA in accordance with separate requirements contained in
13 C.F.R. §124.517.103104
•
Maximum of nine years in the 8(a) Program: Firms may participate in the 8(a)
Program for no more than nine years from the date of their admission into the
100101
15 U.S.C. §637(a)(1)(D)(ii); 48 C.F.R. §19.805-1(d). However, competitive awards for contracts whose anticipated
value is less than $4 million ($6.5 million for manufacturing contracts) can be made with the approval of the SBA’s
Associate Administrator for 8(a) Business Development. 15 U.S.C. §637(a)(1)(D)(i)(I)-(II); 48 C.F.R. §19.805-1(d).
101102
48 C.F.R. §19.805-1(b)(1)-(2) (sole-source awards to tribally or ANC-owned firms); 48 C.F.R. §219.8051(b)(2)(A)-(B) (sole-source awards to NHO-owned firms). Prior to enactment of the National Defense Authorization
Act (NDAA) for FY2010, contracting officers making sole-source awards in reliance on the second exception did not
have to justify such awards or obtain approval of them from higher-level agency officials. The NDAA changed this by
requiring justifications, approvals, and notices for sole-source contracts in excess of $20 million awarded under the
authority of §8(a) similaranalogous to those required for sole-source contracts awarded under the general contracting
authorities.
Compare P.L. 111-84, §811, 123 Stat. 2405-06 (October 28, 2009) with 10 U.S.C. §2304(c) & (f)
(procurements of
defense agencies); 41 U.S.C. §3304(a) & (e) (procurements of civilian agencies).
102103
48 C.F.R. §19.805-1(c).
103104
48 C.F.R. §19.805-2(d).
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The “8(a) Program” for Small Businesses
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Program, although they may be terminated or graduate from the program before
nine years have passed.104105
•
One-time eligibility for the 8(a) Program: Once a firm or a disadvantaged
individual upon whom a firm’s eligibility was based has exited the 8(a) Program
after participating in it for any length of time, neither the firm nor the individual
is generally eligible to participate in the 8(a) Program again.105106 When at least
50% of the assets of one firm are the same as those of another firm, the firms are
considered identical for purposes of eligibility for the 8(a) Program.106107
•
Limits on ownership of 8(a) firms by family members of current or former 8(a)
firm owners: Individuals generally may not use their disadvantaged status to
qualify a firm for the 8(a) Program if the individual has an immediate family
member who is using, or has used, his or her disadvantaged status to qualify a
firm for the 8(a) Program.107108
•
Limits on the amount of 8(a) contracts that a firm may receive: 8(a) firms may
generally not receive additional sole-source awards once they have received a
combined total of competitive and sole-source awards “in excess of the dollar
amount set forth in this section during its participation in the 8(a) … program.”108
in excess of $100 million,
in the case of firms whose size is based on their number of employees, or in
excess of an amount equivalent to the lesser of (1) $100 million or (2) five times
the size standard for the industry, in the case of firms whose size is based on their
revenues.109 Additionally, 8(a) firms in the “transitional stage,” or the last five
years of
participation, must achieve annual targets for the amount of revenues they
they receive from non-8(a) sources.109110 These targets increase over time, with firms
firms required to attain 15% of their revenue from non-8(a) sources in the fifth
year;
25% in the sixth year; 35% in the seventh year; 45% in the eight year; and
55%
in the ninth year.110111 Firms that do not display the relevant percentages of revenue
revenue from non-8(a) sources are ineligible for sole-source 8(a) contracts
“unless and
until” they correct the situation.111
104
15 U.S.C. §636(j)(10)(C)(i112
•
Limitations on subcontracting: Although not only under the authority of Section
8(a) of the Small Business Act or applicable only to 8(a) businesses, limitations
105
15 U.S.C. §636(j)(15) (nine-year term); 15 U.S.C. §637(a)(9) (termination and early graduation); 13 C.F.R.
§124.301 (exiting the 8(a) Programprogram); 13 C.F.R. §124.302 (early graduation); 13 C.F.R. §124.303 (termination from the
Program).
105).
106
15 U.S.C. §636(j)(11)(B)-(C); 13 C.F.R. §124.108(b).
106107
13 C.F.R. §124.108(b)(4).
107108
13 C.F.R. §124.105(g)(1). SBA may waive this prohibition if the firms have no connections in terms of ownership,
control, or contractual relationships and certain other conditions are met. Id.
109
13 C.F.R. § 124.519(a)(1)-(2). Contracts less than $100,000 are not counted in determining whether a firm has
reached the applicable limit. 13 C.F.R. § 124.519(a)(3). The Administrator of the SBA may waive this requirement if
the head of the procuring agency determines that a sole-source award to a firm is necessary “to achieve significant
interests of the Government.” 13 C.F.R. § 124.519(e). Even after they have received a combined total of competitive
and sole-source awards in excess of $100 million, or other applicable amount, firms may still receive competitive
contracts under the 8(a) Program. 13 C.F.R. § 124.519(b).
110
15 U.S.C. §636(j)(10)(I)(i)-(iii); 13 C.F.R. §124.509(b)(1).
111
13 C.F.R. §124.509(b)(2).
112. Id.
108
13 C.F.R. §124.519(a). Currently, this section does not specify an amount. However, prior to being amended in
2011, Subsections 124.519(a)(1) and (2) specified the applicable amounts as $100 million, in the case of firms whose
size is based on their number of employees, or an amount equivalent to the lesser of (1) $100 million or (2) five times
the size standard for the industry, in the case of firms whose size is based on their revenues. 13 C.F.R. §124.519(a)(1)(2) (2010). The Administrator of the SBA may waive this requirement if the head of the procuring agency represents
that a sole-source award to a firm is necessary “to achieve significant interests of the Government.” 13 C.F.R.
§124.519(e). Even after they have received a combined total of competitive and sole-source awards in excess of $100
million, or other applicable amount, firms may still receive competitive contracts under the 8(a) Program. 13 C.F.R.
§124.519(b).
109
15 U.S.C. §636(j)(10)(I)(i)-(iii); 13 C.F.R. §124.509(b)(1).
110
13 C.F.R. §124.509(b)(2).
111
13 C.F.R. §124.509(d)(1). This prohibition may be waived when the Director of the Office of Business
Development finds that denial of a sole-source contract would cause severe economic hardship for the firm, potentially
jeopardizing its survival, or when extenuating circumstances beyond the firm’s control caused it to miss its target. 13
C.F.R. §125.509(e).
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on subcontracting require that small businesses receiving contracts under a setaside perform an amount of work that equals certain minimum percentages of the
amount paid under the contract.113 Specifically, small businesses must perform at
least 50% of the amount paid under service contracts, and at least 50% of the
amount paid under supply contracts minus the cost of materials.114Congressional Research Service
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The “8(a) Program” for Small Businesses
•
Limitations on subcontracting: Although not only under the authority of Section
8(a) of the Small Business Act or applicable only to 8(a) businesses, limitations
on subcontracting require that small businesses receiving contracts under a setaside perform minimum percentages of the contract work.112 These percentages
vary depending upon the type of the contract, with employees of the small
business required to perform (1) at least 50% of the personnel costs of service
contracts; (2) at least 50% of the costs of manufacturing (excluding materials) in
supply contacts; (3) at least 15% of the costs of construction (excluding
materials) in general construction contracts; and (4) at least 25% of the costs of
construction (excluding materials) in “special trade” construction contracts.113
Requirements for Tribally, ANC-, NHO-, and CDC-Owned Firms
Tribes, ANCs, NHOs or CDCs themselves generally do not participate in the 8(a) Program.
Rather, businesses that are at least 51% owned by such entities participate in the 8(a) Program,114115
although the rules governing their participation are somewhat different from those for the 8(a)
Program generally.115116
Eligibility for the 8(a) Program
“Small”
Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be “small” under the SBA’s size
standards.116117 However, certain affiliations with the owning entity or other business enterprises of
that entity are excluded in size determinations unless the Administrator of Small Business
determines that a small business owned by an Indian tribe, ANC, NHO, or CDC “[has] obtained,
or [is] likely to obtain, a substantial unfair competitive advantage within an industry category”
because of such exclusions.117118 Other affiliations of small businesses owned by Indian tribes,
ANCs, NHOs, or CDCs can count in size determinations, and ANC-owned firms, in particular,
have been subjected to early graduation from the 8(a) Program because they exceeded the size
standards.118
112119
113
15 U.S.C. §637(a)(14)(A)-(B); 15 U.S.C. §644(o); 13 C.F.R. §125.6; 48 C.F.R. §52.219-14.
15 U.S.C. §657s(a)(1)&(2). The Administrator of Small Business is also required to prescribe similar limits for
general and specialty trade construction. 15 U.S.C. §657s(d)(3). However, the limitations as to these and other types of
contracts currently given in SBA regulations do not appear to have been updated since Congress imposed this
requirement in 2013. See 13 C.F.R. §124.510(a)13 C.F.R. §124.510 (limits on subcontracting for 8(a) firms); 13 C.F.R. §125.6(a)(1)-(4)
(limits on subcontracting
for small businesses generally).
114115
13 C.F.R. §124.109(c)(3)(i) (tribally and ANC-owned firms); 13 C.F.R. §124.110 (b) (NHO-owned firms); 13
C.F.R. §124.111(c) (CDC-owned firms).
115116
13 C.F.R. §§124.109-124.111.
116117
13 C.F.R. §124.109(c)(2)(iii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(b) (NHO-owned firms); 13
C.F.R. §124.111(c) (CDC-owned firms).
117118
13 C.F.R. §124.109(c)(2)(iii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(b) (NHO-owned firms); 13
C.F.R. §124.111(c) (CDC-owned firms). It is unclear how the language here, stating that “any other business enterprise
owned by [an organization]” shall be excluded from the size determination, is to be reconciled with that in 13 C.F.R.
§121.103(b)(2)(ii), which suggests that businesses owned and controlled by organizations could be found to be
affiliates of the organization for reasons other than common ownership or management, or performance of common
administrative services.
118119
See, e.g., Valenzuela Eng’g, Inc. & Curry Contracting Co., Inc., SBA-4151 (1996) (rejecting a challenge to the size
of an ANC-owned firm because its subcontractor performed less than 25% of the work on the contract and was not its
affiliate); Gov’t Accountability Office, Increased Used of Alaska Native Corporations’ Special 8(a) Provisions Calls
(continued...)
113for Tailored Oversight, GAO-06-399, at 29 (April 2006) (describing “early graduation” of ANC-owned 8(a) firms).
114
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“Business”
Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be “businesses” under the SBA’s
definition.119120 Although ANCs themselves may be for-profit or non-profit, ANC-owned businesses
must be for-profit to participate in the 8(a) Program.120121
“Unconditionally owned and controlled”
Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be unconditionally owned and
substantially controlled by the tribe, ANC, NHO, or CDC, respectively.121122 However, under SBA
regulations, tribally or ANC-owned firms may be managed by individuals who are not members
of the tribe or Alaska Natives if the firm can demonstrate:
that the Tribe [or ANC] can hire and fire those individuals, that it will retain control of all management
management decisions common to boards of directors, including strategic planning, budget
approval, and
the employment and compensation of officers, and that a written management development
development plan exists which shows how Tribal members will develop managerial skills
sufficient to
manage the concern or similar Tribally-owned concerns in the future.122
The rules governing NHO-owned firms do not address management of NHO-owned firms by
persons who are not Native Hawaiians,123 and although the general rules apply where no “special
rules” exist,124 it seems unlikely that NHO-owned firms are treated differently from tribally or
ANC-owned firms in this regard. CDCs are to be managed and have their daily operations
123
NHO-owned firms must demonstrate that the NHO controls the board of directors.124 However,
the individual who is responsible for the NHO-owned firm’s day-to-day management need not
establish personal social and economic disadvantage.125 CDCs are to be managed and have their
daily operations conducted by individuals with “managerial experience of an extent and
complexity needed to run
the [firm].”125
(...continued)
for Tailored Oversight, GAO-06-399, at 29 (April 2006) (describing “early graduation” of ANC-owned 8(a) firms).
119
the [firm].”126
“Socially disadvantaged”
As owners of prospective or current 8(a) firms, Indian tribes, ANCs, NHOs, and CDCs are all
presumed to be socially disadvantaged.127
120
13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility
requirements where they are not contrary to or inconsistent with the special requirements for these entities); 13 C.F.R.
§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned
firms).
120121
13 C.F.R. §124.109(a)(3).
121122
13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility
requirements where they are not contrary to or inconsistent with the special requirements for these entities); 13 C.F.R.
§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned
firms).
122123
13 C.F.R. §124.109(c)(4)(B).
123
See 13 C.F.R. §124.110(d) (stating only that “[a]n individual responsible for the day-to-day management of an
NHO-owned firm need not establish personal social and economic disadvantage”).
124
13 C.F.R. §124.110(a) (“Concerns owned by economically disadvantaged Native Hawaiian Organizations, as
defined in [Section] 124.3, are eligible for participation in the 8(a) program and other federal programs requiring SBA
to determine social and economic disadvantage as a condition of eligibility. Such concerns must meet all eligibility
criteria set forth in [Section] 124.101 through 124.108 and [Section] 124.112 to the extent that they are not inconsistent
with this section.”).
125
13 C.F.R. §124.111(b).
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“Socially disadvantaged”
As owners of prospective or current 8(a) firms, Indian tribes, ANCs, NHOs, and CDCs are all
presumed to be socially disadvantaged.126
“Economically disadvantaged”
By statute, ANCs are deemed to be economically disadvantaged,127 and CDCs are similarly
presumed to be economically disadvantaged.128124
13 C.F.R. §124.110(d).
125
Id.
126
13 C.F.R. §124.111(b).
127
13 C.F.R. §124.109(b)(1) (tribally and ANC-owned firms); 15 U.S.C. §637(a)(4)(A)(i)(II) (NHO-owned firms); 13
C.F.R. §124.110(a) (same); 13 C.F.R. §124.111(a) (CDC-owned firms); Small Disadvantaged Business Certification
Application: Community Development Corporation (CDC) Owned Concern, OMB Approval No. 3245-0317 (“A
Community Development Corporation (CDC) is considered to be a socially and economically disadvantaged entity if
the parent CDC is a nonprofit organization responsible to residents of the area it serves which has received financial
assistance under 42 U.S.C. 9805, et seq.”). SBA’s authority to designate CDCs as socially and economically
disadvantaged derives from 42 U.S.C. §9815(a)(2). See 42 U.S.C. §9815(a)(2) (“Not later than 90 days after August 13,
(continued...)
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“Economically disadvantaged”
By statute, ANCs are deemed to be economically disadvantaged,128 and CDCs are similarly
presumed to be economically disadvantaged.129 Indian tribes and NHOs, in contrast, must
establish economic disadvantage at least once. Indian tribes must present data on, among other
things, the number of tribe members; the tribal unemployment rate; the per capita income of tribe
members; the percentage of the local Indian population above the poverty level; the tribe’s access
to capital; the tribe’s assets as disclosed in current financial statements; and all businesses wholly
or partially owned by tribal enterprises or affiliates, as well as their primary industry
classification.129130 However, once a tribe has established that it is economically disadvantaged for
purposes of one 8(a) business, it need not reestablish economic disadvantage in order to have
other businesses certified for the 8(a) Program unless the Director of the Office of Business
Development requires it to do so.130131
When determining whether an NHO is economically disadvantaged, SBA will consider “the
individual economic status of NHO’s members,” the majority of whom “must meet the same
initial eligibility economic disadvantaged thresholds as individually-owned 8(a) applicants.”131
qualify as
economically disadvantaged” under the same standards as individual applicants to the 8(a)
Program.132 Specifically:
For the first 8(a) applicant owned by a particular NHO, individual NHO members must meet
the same initial eligibility economic disadvantage thresholds as individually-owned 8(a)
applicants. For any additional 8(a) applicant owned by the NHO, individual NHO members
must meet the economic disadvantage thresholds for continued 8(a) eligibility.132
126
13 C.F.R. §124.109(b)(1) (tribally and ANC-owned firms); 15 U.S.C. §637(a)(4)(A)(i)(II) (NHO-owned firms);
Small Disadvantaged Business Certification Application: Community Development Corporation (CDC) Owned
Concern, OMB Approval No. 3245-0317 (“A Community Development Corporation (CDC) is considered to be a
socially and economically disadvantaged entity if the parent CDC is a nonprofit organization responsible to residents of
the area it serves which has received financial assistance under 42 U.S.C. 9805, et seq.”). SBA’s authority to designate
CDCs as socially and economically disadvantaged derives from 42 U.S.C. §9815(a)(2). See 42 U.S.C. §9815(a)(2)
(“Not later than 90 days after August 13, 133
“Good character”
When an organization owns an actual or prospective 8(a) firm, all members, officers, or
employees of that organization are generally not required to show good character. The regulations
governing tribally and ANC-owned firms explicitly address the issue, stating that the “good
character” requirement applies only to officers or directors of the firm, or shareholders owning
more than a 20% interest.134 NHO-owned firms may be subject to the same requirements in
(...continued)
1981, the Administrator of the Small Business Administration, after
consultation with the Secretary, shall promulgate
regulations to ensure the availability to community development
corporations of such programs as shall further the
purposes of this subchapter, including programs under §637(a) of
title 15.”).
127128
43 U.S.C. §1626(e)(1) (“For all purposes of Federal law, a Native Corporation shall be considered to be a
corporation owned and controlled by Natives and a minority and economically disadvantaged business enterprise if the
Settlement Common Stock of the corporation and other stock of the corporation held by holders of Settlement Common
Stock and by Natives and descendants of Natives, represents a majority of both the total equity of the corporation and
the total voting power of the corporation for the purposes of electing directors.”); 13 C.F.R. §124.109(a)(2) (same).
128similar).
129
See Small Disadvantaged Business Certification Application, supra note 125.
129129.
130
15 U.S.C. §637(a)(6)(A); 13 C.F.R. §124.109(b)(2)(i)-(vii).
130131
13 C.F.R. §124.109(b).
131132
13 C.F.R. §124.110(c)(1).
132133
Id. If the NHO has no members, then a majority of the members of the board of directors must qualify as
economically disadvantaged.
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“Good character”
When an organization owns an actual or prospective 8(a) firm, all members, officers, or
employees of that organization are generally not required to show good character. The regulations
governing tribally and ANC-owned firms explicitly address the issue, stating that the “good
character” requirement applies only to officers or directors of the firm, or shareholders owning
more than a 20% interest.133 NHO-owned firms may be subject to the same requirements in
practice.134
134
13 C.F.R. §124.109(c)(7)(ii).
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practice.135 With CDC-owned firms, the firm itself and “all of its principals” must have good
character.135136
“Demonstrated potential for success”
Firms owned by ANCs, Indian tribes, NHOs, and CDCs may evidence “potential for success” in
several ways, including by demonstrating that:
1. the firm has been in business for at least two years, as shown by individual or
consolidated income tax returns for each of the two previous tax years showing
operating revenues in the primary industry in which the firm seeks certification;
2. the individuals who will manage and control the daily operations of the firm have
substantial technical and management experience; the firm has a record of
successful performance on government or other contracts in its primary industry
category; and the firm has adequate capital to sustain its operations and carry out
its business plan; or
3. the owner-group has made a firm written commitment to support the operations
of the firm and has the financial ability to do so.136137
The first of these ways for demonstrating potential for success is the same for individually owned
firms,137138 and the second arguably corresponds to the circumstances in which SBA may waive the
requirement that individually owned firms have been in business for at least two years.138139 There is
no equivalent to the third way for individually owned firms, and some commentators have
suggested that this provision could “benefit ANCs by allowing more expeditious and effortless
access to 8(a) contracts for new concerns without having to staff new subsidiaries with
experienced management.”139
133
13 C.F.R. §124.109(c)(7)(ii).
140
Report of Benefits for Firms Owned By ANCs, Indian Tribes, NHOs, and CDCs
Although implementation of this requirement has been delayed,141 8(a) firms owned by ANCs,
Indian tribes, NHOs, and CDCs must submit information annually to the SBA showing:
135
See supra note 120 and accompanying text.
135
13 C.F.R. §124.111(g).
136137
13 C.F.R. §124.109(c)(6)(i)-(iii) (ANC- and tribally-owned firms); 13 C.F.R. §124.110(g)(1)-(3) (NHO-owned
firms); 13 C.F.R. §124.111(f)(1)-(3) (CDC-owned firms).
137138
See supra note 8485 and accompanying text.
138139
See supra note 8586 and accompanying text.
139140
Daniel K. Oakes, Inching Toward Balance: Reaching Proper Reform of the Alaska Native Corporations’ 8(a)
Contracting Preferences, 40 Pub. Cont. L.J. 777 (2011).
134
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Report of Benefits for Firms Owned By ANCs, Indian Tribes, NHOs, and CDCs
Although implementation of this requirement has been delayed,140 8(a) firms owned by ANCs,
Indian tribes, NHOs, and CDCs must submit information annually to the SBA showing:
141
Regulations promulgated by SBA in February 2011 provided that this reporting requirement would be effective “as
of September 9, 2011, unless SBA further delays implementation through a Notice in the Federal Register.” Small Bus.
Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business Status
Determinations: Final Rule, 76 Federal Register 8,222 (February 11, 2011). SBA appears to have delayed reporting
through four such notices, two announcing tribal consultations about the reporting requirements, and two seeking
comments on the reporting requirements pursuant to the Paperwork Reduction Act of 1995. See Small Bus. Admin.,
Notice: Extension of Comment Period for New 8(a) Business Development Program Reporting Requirements, 78
Federal Register 9,447 (February 8, 2013); Small Bus. Admin., 60 Day Notice and Request for Comments, 76 Federal
Register 63,983 (October 14, 2011); Small Bus. Admin., Notice of Tribal Consultations, 76 Federal Register 27,859
(continued...)
136
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how the Tribe, ANC, NHO or CDC has provided benefits to the Tribal or native members
and/or the Tribal, native or other community due to the Tribe’s/ANC’s/NHO’s/CDC’s
participation in the 8(a) … program through one or more firms. This data includes
information relating to funding cultural programs, employment assistance, jobs, scholarships,
internships, subsistence activities, and other services provided by the Tribe, ANC, NHO or
CDC to the affected community.141142
Set-Asides and Sole-Source Awards
Like other participants in the 8(a) Program, firms owned by Indian tribes, ANCs, NHOs, and
CDCs are eligible for 8(a) set-asides and may receive sole-source awards valued at less than $4
million ($6.5 million for manufacturing contracts). However, firms owned by Indian tribes and
ANCs can also receive sole-source awards in excess of $4 million ($6.5 million for
manufacturing contracts) even when contracting officers reasonably expect that that at least two
eligible and responsible 8(a) firms will submit offers and the award can be made at fair market
price.142143 NHO-owned firms may receive sole-source awards from the Department of Defense
under the same conditions.143144
Other Requirements
Firms owned by Indian tribes, ANCs, NHOs, and CDCs are governed by the same regulations as
other 8(a) firms where certain of the “other requirements” are involved, including (1) inability to
protest an 8(a) firm’s eligibility for an award;144 (2) maximum of nine years in the 8(a) Program
140
Regulations promulgated by SBA in February 2011 provided that this reporting requirement would be effective “as
of September 9, 2011, unless SBA further delays implementation through a Notice in the Federal Register.” Small Bus.
Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business Status
Determinations: Final Rule, 76 Federal Register 8222 (February 11, 2011). SBA appears to have delayed reporting
through three such notices, two announcing tribal consultations about the reporting requirements, and a third
announcing SBA’s intent to request approval of an information collection in accordance with the Paperwork Reduction
Act of 1995. See Small Bus. Admin., 60 Day Notice and Request for Comments, 76 Federal Register 63983 (October
14, 2011); Small Bus. Admin., Notice of Tribal Consultations, 76 Federal Register 27859 (May 13, 2011); Small Bus.
Admin., Notice of Tribal Consultations, 76 Federal Register 12273 (March 7, 2011).
141
13 C.F.R. §124.604.
142145 (2) maximum of nine years in the 8(a) Program
(for individual firms);146 and (3) limits on subcontracting.147 However, the requirements for such
firms differ somewhat from those for other 8(a) firms where one-time eligibility for the 8(a)
Program; limits on majority ownership of 8(a) firms; and limits on the amount of 8(a) contracts
that a firm may receive are involved. Firms owned by Indian tribes, ANCs, NHOs, and CDCs
may participate in the 8(a) Program only one time.148 However, unlike the disadvantaged
(...continued)
(May 13, 2011); Small Bus. Admin., Notice of Tribal Consultations, 76 Federal Register 12,273 (March 7, 2011).
142
13 C.F.R. §124.604.
143
An Act To Amend the Small Business Act To Reform the Capital Ownership Development Program, and for Other
Purposes; P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); 48 C.F.R.
§19.805-1(b)(2).
143144
The authority for DOD to make sole-source awards to NHO-owned firms of contracts valued at more than $4
million ($6.5 million for manufacturing contracts) even if contracting officers reasonably expect that offers will be
received from at least two responsible small businesses existed on a temporary basis in 2004-2006 and became
permanent in 2006. See Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the
Gulf of Mexico, and Pandemic Influenza Act of 2006, P.L. 109-148, §8020, 119 Stat. 2702-03 (December 30, 2005)
(“[Provided] [t]hat, during the current fiscal year and hereafter, businesses certified as 8(a) by the Small Business
Administration pursuant to section 8(a)(15) of Public Law 85-536, as amended, shall have the same status as other
program participants under section 602 of P.L. 100-656 ... for purposes of contracting with agencies of the Department
of Defense.”); 48 C.F.R. §219.805-1(b)(2)(A)-(B).
144
See supra note 102.
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The “8(a) Program” for Small Businesses
(for individual firms);145 and (3) limits on subcontracting.146 However, the requirements for such
firms differ somewhat from those for other 8(a) firms where one-time eligibility for the 8(a)
Program; limits on majority ownership of 8(a) firms; and limits on the amount of 8(a) contracts
that a firm may receive are involved. Firms owned by Indian tribes, ANCs, NHOs, and CDCs
may participate in the 8(a) Program only one time.147 However, unlike the disadvantaged
145
See supra note 104.
146
13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility
requirements where they are not contrary to or inconsistent with special requirements for these entities); 13 C.F.R.
§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned
firms).
147
15 U.S.C. §644(o); 15 U.S.C. §657s; 13 C.F.R. §125.6; 48 C.F.R. §52.219-14.
148
13 C.F.R. §124.109(a) & (b) (ANC- and tribally-owned firms); 13 C.F.R. §124.110(a) (NHO-owned firms); 13
(continued...)
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The “8(a) Program” for Small Businesses
.
individuals upon whom other firms’ eligibility for the 8(a) Program is based, Indian tribes, ANCs,
NHOs, and CDCs may confer eligibility for the 8(a) Program upon firms on multiple occasions
and for an indefinite period.148149 Additionally, although Indian tribes, ANCs, NHOs, and CDCs may
not own 51% or more of a firm obtaining the majority of its revenues from the same “primary”
industry in which another firm they own or owned currently operates or has operated within the
past two years, there are no limits on the number of firms they may own that operate in other
primary industries.149150 Moreover, Indian tribes, ANCs, NHOs, and CDCs may own multiple firms
that earn less than 50% of their revenue in the same “secondary” industries.150151 Finally, firms
owned by Indian tribes, ANCs, and NHOs may continue to receive additional sole-source awards
even after they have received a combined total of competitive and sole-source 8(a) contracts in
excess of the dollar amount set forth in 13 C.F.R. Section 124.519, while individually owned
firms may not.151152 However, firms owned by any of these four types of entities are subject to the
same requirements regarding the percentages of revenue received from non-8(a) sources at
various stages of their participation in the 8(a) Program as other 8(a) firms.152153
Constitutionality of the 8(a) Program
The 8(a) Program has periodically been challenged on the grounds that the presumption that
members of certain racial and ethnic groups are disadvantaged violates the constitutional
guarantee of equal protection. The outcomes in early challenges to the program varied, with some
courts finding that the plaintiffs lacked standing to bring such challenges because they were not
economically disadvantaged, or were otherwise ineligible for the program;153 and other courts
145
13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility
requirements where they are not contrary to or inconsistent with special requirements for these entities); 13 C.F.R.
§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned
firms).
146
15 U.S.C. §644(o); 13 C.F.R. §125.6; 48 C.F.R. §52.219-14.
147
13 C.F.R. §124.109(a) & (b) (ANC- and tribally-owned firms); 13 C.F.R. §124.110(a) (NHO-owned firms); 13154 and other courts
finding that the program was unconstitutional as applied in specific cases.155 Most recently, in
(...continued)
C.F.R. §124.111(a) (CDC-owned firms).
148149
Id.; 15 U.S.C. §636(j)(11)(B)-(C).
149150
13 C.F.R. §124.109(c)(3)(ii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(e) (NHO-owned firms); 13
C.F.R. §124.111(d) (CDC-owned firms). These regulations also provide that an 8(a) firm owned by an ANC, Indian
tribe, NHO, or CDC may not, within its first two years in the 8(a) Program, receive a sole-source contract that is a
follow-on to an 8(a) contract currently performed by an 8(a) firm owned by that entity, or previously performed by an
8(a) firm owned by that entity that left the program within the past two years. Id. In addition, there are restrictions on
the percentage of work that may be performed by any non-8(a) venturer(s) in joint ventures involving 8(a) firms. See
generally 13 C.F.R. §124.513.
150151
13 C.F.R. §124.109(c)(3)(ii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(e) (NHO-owned firms); 13
C.F.R. §124.111(d) (CDC-owned firms).
151152
13 C.F.R. §124.519(a). See supra note 108.
152109.
153
13 C.F.R. §124.509.
153154
See, e.g., Ray Baillie Trash Hauling, 477 F.3d at 710 (“The plaintiffs never applied for participation in the section
8(a) program. Furthermore, they do not even contend that they are socially or economically disadvantaged and
therefore eligible for participation in the program.”); SRS Techs., Inc. v. U.S. Dep’t of Defense, No. 96-1484, 1997
(continued...)
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The “8(a) Program” for Small Businesses
finding that the program was unconstitutional as applied in specific cases.154 Most recently, in
U.S. App. LEXIS 10143 (4th Cir., May 6, 1997) (“SBA’s requirement of economic disadvantage for entry into the 8(a)
Program is a race-neutral criterion. It was by virtue of this race-neutral criterion that plaintiff failed to qualify for a
contract award, and its standing to challenge the race-conscious criteria is therefore lacking.”). But see C.S. McCrossan
Constr. Co., Inc. v. Cook, No. 95-1345-HB, 1996 U.S. Dist. LEXIS 14721 (D.N.M., April 2, 1996) (“Although
Defendants attempt to characterize this set-aside program as one based on size and economic status of the owner, the
fact remains that ‘economic disadvantage’ requires a showing of ‘social disadvantage’ which then implicates the racebased challenge. … Plaintiff is not seeking admission into the 8(a) program. It is challenging the government’s
preferential treatment towards 8(a) program participants in the bidding of the job order contract.”).
155
See, e.g., Cortez III Service Corp. v. Nat’l Aeronautics & Space Admin., 950 F. Supp. 357, 361 (D.D.C. 1996)
(finding that the 8(a) Program is facially constitutional, but that “agencies have a responsibility to decide whether there
(continued...)
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.
DynaLantic Corporation v. U.S. Department of Defense, the U.S. District Court for the District of
Columbia found that the 8(a) Program was not unconstitutional on its face because “breaking
down barriers to minority business development created by discrimination” constituted a
compelling government interest, and the government had a strong basis in evidence for
concluding that race-based action was necessary to further this interest.155156 However, the court
found that the program was unconstitutional as applied in the military simulation and training
industry because the Department of Defense (DOD) conceded it had “no evidence of
discrimination, either in the public or private sector, in the simulation and training industry.”156157
Particularly in its rejection of the facial challenge to the 8(a) Program, the court emphasized
certain aspects of the program’s history and requirements when finding that the government had
articulated a compelling interest for the program and had a strong basis in evidence for its actions.
Specifically, the court rejected the plaintiff’s assertion that the 8(a) Program was “not truly
remedial,” but rather favored “virtually all minority groups … over the larger pool of citizens,”
because non-minority individuals may qualify for the program, and all 8(a) applicants must
demonstrate economic disadvantage.157 The court also noted that the history of the 8(a) program
(...continued)
U.S. App. LEXIS 10143 (4th Cir., May 6, 1997) (“SBA’s requirement of economic disadvantage for entry into the 8(a)
Program is a race-neutral criterion. It was by virtue of this race-neutral criterion that plaintiff failed to qualify for a
contract award, and its standing to challenge the race-conscious criteria is therefore lacking.”). But see C.S. McCrossan
Constr. Co., Inc. v. Cook, No. 95-1345-HB, 1996 U.S. Dist. LEXIS 14721 (D.N.M., April 2, 1996) (“Although
Defendants attempt to characterize this set-aside program as one based on size and economic status of the owner, the
fact remains that ‘economic disadvantage’ requires a showing of ‘social disadvantage’ which then implicates the racebased challenge. … Plaintiff is not seeking admission into the 8(a) program. It is challenging the government’s
preferential treatment towards 8(a) program participants in the bidding of the job order contract.”).
154
See, e.g., Cortez III Service Corp. v. Nat’l Aeronautics & Space Admin., 950 F. Supp. 357, 361 (D.D.C. 1996)
(finding that the 8(a) Program is facially constitutional, but that “agencies have a responsibility to decide whether there158 The court also noted that the history of the 8(a) program
prior to 1978 (when Congress expressly authorized set-asides for disadvantaged small businesses)
had evidenced that race-neutral methods were insufficient to promote contracting with minorityowned small businesses.159 The court further noted that the 8(a) Program was intended to be a
business development program, not a means to “channel contracts” to minority firms;160 that
Section 8(a) of the Small Business Act expressly provides that awards may be made through the
(...continued)
has been a history of discrimination in the particular industry at issue” prior to procuring requirements through the 8(a)
Program); Fordice Constr. Co. v. Marsh, 773 F. Supp. 867 (S.D. Miss. 1990) (“The court … finds that the United States
Army Corps of Engineers failed to give consideration to the impact of a 100% set-aside upon non-§8(a) eligible
contractors in the Vicksburg area.”).
155
No. 95-2301 (EGS), 2012 U.S. Dist. LEXIS 114807 (D.D.C., August 15, 2012), at *29, *90156
885 F. Supp. 2d 237, 251, 271 (D.D.C. 2012). If the 8(a) Program as
it presently exists, with its presumption that
minorities are socially disadvantaged, were ever found to be
unconstitutional on its face, the program could potentially
be reconstituted without the presumption. Such a program
might require proof of actual social disadvantage from all
applicants to the 8(a) Program, perhaps using the same three
criteria currently used by individual applicants
demonstrating personal social disadvantage. See 13 C.F.R.
§124.103(c)(2) (standards of evidence for showing personal
disadvantage). Alternatively, the 8(a) Program could
potentially continue as a program for small businesses owned by
Indian tribes, ANCs, NHOs, or CDCs because tribes
and other entities are generally not seen as constituting racial
groups. Morton v. Mancari, 417 U.S. 535, 548 (1973)
(treating the category of “Native Americans” as a political class,
not a racial one, and describing programs targeting
Native Americans as “reasonably designed to further the cause of
Indian self-government”). The presumption of social
and/or economic disadvantage accorded to these groups would
thus not implicate a racial classification and would
probably be subject only to “rational basis” review. Rational basis
review is characterized by deference to legislative
judgment, and the party challenging a government program must
show that it is not rationally related to a legitimate
government interest. See Craig v. Boren, 429 U.S. 190, 197 (1976).
156157
DynaLantic, 2012 U.S. Dist. LEXIS 114807, at *72.
157
Id. at *31-*32885 F. Supp. 2d at 265-66.
158
Id. at 252. The court also rejected DynaLantic’s argument that the government may only seek to remedy
discrimination by a government entity, or by private individuals directly using government funds to discriminate. The
court viewed these arguments as foreclosed by prior decisions holding that, under the Fourteenth Amendment, the
government may implement race-conscious programs “to prevent itself from acting as a ‘passive participant’ in private
discrimination in the relevant industries or markets.” Id. at 31 (quoting City of Richmond v. J.A. Croson, 488 U.S. 469,
492 (1989)).
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prior to 1978 (when Congress expressly authorized set-asides for disadvantaged small businesses)
had evidenced that race-neutral methods were insufficient to promote contracting with minorityowned small businesses.158 The court further noted that the 8(a) Program was intended to be a
business development program, not a means to “channel contracts” to minority firms;159 that
Section 8(a) of the Small Business Act expressly provides that awards may be made through the
492
(1989)).
159
Id. at 255 (“Reports prepared by the GAO and investigations conducted by both the executive and legislative
branches prior to the 1978 codification showed that the Section 8(a) program had fallen far short of its goal to develop
businesses owned by disadvantaged individuals, and that one reason for this failure was that the program had no
legislative basis.”).
160
Id. at 256 (quoting H.Rept. 1714, 95th Cong., 2nd sess., at 22-23 (1978)).
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.
8(a) Program only when SBA determines that “such action is necessary and appropriate”;160161 and
that the act requires the President and SBA to report annually to Congress on the program,
thereby ensuring that Congress has evidence as to whether there is a “continuing compelling need
for the program.”161162 Similarly, in finding that the program was narrowly tailored to meet the
government’s interests, the court noted (1) that goals for contracting with small disadvantaged
businesses are purely aspirational, and there are no penalties for failing to meet them;162163 (2) the
nine-year limits on program participation for individual owners and firms;163164 and (3) that SBA
may not accept a requirement for the 8(a) Program if it determines that doing so will have a
adverse effect on another small business or group of small businesses.164165 The court emphasized
that the last two factors, in particular, helped ensure that race-conscious remedies do not “last
longer than the discriminatory effects [they are] designed to eliminate,”165166 and “work the least
harm possible to other innocent persons competing for the benefit.”166167
In contrast, in upholding the as-applied challenge, the court focused on the industry in which
DOD had proposed using an 8(a) set-aside, rather than aspects of the 8(a) Program. The court
characterized the military simulation and training industry as a “highly skilled” one,167168 and noted
that the government had conceded there was no evidence of public or private sector
discrimination in this industry.168169 The court further suggested that, with the requisite evidence, the
government could use the 8(a) Program to make awards in the military simulation and training
industry.169170 However, despite such caveats, the 8(a) Program would appear vulnerable to as158
Id. at *40 (“Reports prepared by the GAO and investigations conducted by both the executive and legislative
branches prior to the 1978 codification showed that the Section 8(a) program had fallen far short of its goal to develop
businesses owned by disadvantaged individuals, and that one reason for this failure was that the program had no
legislative basis.”).
159
Id. at *43 (quoting H.Rept. 1714, 95th Cong., 2nd sess., at 22-23 (1978)).
160
Id. at *33-*34.
161
Id. at *48asapplied challenges in the wake of the DynaLantic decision, particularly in other “highly skilled”
industries where there could be questions about the availability of qualified minority
contractors.171 As-applied challenges to the 8(a) Program have succeeded in the past, arguably
161
Id. at 252-53.
Id. at 258. DynaLantic had asserted that post-enactment evidence of discrimination should not be considered.
However, the court concluded that it was proper to consider such evidence, particularly where the “statute is over thirty
years old and the evidence used to justify Section 8(a) [at the time of its enactment] is stale for purposes of determining
a compelling interest in the present.” Id.
162163
Id. at *132-*135.
163
Id. at *137-*140.
164
Id. at *144-*150.
165282-86.
164
Id. at 287-88.
165
Id. at 289-91.
166
Adarand Constructors, Inc. v . Peña, 515 U.S. 200, 238 (1995).
166167
Grutter v. Bollinger, 539 U.S. 306, 341 (2003).
167168
DynaLantic, 2012 U.S. Dist. LEXIS 114807, at *120.
168
Id. at *72885 F. Supp. 2d at 281.
169
Id. at 265. The government attempted to assert that, “as a matter of law, [it] need not tie evidence of discriminatory
barriers to minority business formation and development to evidence of discrimination in any particular industry.” Id. at
*118280. However, the court rejected this position as inconsistent with Supreme Court precedent, which it construed as
making “clear that the government must provide evidence demonstrating there were eligible minorities in the relevant
market … that were denied entry or access notwithstanding their eligibility.” Id.
169170
Id. at *154292. DOD, however, has responded to the DynaLantic decision by prohibiting the award of contracts for
“military
simulators or any services in the military simulator industry,” a prohibition that applies to “all future contract
awards,
including extensions of existing contracts or the exercise of options on existing contracts.” Dep’t of Defense,
Office of
the Under Secretary of Defense, Immediate Cessation of Small Business Development Program (8(a)
(continued...)
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applied challenges in the wake of the DynaLantic decision, particularly in other “highly skilled”
industries where there could be questions about the availability of qualified minority
contractors.170 As-applied challenges to the 8(a) Program have succeed in the past, arguably
without materially diminishing the efficacy of the program.171 Program)
Procurement Contracts for Military Simulators or Services in the Military Simulator Industry, August 22, 2012,
available at http://www.acq.osd.mil/dpap/policy/policyvault/USA004988-12-DPAP.pdf. Some commentators have
criticized this decision, in part, on the grounds that it prohibits the procurement of goods or services in this industry,
while the DynaLantic decision addressed only goods. See, e.g., National Minority Organizations Respond to Federal
DynaLantic Corp. Decision, PR Newswire, August 31, 2012, available at http://www.prnewswire.com/news-releases/
national-minority-organizations-respond-to-federal-court-dynalantic-corp-decision-168192866.html.
171
See, e.g., Danielle Ivory, Minority Vendors Say Awards Program at Risk on U.S. Court Ruling, Bloomberg Gov’t,
September 13, 2012 (quoting Alan Chvotkin, counsel and executive vice president of the Professional Services
(continued...)
162
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.
without materially diminishing the efficacy of the program.172 The current situation could be
different, though, in that competition for federal contracts seems likely to increase as federal
procurement spending decreases due to budget cuts and, potentially, sequestration.172
173
Both parties in DynaLantic have appealed the district court’s decision to the U.S. Court of
Appeals for the District of Columbia Circuit.174 At least one other challenge to the 8(a) Program is
also pending in the federal district court for the
District of Columbia,173175 and new challenges could
potentially be filed in other jurisdictions,
including the U.S. Court of Federal Claims. Appeals
from the Court of Federal Claims are heard
by the U.S. Court of Appeals for the Federal Circuit,
which, in its 2008 decision in Rothe
Development Corporation v. Department of Defense, struck
down a DOD contracting program
that incorporated a similar presumption that minorities are
disadvantaged.174176 The Rothe court
applied what is arguably a more stringent approach to equal
protection analysis—and,
particularly, the evidence compiled by Congress—than that applied by
the DynaLantic court,177 and
it is unclear how the 8(a) Program would fare if reviewed in light of
Rothe.175
(...continued)
Program) Procurement Contracts for Military Simulators or Services in the Military Simulator Industry, August 22,
2012, available at http://www.acq.osd.mil/dpap/policy/policyvault/USA004988-12-DPAP.pdf. Some commentators
have criticized this decision, in part, on the grounds that it prohibits the procurement of goods or services in this
industry, while the DynaLantic decision addressed only goods. See, e.g., National Minority Organizations Respond to
Federal DynaLantic Corp. Decision, PR Newswire, August 31, 2012, available at http://www.prnewswire.com/newsreleases/national-minority-organizations-respond-to-federal-court-dynalantic-corp-decision-168192866.html.
170
See, e.g., Danielle Ivory, Minority Vendors Say Awards Program at Risk on U.S. Court Ruling, Bloomberg Gov’t,
September 13, 2012 (quoting Alan Chvotkin, counsel and executive vice president of the Professional Services
178
(...continued)
Council, as saying that the DynaLantic ruling may “open the door to more lawsuits,” and “[t]he implications across the
government could be significant”).
171172
See supra note 153154 and accompanying text.
172173
See, e.g., Federal Spending Cuts Mean Fiercer Competition for Contractors and Higher Need for Market Research,
According to US Federal Contractor Registration, SFGate, September 22, 2011, available at http://www.sfgate.com/
business/article/Federal-Spending-Cuts-Mean-Fiercer-Competition-2304840.php.
173174
See, e.g., Stewart Bishop, DynaLantic Appeals Ruling on Minority-Based Contracting, Law360, October 19, 2012,
available at http://www.law360.com/articles/387961/dynalantic-appeals-ruling-on-minority-based-contracting- (also
noting the government’s intent to appeal).
175
Rothe Dev., Inc. v. Dep’t of Defense, No. 12-CV-744, Original Complaint (filed D.D.C., May 9, 2012).
174176
545 F.3d 1023 (Fed. Cir. 2008). For more on the Rothe decision, see generally archived CRS Report R40440, Rothe
Development Corporation v. Department of Defense: The Constitutionality of Federal Contracting Programs for
Minority-Owned and Other Small Businesses, by Jody Feder and Kate M. Manuel.
175177
See generally CRS Legal Sidebar WSLG213, 8(a) Program for Minority Owned Small Businesses: Facially
Constitutional But Potentially Vulnerable to As-Applied Challenges?, by Kate M. Manuel and Jody Feder.
178
In particular, the DynaLantic court relied on the precedent of United States v. Salerno in requiring that a plaintiff in
a facial challenge must establish “that no set of circumstances exists under which [Section 8(a)] would be valid.”
DynaLantic, 2012 U.S. Dist. LEXIS 114807, at *23 (quoting Salerno, 481 U.S. 739, 745 (1987)). The Rothe court, in
contrast, declined to apply this requirement of Salerno to the facial challenge to the program it struck down. See Rothe,
545 F.3d at 1032.
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.
Appendix. Comparison of the Requirements
Pertaining to 8(a) Businesses Generally, Tribally
Owned Businesses, ANC-Owned Businesses,
and Others
Requirements
“Small”
8(a)
Businesses
Generally
“Unconditionally
owned and
controlled”
ANC-Owned 8(a)
BusinessesDifferent Types of 8(a) Firms
Category
“Small”
“Business”
8(a) Firms
Generally
Tribally Owned
8(a) Firms
ANC-Owned
8(a) Firms
Independently
owned and
operated; not
dominant in field
of operation;
meets size
standards (15
U.S.C. §631(a))
Independently
owned and
operated; not
dominant in field of
operation; meets
size
of operation;
meets size
standards (15
U.S.C. §631(a))
Independently
owned and
operated; not
dominant in field of
operation; meets
size
of operation;
meets size
standards (15
U.S.C. §631(a))
Affiliations based on
the tribe or tribal
ownership, among
others, do not count
(15 U.S.C.
§636(j)(10)(J)(ii); 13
All affiliations
count (13 C.F.R.
§121.103)
Affiliations based
on the tribe or
tribal ownership,
among others, do
not count (15
U.S.C.
§636(j)(10)(J)(ii);
13 C.F.R.
§124.109(c)(2))
Affiliations
based on
the the
ANC or
ownership by the
ANC,
the ANC,
among others,
do not count
(15
U.S.C.
§636(j)(10)(J)(ii); 13
13 C.F.R.
§124.109(c)(2))
For-profit
entity entity
with its
place of
business in the
United States;
operates
primarily
within the
within
the United States
or makes a
significant
contribution
to to
the U.S.
economy (13
economy
(13 C.F.R.
§121.105(a)(1))
For-profit entity
with its place of
business in the
United States;
operates primarily
within the United
States or makes a
significant
contribution to the
the U.S. economy
(13
C.F.R.
§121.105(a)(1))
For-profit entity
with its place of
business in the
United States;
operates primarily
within
primarily within
the United
States or makes a
a significant
contribution to the
U.S.
the U.S.
economy (13
C.F.R.
§121.105(a)(1))
At least 51%
unconditionally
and directly
owned by one
or more
At least 51% tribally
owned (13 C.F.R.
§124.109(b))
At least 51% ANCowned (13 C.F.R.
§124.109(a)(3))
Management may be
conducted by
Management may be
conducted by
Independently
owned and
operated; not
dominant in
field of
operation;
meets size
standards (15
U.S.C. §631(a))
All affiliations
count (13
C.F.R.
§121.103)
“Business”
Tribally Owned
8(a) Businesses
Although ANC may
be non-profit, ANCowned firms must
be for-profit to be
eligible for 8(a)
Program (13 C.F.R.
§124.109(a)(3))
Congressional Research Service
NHO-Owned
8(a)
Businesses
Although ANC
may be nonprofit, ANCowned firms
must be forprofit to be
eligible for 8(a)
Program (13
C.F.R.
§124.109(a)(3))
“Uncondition
ally owned
and
controlled”
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At least 51%
unconditionally
and directly
owned by one or
more
Congressional Research Service
At least 51%
tribally owned (13
C.F.R.
§124.109(b))
At least 51%
ANC-owned
(13 C.F.R.
§124.109(a)(3))
NHOOwned 8(a)
Firms
Independently
owned and
operated; not
dominant in
field of
operation;
meets size
standards (15
U.S.C. §631(a))
Affiliations
based on the
NHO or
ownership by
the NHO,
among others,
do not count
(15 U.S.C.
§636(j)(10)(J)(ii
); );
13 C.F.R.
§124.110(c))
CDC-Owned 8(a)
Businesses
Independently owned
and
8(a) Firms
Independently
owned and
operated; not
dominant in field of
operation; meets size
size standards (15
U.S.C.
§631(a))
Affiliations based
on the
CDC or
ownership by
the the
CDC, among
others, do not count
count (15 U.S.C.
§636(j)(10)(J)(ii); 13
C.F.R. §124.111(c))
For-profit entity
entity with its
place of
business in the
United States;
operates
primarily within
the United
States or makes
a significant
contribution to
within the
United States
or makes a
significant
contribution
to the U.S.
economy (13
C.F.R.
§121.105(a)(1)
)
For-profit entity
with its
place of
business in the
United States; operates
primarily within the
United States or makes
a significant contribution
to the
operates primarily
within the United
States or makes a
significant
contribution to the
U.S. economy (13
C.F.R.
§121.105(a)(1))
At least 51%
NHO-owned
(13 C.F.R.
§124.110(a))
At least 51% CDCowned (13 C.F.R.
§124.111(a))
Not explicitly
Management and daily
business operations to
Management and
25
The “8(a) Program” for Small Businesses
Requirements
8(a)
Businesses.
Category
8(a) Firms
Generally
disadvantaged
individuals
who who
are U.S.
citizens (13
citizens
(13 C.F.R.
§124.105)
Management
and daily
business
operations
must be
and
daily business
operations must
be conducted by
one or more
disadvantaged
individuals (13
C.F.R.
§124.106)
NHO-Owned
8(a)
Businesses
CDC-Owned 8(a)
Businesses §124.106)
c11173008
NHOOwned 8(a)
Firms
Tribally Owned
8(a) BusinessesFirms
ANC-Owned 8(a)
Businesses
individuals who are
not members of the
tribe provided that
the
8(a) Firms
Management may
be conducted by
individuals who
are not members
of the tribe
provided that the
SBA determines
that such
management is
necessary to assist
the
assist the
business’s
development, among
other
among other
things (13
C.F.R.
§124.109(c)(4)(B))
individuals who are
not Alaska Management
may be
conducted by
individuals who
are not Alaska
Natives
provided that the
SBA
the SBA
determines that
such
management is
necessary to assist
the
assist the
business’s
development, among
other
among other
things (13
C.F.R.
§124.109(c)(4)(B
))
NHO must
control the
board of
directors, but
individual who
is responsible
for day-to-day
management
need not
establish
personal social
and economic
disadvantage
(13 C.F.R.
§124.110(d))
daily business
operations to be
))
addressed in
regulationa
be conducted by
individuals having
managerial experience
of an
experience of an
extent and
complexity needed to
to run the firm (13
C.F.R.
§124.111(b))
CDC-Owned
8(a) Firms
“Socially
disadvantaged
individual”
Members of
designated
groups
presumed to
presumed
to be socially
disadvantaged;
other
individuals may
prove individuals
may prove
personal
disadvantage
by a
preponderance
of the
evidence (13
evidence
(13 C.F.R.
§124.103)
Indian tribes
presumed to be
socially
disadvantaged (43
U.S.C. §1626(e); 15
15 U.S.C.
§637(a)(4)(A)-(B);
13 C.F.R.
§124.109(b)(1))
ANCs
presumed to
be be
socially
disadvantaged
(43
U.S.C.
§1626(e); 15
U.S.C.
§637(a)(4)(A)-(B);
13 C.F.R.
§124.109(b)(1))
NHOs
presumed to be
be socially
disadvantaged
(43 U.S.C.
§1626(e); 15
U.S.C.
§637(a)(4)(A)(B); 13 C.F.R.
§124.109(b)(1)
)
CDCs presumed to be
socially disadvantaged
(42
be socially
disadvantaged (42
U.S.C. §9815(a)(2))
“Economically
disadvantaged
individual”
Financial
information
(e.g., personal
personal income,
personal net
worth, fair
market value
of of
assets) must
show
diminished
financial capital
and credit
opportunities
(13
C.F.R.
§124.104)
Tribe must prove
economic
disadvantage the
first time a tribally
owned firm applies
applies to the 8(a)
Program;
thereafter, a tribe
need only prove
economic
disadvantage at the
the request of the SBA
SBA (13 C.F.R.
§124.109(b)(2))
Deemed to be
economically
disadvantaged
(43
U.S.C.
§1626(e); 13
C.F.R.
§124.109(a)(2))
For first
applicant to
8(a)
Program,
NHO
members must
meet the same
initial eligibility
economic
disadvantage
thresholds as
individuallyowned 8(a)
applicants; for
later
applicants,
NHO members
must
members must
meet the
economic
disadvantage
thresholds for
continued 8(a)
eligibility (13
C.F.R.
§124.110(c)(1)
CDCs presumed to be
be economically
disadvantaged (42
U.S.C.
§9815(a)(2))
Congressional Research Service
26
The “8(a) Program” for Small Businesses
Requirements
“Good
character”
“Demonstrated
potential for
success”
8(a)
Businesses.
Category
8(a) Firms
Generally
Tribally Owned
8(a) BusinessesFirms
ANC-Owned 8(a)
Businesses
8(a) Firms
NHOOwned 8(a)
Firms
CDC-Owned
8(a) Firms
C.F.R.
§124.110(c)(1)
“Good
character”
“Demonstrate
d potential for
success”
No criminal
conduct or
violations of
SBA
regulations;
cannot be
debarred or
suspended
from
government
contracting (13
C.F.R.
§124.108(a))
No criminal conduct
or violations of SBA
regulations; cannot
be Firm must
generally have
been in business
in primary
industry for at
least two full
years prior to
date of
application to
8(a) Program
unless SBA grants
a waiver; waiver
based on 5
conditionsb (13
C.F.R. §124.107)
No criminal
conduct or
violations of SBA
regulations;
cannot be
debarred or
suspended from
government
contracting (13
C.F.R.
§124.108(a))
No criminal conduct
or violations of SBA
regulations; cannot
be
conduct or
violations of
SBA regulations;
cannot be
debarred or
suspended from
government
contracting (13
C.F.R.
§124.108(a))
Requirement applies
applies only to
officers,
directors, and
shareholders owning
more than a 20%
interest in the
business, not to all
members of the
tribe (13
and shareholders
owning more than
a 20% interest in
the business, not
to all members of
the tribe (13
C.F.R.
§124.109(c)(7)(B)(
ii))
Requirement applies
applies only to
officers,
directors, and
shareholders owning
more
owning more
than a 20%
interest in the
business, not to all
ANC
all ANC
shareholders
(13 C.F.R.
§124.109(c)(7)(B
)(ii))
Firm must
generally have
been in
business in
business
in primary
industry for at
least two full
years prior to
date of
application to
8(a) Program
unless SBA
grants a
waiver; waiver
based on 5
conditionsb (13
C.F.R.
§124.107)
Firm must have
been in business in
primary industry for
at least two full
years prior to date
of application application
to 8(a)
Program; individuals
who will manage
firm Program;
individuals who
will manage firm
must have
substantial
experience, and firm
must have had
firm must have
had successful
performance and
adequate capital; or
Tribe must have
made
or Tribe must
have made
written
commitment to
support the firm and
have the financial
and have the
financial ability to
do so
Firm must have
been in business in
primary industry for
at
in primary
industry for at
least two full
years prior to date
of
date of
application to
8(a)
Program; individuals
who will manage
firm must have
substantial
experience, and firm
must have had
successful
performance and
adequate capital; or
ANC must have
made written
commitment to
support the firm and
have the financial
ability to do so
(13 C.F.R.
§124.109(c)(6)(i)-(iii)
(13 C.F.R.
§124.109(c)(6)(i)-(iii)
NHO-Owned
8(a)
Businesses
CDC-Owned 8(a)
Businesses
No criminal
conduct or
violations of
SBA regulations;
cannot be
debarred or
suspended from
government
contracting (13
C.F.R.
§124.108(a))
No criminal conduct or
violations of SBA
regulations; cannot be
debarred or suspended
from government
contracting (13 C.F.R.
§124.108(a))
Requirements apply to
the firm and “all its
principals” (13 C.F.R.
§124.111(g))
Regulations do
not address to
whom
requirements
applya
Firm must have
been in business
in Program;
individuals who
will manage firm
must have
substantial
experience, and
firm must have
had successful
performance
and adequate
capital; or ANC
must have made
written
commitment to
support the firm
and have the
financial ability
to do so
(13 C.F.R.
§124.109(c)(6)(i)-
c11173008
Congressional Research Service
(13 C.F.R.
No criminal
conduct or
violations of
SBA
regulations;
cannot be
debarred or
suspended
from
government
contracting
(13 C.F.R.
§124.108(a))
No criminal
conduct or
violations of SBA
regulations; cannot
be debarred or
suspended from
government
contracting (13
C.F.R. §124.108(a))
Requirements apply
to the firm and “all
its principals” (13
C.F.R. §124.111(g))
Regulations do
not address to
whom
requirements
applya
Firm must
have been in
business in
primary
industry for at
least two full
years prior to
date of
application to
8(a) Program;
individuals who
will
who will
manage firm
must have
substantial
experience, and
firm must have
had
and firm must
have had
successful
performance
and adequate
capital; or NHO
must
NHO must
have made
written
commitment to
to support the
firm and have
the financial
ability to do so
Firm must have
been in
business in primary
industry
primary industry
for at least two
full full
years prior to date
of application to
8(a)
Program; individuals
individuals who will
manage firm
must must
have substantial
experience, and firm
firm must have had
successful performance
and
performance and
adequate capital; or
CDC must have made
written
made written
commitment to
support the firm and
and have the
financial ability
to do so
(13 C.F.R. §124.111
(f)(1)-(3)
(13 C.F.R.
§124.110 (g)(1)(3)
Sole-source
awards
With
contracts
valued at over
$4 million
($6.5 million
for
manufacturing
Can be made with
contracts valued at
over $4 million
($6.5 million for
manufacturing
contracts) even if
there is a reasonable
Congressional Research Service
Can be made with
contracts valued at
over $4 million
($6.5 million for
manufacturing
contracts) even if
there is a reasonable
Can be made
with
Department of
Defense
contracts
valued at over
$4 million ($6.5
With contracts valued
at over $4 million ($6.5
million for
manufacturing)contracts,
sole-source awards
permissible only if there
is not a reasonable
27
The “8(a) Program” for Small Businesses
8(a)
Businesses
Generally
NHO-Owned
8(a)
Businesses
CDC-Owned 8(a)
Businesses
to
do so
(13 C.F.R. §124.111
(f)(1)-(3)
27
The “8(a) Program” for Small Businesses
.
Category
8(a) Firms
Generally
Tribally Owned
8(a) Firms
(iii)
ANC-Owned
8(a) Firms
NHOOwned 8(a)
Firms
§124.109(c)(6)(i)
-(iii)
the financial
ability to do so
CDC-Owned
8(a) Firms
(13 C.F.R.
§124.110
(g)(1)-(3)
Sole-source
awards
With contracts
valued at over $4
million ($6.5
million for
manufacturing
contracts), solesource awards
permissible only
if there is not a
reasonable
expectation that
at least two
eligible 8(a) firms
will submit offers
and the award
can be made at
fair market price
(48 C.F.R.
§19.805-1(b)(1)(2))
Can be made with
contracts valued
at over $4 million
($6.5 million for
manufacturing
contracts) even if
there is a
reasonable
expectation that
at least two
eligible 8(a) firms
will submit offers
and the award can
be made at fair
market price (15
U.S.C.
§637(a)(1)(D)(i)(ii); 48 C.F.R.
§19.805-1(b)(1)(2))
Can be made
with contracts
valued at over
$4 million ($6.5
million for
manufacturing
contracts) even
if there is a
reasonable
expectation that
at least two
eligible 8(a)
firms will
submit offers
and the award
can be made at
fair market
price (48 C.F.R.
§219.8051(b)(2)(A)-(B)).
expectation that at least
two eligible 8(a) firms
will submit offers and
the award can be made
at fair market price (48
C.F.R. §19.805-1(b)(1)(2))
Tribally Owned
8(a) Businesses
ANC-Owned 8(a)
Businesses
contracts),
sole-source
awards
permissible
only if there is
not a
submit
offers and the
award can be
made at fair
market price (15
U.S.C.
§637(a)(1)(D)(i)(ii); 48 C.F.R.
§19.805-1(b)(1)(2))
Can be made
with
Department of
Defense
contracts
valued at over
$4 million
($6.5 million
for
manufacturing
contracts)
even if there is
a reasonable
expectation
that at least
two eligible
8(a) firms will
submit offers
and the award
can be made at
fair market
price (48
C.F.R. §19
§219.8051(b)(1)-(2))
2)(A)(B)).
With contracts
valued at over $4
million ($6.5 million
for manufacturing
contracts), solesource awards
permissible only if
there is not a
reasonable
expectation that at
least two eligible
8(a) firms will
submit offers and
the award can be
made at fair market
price (15 U.S.C.
§637(a)(1)(D)(i)-(ii);
48 C.F.R. §19.8051(b)(1)-(2))
expectation that at
least 48 C.F.R.
§19.805-1(b)(1)-(2))
Otherwise
cannot be
made unless
there is not a
reasonable
expectation
that at least
two eligible
8(a) firms will
submit offers and
and the award
can be
made at
fair market
price (15 U.S.C.
§637(a)(1)(D)(i)-(ii);
48 48
C.F.R.
§19.8051(b)(1)-(2))
Inability to
protest eligibility
for award
Firm’s
eligibility for
eligibility for
award
c11173008
Firm’s eligibility
for award cannot
be challenged
or protested
as part of the
solicitation or
proposed
contract
award (48
C.F.R. §19.8052(d))
Firm’s eligibility for
award cannot be
challenged or
protested as part of
the solicitation or
proposed contract
award (48 C.F.R.
§19.805-2(d))
Firm’s eligibility for
award cannot be
challenged or
protested as part of
the solicitation or
proposed contract
award (48 C.F.R.
§19.805-2(d))
Firm’s eligibility
for award
cannot be
challenged or
protested as
part of the
solicitation or
proposed
contract award
(48 C.F.R.
§19.805-2(d))
Firm’s eligibility for
award cannot be
challenged or protested
as part of the
solicitation or proposed
contract award (48
C.F.R. §19.805-2(d))
Maximum of
nine years in the
8(a) Program
Firm receives
“a program
term of nine
years” but
could be
terminated or
graduated
early (13
C.F.R. §124.2)
Firm receives “a
program term of
nine years” but
could be terminated
or graduated early
(13 C.F.R. §124.2)
Firm receives “a
program term of
nine years” but
could be terminated
or graduated early
(13 C.F.R. §124.2)
Firm receives “a
program term
of nine years”
but could be
terminated or
graduated early
(13 C.F.R.
§124.2)
Firm receives “a
program term of nine
years” but could be
terminated or graduated
early (13 C.F.R. §124.2)
Requirements
Otherwise
cannot be made
unless there is
not a
reasonable
expectation that
at least two
eligible 8(a)
firms will
submit offers
and the award
can be made at
fair market
price (48 C.F.R.
§19.805-1(b)(1)(2))
Congressional Research Service
28
The “8(a) Program” for Small Businesses
Requirements
8(a)
Businesses
Generally
Tribally Owned
8(a) Businesses
ANC-Owned 8(a)
Businesses
NHO-Owned
8(a)
Businesses
CDC-Owned 8(a)
Businesses
One-time
eligibility for
8(a) Program
Applies to
both
disadvantaged
owners and
firms (13
C.F.R.
§124.108(b))
Applies only to
tribally owned firms,
not tribes (15 U.S.C.
§636(j)(11)(B)-(C))
Applies only to
ANC-owned firms,
not ANCs (15
U.S.C.
§636(j)(11)(B)-(C))
Applies only to
NHO-owned
firms, not
NHOs (15
U.S.C.
§636(j)(11)(B)(C))
Applies only to CDCowned firms, not CDCs
(15 U.S.C.
§636(j)(11)(B)-(C))
Limits on the
amount of 8(a)
contracts that a
firm may receive
No source
awards
possible once
the firm has
received
combined total
of competitive
and solesource 8(a)
contracts in
excess of the
dollar amount
set forth in 13
C.F.R.
§124.519 (13
C.F.R.
§124.519(a))
Can make solesource awards even
when a firm has
received combined
total of competitive
and sole-source 8(a)
contracts in excess
of the dollar amount
set forth in 13
C.F.R. §124.519 (13
C.F.R. §124.519(a))
Can make solesource awards even
when a firm has
combined total of
competitive and
sole-source 8(a)
contracts in excess
of the dollar amount
set forth in 13
C.F.R. §124.519 (13
C.F.R. §124.519(a))
Combined total of
competitive and solesource 8(a) contracts in
excess of the dollar
amount set forth in 13
C.F.R. §124.519 not
explicitly addressed in
regulation
Firms must receive
an increasing
percentage of
revenue from non8(a) sources
throughout their
participation in the
8(a) Program (13
C.F.R. §124.509(b))
Firms must receive
an increasing
percentage of
revenue from non8(a) sources
throughout their
participation in the
8(a) Program (13
C.F.R. §124.509(b))
Can make solesource awards
even when a
firm has
combined total
of competitive
and sole-source
8(a) contracts
in excess of the
dollar amount
set forth in 13
C.F.R. §124.519
(13 C.F.R.
§124.519(a))
Firms must
receive an
increasing
percentage of
revenue from
non-8(a)
sources
throughout
their
participation in
the 8(a)
Program (13
C.F.R.
§124.509(b))
Firms must
receive an
increasing
percentage of
revenue from
non-8(a)
sources
throughout
their
participation in
the 8(a)
Program (13
C.F.R.
§124.509(b))
Firms must receive an
increasing percentage of
revenue from non-8(a)
sources throughout
their participation in the
8(a) Program (13 C.F.R.
§124.509(b)) or
protested as part
of the solicitation
or proposed
Congressional Research Service
Firm’s eligibility
for award cannot
be challenged or
protested as part
of the solicitation
or proposed
Firm’s eligibility
for award
cannot be
challenged or
protested as
part of the
Firm’s
eligibility for
award cannot
be challenged
or protested
as part of the
Firm’s eligibility for
award cannot be
challenged or
protested as part
of the solicitation
or proposed
28
The “8(a) Program” for Small Businesses
.
Category
c11173008
8(a) Firms
Generally
Tribally Owned
8(a) Firms
ANC-Owned
8(a) Firms
NHOOwned 8(a)
Firms
CDC-Owned
8(a) Firms
contract award
(48 C.F.R.
§19.805-2(d))
contract award
(48 C.F.R.
§19.805-2(d))
solicitation or
proposed
contract award
(48 C.F.R.
§19.805-2(d))
solicitation or
proposed
contract
award (48
C.F.R.
§19.805-2(d))
contract award (48
C.F.R. §19.8052(d))
Maximum of
nine years in
the 8(a)
Program
Firm receives “a
program term of
nine years” but
could be
terminated or
graduated early
(13 C.F.R.
§124.2)
Firm receives “a
program term of
nine years” but
could be
terminated or
graduated early
(13 C.F.R. §124.2)
Firm receives “a
program term of
nine years” but
could be
terminated or
graduated early
(13 C.F.R.
§124.2)
Firm receives
“a program
term of nine
years” but
could be
terminated or
graduated
early (13
C.F.R. §124.2)
Firm receives “a
program term of
nine years” but
could be
terminated or
graduated early (13
C.F.R. §124.2)
One-time
eligibility for
8(a) Program
Applies to both
disadvantaged
owners and firms
(13 C.F.R.
§124.108(b))
Applies only to
tribally owned
firms, not tribes
(15 U.S.C.
§636(j)(11)(B)(C))
Applies only to
ANC-owned
firms, not ANCs
(15 U.S.C.
§636(j)(11)(B)(C))
Applies only to
NHO-owned
firms, not
NHOs (15
U.S.C.
§636(j)(11)(B)(C))
Applies only to
CDC-owned firms,
not CDCs (15
U.S.C.
§636(j)(11)(B)-(C))
Limits on the
amount of
8(a) contracts
that a firm
may receive
No source
awards possible
once the firm has
received
combined total of
competitive and
sole-source 8(a)
contracts in
excess of the
dollar amount set
forth in 13 C.F.R.
§124.519 (13
C.F.R.
§124.519(a))
Can make solesource awards
even when a firm
has received
combined total of
competitive and
sole-source 8(a)
contracts in
excess of the
dollar amount set
forth in 13 C.F.R.
§124.519 (13
C.F.R.
§124.519(a))
Can make solesource awards
even when a
firm has
combined total
of competitive
and sole-source
8(a) contracts in
excess of the
dollar amount
set forth in 13
C.F.R. §124.519
(13 C.F.R.
§124.519(a))
Combined total of
competitive and
sole-source 8(a)
contracts in excess
of the dollar
amount set forth in
13 C.F.R. §124.519
not explicitly
addressed in
regulation
Firms must
receive an
increasing
percentage of
revenue from
non-8(a) sources
throughout their
participation in
the 8(a) Program
(13 C.F.R.
§124.509(b))
Firms must
receive an
increasing
percentage of
revenue from
non-8(a) sources
throughout their
participation in
the 8(a) Program
(13 C.F.R.
§124.509(b))
Firms must
receive an
increasing
percentage of
revenue from
non-8(a)
sources
throughout their
participation in
the 8(a)
Program (13
C.F.R.
§124.509(b))
Can make
sole-source
awards even
when a firm
has combined
total of
competitive
and solesource 8(a)
contracts in
excess of the
dollar amount
set forth in 13
C.F.R.
§124.519 (13
C.F.R.
§124.519(a))
Congressional Research Service
Firms must
receive an
increasing
percentage of
revenue from
non-8(a)
sources
throughout
their
participation in
the 8(a)
Program (13
C.F.R.
§124.509(b))
Firms must receive
an increasing
percentage of
revenue from non8(a) sources
throughout their
participation in the
8(a) Program (13
C.F.R. §124.509(b))
29
The “8(a) Program” for Small Businesses
.
Source: Congressional Research Service.
a.
The rules governing NHO- and/or CDC-owned firms do not address this issue, and although the general
rules apply where no “special rules” exist, it seems unlikely that NHO- and/or CDC-owned firms are
treated differently than tribally or ANC-owned firms in this regard.
b.
These criteria include (1) the management experience of the disadvantaged individual(s) upon whom
eligibility is based; (2) the business’s technical experience; (3) the firm’s capital; (4) the firm’s performance
record on prior federal or other contracts in its primary field of operations; and (5) whether the firm
presently has, or can demonstrate its ability to timely obtain, the personnel, facilities, equipment, and other
resources necessary to perform contracts under Section 8(a).
Congressional Research Service
29
The “8(a) Program” for Small Businesses
Author Contact Information
Kate M. Manuel
Legislative Attorney
kmanuel@crs.loc.gov, 7-4477
Congressional Research Service
John R. Luckey
Legislative Attorney
jluckey@crs.loc.gov, 7-7897Acknowledgments
Former CRS legislative attorney, John R. Luckey, co-authored this report.
c11173008
Congressional Research Service
30