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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
November 26, 2014
Congressional Research Service
7-5700
www.crs.gov
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The “8(a) Program” for Small Businesses
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 FY2013, the federal
government spent $14 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 program. This amount increases to $750,000 for continuing eligibility. In determining
whether an applicant has good character, SBA looks for criminal conduct, violations of SBA
regulations, or debarment or suspension from federal contracting. For a firm to have “potential for
success,” it generally must have been in business in the field of its primary industry classification
for two years immediately prior to applying to the program. However, small businesses owned by
Indian tribes, Alaska Native Corporations, Native Hawaiian Organizations, and Community
Development Corporations 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”
constitutes 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 discrimination 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 Different Types of 8(a) Firms ........... 25
Contacts
Author Contact Information........................................................................................................... 30
Acknowledgments ......................................................................................................................... 30
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ommonly known as the “8(a) Program,” the Minority Small Business and Capital
Ownership Development Program is one of several federal contracting programs for small
C 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 FY2013, the federal government spent $14
billion on contracts and subcontracts with 8(a) firms.3 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.4
However, recent Congresses have had particular interest in the 8(a) Program because of the
recession of 2007-2009,5 its effects on minority-owned small businesses,6 and small businesses’
role in job creation.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 2013, available at https://www.fpds.gov/downloads/top_requests/
FPDSNG_SB_Goaling_FY_2013.pdf. The report on FY2014 has not yet been compiled.
4 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)).
5 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 2007-
2009).
6 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.
7 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-plan-
focuses-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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and ethnic groups are socially disadvantaged violates the constitutional guarantee of equal
protection. A separate report, CRS Report R43573, Federal Contracting and Subcontracting with
Small Businesses: Legislation in the 113th Congress, by Kate M. Manuel, 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.”8 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.9 Two years later, in 1953, Congress transferred the SDPA’s
subcontracting authorities, among others, to the newly created Small Business Administration,10
with the intent that the SBA would exercise these powers in peacetime, as well as in wartime.11
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.12 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,”13 but the SBA seldom, if ever, employed
this subcontracting authority, focusing instead upon its loan and other programs.14
8 Small Business Mobilization Act, P.L. 77-603, §4(f), 56 Stat. 351 (June 11, 1942).
9 Act of July 31, 1951, P.L. 82-96, §110, 65 Stat. 131.
10 P.L. 83-163, §207(c)-(d), 67 Stat. 230 (July 30, 1953).
11 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”).
12 P.L. 85-536, §8(a)(1)-(2), 72 Stat. 384 (July 18, 1958).
13 Id.
14 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...)
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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.”15 Subsequent Presidents followed Roosevelt’s example, issuing a number of executive
orders seeking to improve the employment opportunities of members 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.17
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.18 However, under the PTCP, small businesses did not have to be minority-owned to
receive subcontracts under Section 8(a).19 Nixon’s program was larger and focused more
specifically on minority-owned small businesses.20 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.”21 A later regulation, promulgated in 1973, defined
“disadvantaged persons” as including, but not limited to, “black Americans, Spanish-Americans,
oriental Americans, Eskimos, and Aleuts.”22 However, the SBA lacked explicit statutory authority
for focusing its 8(a) Program on minority-owned businesses until 1978,23 although courts
(...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.”).
15 Exec. Order No. 8802, 6 Federal Register 3,109 (June 25, 1941). Similar requirements were later imposed on non-
defense contracts. See Exec. Order No. 9346, 8 Federal Register 7,182 (May 29, 1943).
16 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).
17 Report of the National Advisory Commission on Civil Disorders 21 (1968).
18 See, e.g., Hasty, supra note 14, at 11-12.
19 See, e.g., Jonathan J. Bean, BIG 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).
21 13 C.F.R. §124.8-1(b) (1970).
22 13 C.F.R. §124.8(c) (1973).
23 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.”24
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.25 Under the 1978 amendments, SBA can only
subcontract under Section 8(a) with “socially and economically disadvantaged small business
concerns,”26 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).27
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.”28
They also included congressional findings that “Black Americans, Hispanic Americans, Native
Americans, and other minorities” are socially disadvantaged.29 Thus, if an individual was a
24 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.
25 P.L. 95-507, 92 Stat. 1757 (October 24, 1978).
26 Id. at §202.
27 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.
28 Id. (codified at 15 U.S.C. §637(a)(5)).
29 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.30 Under these
regulations, which include a three-part test for determining whether minority groups not
mentioned in the amendment’s findings are disadvantaged,31 the SBA recognized the racial or
ethnic groups listed in Table 1 as socially disadvantaged for purposes of the 8(a) Program.32 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.33
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
n/a
(including American
Indians, Eskimos,
Aleuts, Native
Hawaiians)
Asian Pacific
Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China
Americans
(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
India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands,
Americans
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
30 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 29, 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”).
31 See 13 C.F.R. §124.103(d)(2)(i)-(iii)(1980).
32 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(b). 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).
33 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 overcoming the presumption of social disadvantage).
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are not socially disadvantaged.”34 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.35
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.].36
Congress created CDCs with the Community Development Act of 198137 and instructed the SBA
to issue regulations ensuring that CDCs could participate in the 8(a) Program.38
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),39 were to be deemed
“socially disadvantaged” for purposes of the 8(a) Program.40 In 1992, ANCs were further deemed
to be “economically disadvantaged.”41
34 P.L. 95-507, §202.
35 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 32, at 108.
36 42 U.S.C. §9802.
37 P.L. 97-35, Ch. 8, Subch. A, 95 Stat. 489 (1981) (codified at 42 U.S.C. §§9801 et seq.).
38 Id. at §626, 95 Stat. 496 (codified at 42 U.S.C. §9815).
39 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.
40 P.L. 99-272, §18015, 100 Stat. 370 (codified at 15 U.S.C. §637(a)(4)).
41 P.L. 102-415, §10, 106 Stat. 2115 (1992) (codified at 43 U.S.C. §1626(e)).
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The final owner-group, that of Native Hawaiian Organizations (NHOs), was recognized in
1988.42 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.43
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 sole-
source 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.44 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).45
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.”46 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.47 The eligibility requirements are the same at the time of entry into the
8(a) Program and throughout the Program unless otherwise noted.48
42 P.L. 100-656, §207, 102 Stat. 3861 (1988) (codified at 15 U.S.C. §637(a)(4)).
43 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 State of Hawaii.” 13 C.F.R. §124.3.
44 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).
45 See also archived CRS Report R40855, Contracting Programs for Alaska Native Corporations: Historical
Development and Legal Authorities, by Kate M. Manuel and Jane M. Smith (discussing contracting with ANC-owned
firms through the 8(a) Program and other programs).
46 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.
47 The SBA’s Office of Hearings and Appeals has, for example, developed a seven-part test for determining whether a
(continued...)
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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.49 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.50
“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.51
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.52 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 $32.5 million.53
Affiliations between businesses, or relationships allowing one party control or the power of
control over another,54 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.”55
Businesses can thus be determined to be other than small because of their involvement in joint
ventures,56 subcontracting arrangements,57 or franchise or license agreements,58 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).
48 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.”).
49 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).
50 13 C.F.R. §121.105(b).
51 15 U.S.C. §632(a)(1)-(2)(A).
52 13 C.F.R. §§121.101-121.109. 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).
53 13 C.F.R. §121.201.
54 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.
55 13 C.F.R. §121.103(a)(6).
56 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.”).
57 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.”).
58 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).59 Ownership is
“unconditional” when it is not subject to any conditions precedent or subsequent, executory
agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements
that could cause the benefits of ownership to go to another entity.60 Ownership is “direct” when
the disadvantaged individuals own the business in their own right and not through an
intermediary (e.g., ownership by another business entity or by a trust that is owned and controlled
by one or more disadvantaged individuals).61 Non-disadvantaged individuals and non-participant
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.62 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% (increasing to
20%-30% in certain circumstances) of another 8(a) firm.63
Participants must also be controlled by one or more disadvantaged individuals.64 “Control is not
the same as ownership” and includes both strategic policy setting and day-to-day management
and administration of business operations.65 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.66 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.”67 A disadvantaged individual must hold the highest officer position within the
business.68 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.”).
59 15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring at least 51% unconditional ownership). See also 13 C.F.R. §124.105.
60 13 C.F.R. §124.3.
61 13 C.F.R. §124.105(a).
62 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 110-112 and accompanying text.
63 13 C.F.R. §124.105(h)(2).
64 15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring control of management and business operations); 13 C.F.R. §124.106.
65 13 C.F.R. §124.106.
66 Id.
67 13 C.F.R. §124.106 & §124.106(a)(3).
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.70
“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.”71 Members of designated groups, listed in
Table 1, are entitled to a rebuttable presumption of social disadvantage for purposes of the 8(a)
Program,72 although this presumption can be overcome with “credible evidence to the contrary.”73
Individuals who are not members of designated groups must prove they are socially
disadvantaged by a preponderance of the evidence.74 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.75 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.76 Groups not included in
Table 1 may obtain listing by demonstrating disadvantage by a preponderance of the evidence.77
“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 capital and credit
opportunities as compared to others in the same or similar line of business who are not socially
disadvantaged.”78 Individuals claiming economic disadvantage must describe it in a personal
statement and submit financial documentation.79 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.80
However, principal ownership in a prospective or current 8(a) business is generally 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).
71 13 C.F.R. §124.103(a). See also 15 U.S.C. §637(a)(5).
72 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).
73 13 C.F.R. §124.103(b)(3).
74 13 C.F.R. §124.103(c)(1).
75 13 C.F.R. §124.103(c)(2)(i)-(iii).
76 13 C.F.R. §124.103(c)(2)(iii).
77 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 32.
78 13 C.F.R. §124.104(a). See also 15 U.S.C. §637(a)(6)(A).
79 13 C.F.R. §124.104(b)(1).
80 13 C.F.R. §124.104(c). See also 15 U.S.C. §637(a)(6)(E)(i)-(ii).
81 13 C.F.R. §124.104(c)(2).
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applicants to the 8(a) Program must have a net worth of less than $250,000.82 For continued
eligibility, net worth must be less than $750,000.83
“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.84
“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.85 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).86
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.87 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.88 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
permissible under CICA. In fact, an 8(a) set-aside is a recognized competitive procedure.89
82 Id.
83 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: A Legal Overview, by Kate M. Manuel.
85 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).
86 15 U.S.C. §637(a)(7)(A) (“reasonable prospects for success”); 13 C.F.R. §124.107(b)(1)(i)-(v).
87 SBA may delegate the function of executing contracts to the procuring agencies and often does so. See 13 C.F.R.
§124.501(a); 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-
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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.90 Awards made via set-asides or on a
sole-source basis count toward these goals,91 and businesses participating in the 8(a) Program are
considered small disadvantaged businesses.92
Discretion to Subcontract Through the 8(a) Program
There are few limits on agency discretion to subcontract through the 8(a) Program.93 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;94
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;95 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
group 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) (civilian
agency procurements). For more on competition in federal contracting, see CRS Report R40516, Competition in
Federal Contracting: A Legal Overview, by Kate M. Manuel.
90 15 U.S.C. §644(g)(1)-(2).
91 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 3. The government-wide goal was met in FY2013, the most recent year for which
information is available, when 8.6% of all federal procurement dollars was spent with small disadvantaged businesses.
Id. Performance by the large procuring agencies varies, from 2.6% (Department of Energy) to 47.3% (SBA). Id.
92 See 13 C.F.R. §124.1002 (defining “small disadvantaged business”).
93 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.”).
94 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).
95 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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Additionally, SBA is barred from awarding an 8(a) contract, either via a set-aside or on a sole-
source basis, “if the price of the contract results in a cost to the contracting agency which exceeds
a fair market price.”97
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.”98 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.99
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.100 In contrast, when the
anticipated value of the contract exceeds $4 million ($6.5 million for manufacturing contracts),
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
(...continued)
contracts, follow-on or renewal contracts, or procurements 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).
97 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).
98 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., B-
254257 (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 Businesses: Recent Developments in the Law Regarding Precedence Among the Set-Aside Programs and Set-
Asides Under Indefinite-Delivery/Indefinite-Quantity Contracts, by Kate M. Manuel. However, the Small Business Act
was amended on September 27, 2010, to remove the language that formed the basis for these decisions. Small Business
Jobs Act of 2010, P.L. 111-240, §1347,124 Stat. 2546-47 (September 27, 2010).
99 See, e.g., Rothe Computer Solutions, LLC, B-299452 (May 9, 2007).
100 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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submit offers and the award can be made at fair market price.101 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.102 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.103
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. §124.517.104
• 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
101 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).
102 48 C.F.R. §19.805-1(b)(1)-(2) (sole-source awards to tribally or ANC-owned firms); 48 C.F.R. §219.805-
1(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) analogous 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).
103 48 C.F.R. §19.805-1(c).
104 48 C.F.R. §19.805-2(d).
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Program, although they may be terminated or graduate from the program before
nine years have passed.105
• 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.106 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.107
• 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.108
• 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 $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 receive from non-8(a) sources.110 These targets increase over time, with
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.111 Firms that do not display the relevant percentages of
revenue from non-8(a) sources are ineligible for sole-source 8(a) contracts
“unless and until” they correct the situation.112
• 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 program); 13 C.F.R. §124.302 (early graduation); 13 C.F.R. §124.303 (termination).
106 15 U.S.C. §636(j)(11)(B)-(C); 13 C.F.R. §124.108(b).
107 13 C.F.R. §124.108(b)(4).
108 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 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 set-
aside 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.114
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,115
although the rules governing their participation are somewhat different from those for the 8(a)
Program generally.116
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.117 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.118 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.119
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.
114 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) (limits on subcontracting for 8(a) firms); 13 C.F.R. §125.6(a)(1)-(4)
(limits on subcontracting for small businesses generally).
115 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).
116 13 C.F.R. §§124.109-124.111.
117 13 C.F.R. §124.109(c)(2)(ii) (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).
118 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.
119 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
for Tailored Oversight, GAO-06-399, at 29 (April 2006) (describing “early graduation” of ANC-owned 8(a) firms).
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“Business”
Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be “businesses” under the SBA’s
definition.120 Although ANCs themselves may be for-profit or non-profit, ANC-owned businesses
must be for-profit to participate in the 8(a) Program.121
“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.122 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 decisions common to boards of directors, including strategic planning, budget
approval, and the employment and compensation of officers, and that a written management
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.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].”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).
121 13 C.F.R. §124.109(a)(3).
122 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).
123 13 C.F.R. §124.109(c)(4)(B).
124 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,
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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.130 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.131
When determining whether an NHO is economically disadvantaged, SBA will consider “the
individual economic status of NHO’s members,” the majority of whom “must 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.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.”).
128 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) (similar).
129 See Small Disadvantaged Business Certification Application, supra note 129.
130 15 U.S.C. §637(a)(6)(A); 13 C.F.R. §124.109(b)(2)(i)-(vii).
131 13 C.F.R. §124.109(b).
132 13 C.F.R. §124.110(c)(1).
133 Id. If the NHO has no members, then a majority of the members of the board of directors must qualify as
economically disadvantaged.
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.136
“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.137
The first of these ways for demonstrating potential for success is the same for individually owned
firms,138 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.139 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.”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.
136 13 C.F.R. §124.111(g).
137 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).
138 See supra note 85 and accompanying text.
139 See supra note 86 and accompanying text.
140 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).
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
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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.142
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.143 NHO-owned firms may receive sole-source awards from the Department of Defense
under the same conditions.144
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;145 (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).
144 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).
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
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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.149 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.150 Moreover, Indian tribes, ANCs, NHOs, and CDCs may own multiple firms
that earn less than 50% of their revenue in the same “secondary” industries.151 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.152 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.153
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;154 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).
149 Id.; 15 U.S.C. §636(j)(11)(B)-(C).
150 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.
151 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).
152 13 C.F.R. §124.519(a). See supra note 109.
153 13 C.F.R. §124.509.
154 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
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 race-
based 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
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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.156 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.”157
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.158 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 minority-
owned 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.”).
156 885 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).
157 DynaLantic, 885 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. (quoting City of Richmond v. J.A. Croson, 488 U.S. 469, 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”;161 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.”162 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;163 (2) the
nine-year limits on program participation for individual owners and firms;164 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.165 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,”166 and “work the least
harm possible to other innocent persons competing for the benefit.”167
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,168 and noted
that the government had conceded there was no evidence of public or private sector
discrimination in this industry.169 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.170 However, despite such caveats, the 8(a) Program would appear vulnerable to as-
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.171 As-applied challenges to the 8(a) Program have succeeded in the past, arguably
161 Id. at 252-53.
162 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.
163 Id. at 282-86.
164 Id. at 287-88.
165 Id. at 289-91.
166 Adarand Constructors, Inc. v . Peña, 515 U.S. 200, 238 (1995).
167 Grutter v. Bollinger, 539 U.S. 306, 341 (2003).
168 DynaLantic, 885 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
280. 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.
170 Id. at 292. DOD, however, 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) 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...)
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The “8(a) Program” for Small Businesses
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.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,175 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.176 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.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”).
172 See supra note 154 and accompanying text.
173 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.
174 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).
176 545 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.
177 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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The “8(a) Program” for Small Businesses
Appendix. Comparison of the Requirements
Pertaining to Different Types of 8(a) Firms
NHO-
8(a) Firms
Tribally Owned
ANC-Owned
Owned 8(a)
CDC-Owned
Category
Generally
8(a) Firms
8(a) Firms
Firms
8(a) Firms
“Smal ” Independently
Independently
Independently
Independently
Independently
owned and
owned and
owned and
owned and
owned and
operated; not
operated; not
operated; not
operated; not
operated; not
dominant in field
dominant in field
dominant in field dominant in
dominant in field of
of operation;
of operation;
of operation;
field of
operation; meets
meets size
meets size
meets size
operation;
size standards (15
standards (15
standards (15
standards (15
meets size
U.S.C. §631(a))
U.S.C. §631(a))
U.S.C. §631(a))
U.S.C. §631(a))
standards (15
U.S.C. §631(a)) Affiliations based
All affiliations
Affiliations based
Affiliations
on the CDC or
count (13 C.F.R.
on the tribe or
based on the
Affiliations
ownership by the
§121.103)
tribal ownership,
ANC or
based on the
CDC, among
among others, do
ownership by
NHO or
others, do not
not count (15
the ANC,
ownership by
count (15 U.S.C.
U.S.C.
among others,
the NHO,
§636(j)(10)(J)(i ); 13
§636(j)(10)(J)(i );
do not count
among others,
C.F.R. §124.111(c))
13 C.F.R.
(15 U.S.C.
do not count
§124.109(c)(2))
§636(j)(10)(J)(i );
(15 U.S.C.
13 C.F.R.
§636(j)(10)(J)(i
§124.109(c)(2))
); 13 C.F.R.
§124.110(c))
“Business”
For-profit entity
For-profit entity
For-profit entity
For-profit
For-profit entity
with its place of
with its place of
with its place of
entity with its
with its place of
business in the
business in the
business in the
place of
business in the
United States;
United States;
United States;
business in the
United States;
operates
operates primarily operates
United States;
operates primarily
primarily within
within the United
primarily within
operates
within the United
the United States
States or makes a
the United
primarily
States or makes a
or makes a
significant
States or makes
within the
significant
significant
contribution to
a significant
United States
contribution to the
contribution to
the U.S. economy
contribution to
or makes a
U.S. economy (13
the U.S. economy (13 C.F.R.
the U.S.
significant
C.F.R.
(13 C.F.R.
§121.105(a)(1))
economy (13
contribution
§121.105(a)(1))
§121.105(a)(1))
C.F.R.
to the U.S.
§121.105(a)(1))
economy (13
C.F.R.
Although ANC
§121.105(a)(1)
may be non-
)
profit, ANC-
owned firms
must be for-
profit to be
eligible for 8(a)
Program (13
C.F.R.
§124.109(a)(3))
“Uncondition
At least 51%
At least 51%
At least 51%
At least 51%
At least 51% CDC-
ally owned
unconditionally
tribally owned (13 ANC-owned
NHO-owned
owned (13 C.F.R.
and
and directly
C.F.R.
(13 C.F.R.
(13 C.F.R.
§124.111(a))
controlled”
owned by one or
§124.109(b))
§124.109(a)(3))
§124.110(a))
more
Management and
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The “8(a) Program” for Small Businesses
NHO-
8(a) Firms
Tribally Owned
ANC-Owned
Owned 8(a)
CDC-Owned
Category
Generally
8(a) Firms
8(a) Firms
Firms
8(a) Firms
disadvantaged
Management may
Management
NHO must
daily business
individuals who
be conducted by
may be
control the
operations to be
are U.S. citizens
individuals who
conducted by
board of
conducted by
(13 C.F.R.
are not members
individuals who
directors, but
individuals having
§124.105)
of the tribe
are not Alaska
individual who
managerial
experience of an
Management and
provided that the
Natives
is responsible
extent and
daily business
SBA determines
provided that
for day-to-day
complexity needed
operations must
that such
the SBA
management
to run the firm (13
be conducted by
management is
determines that
need not
C.F.R. §124.111(b))
one or more
necessary to
such
establish
disadvantaged
assist the
management is
personal social
individuals (13
business’s
necessary to
and economic
C.F.R. §124.106)
development,
assist the
disadvantage
among other
business’s
(13 C.F.R.
things (13 C.F.R.
development,
§124.110(d))
§124.109(c)(4)(B)) among other
things (13 C.F.R.
§124.109(c)(4)(B
))
“Social y
Members of
Indian tribes
ANCs
NHOs
CDCs presumed to
disadvantaged
designated
presumed to be
presumed to be
presumed to
be socially
individual”
groups presumed
socially
socially
be socially
disadvantaged (42
to be socially
disadvantaged (43
disadvantaged
disadvantaged
U.S.C. §9815(a)(2))
disadvantaged;
U.S.C. §1626(e);
(43 U.S.C.
(43 U.S.C.
other individuals
15 U.S.C.
§1626(e); 15
§1626(e); 15
may prove
§637(a)(4)(A)-(B);
U.S.C.
U.S.C.
personal
13 C.F.R.
§637(a)(4)(A)-
§637(a)(4)(A)-
disadvantage by a
§124.109(b)(1))
(B); 13 C.F.R.
(B); 13 C.F.R.
preponderance
§124.109(b)(1))
§124.109(b)(1)
of the evidence
)
(13 C.F.R.
§124.103)
“Economically
Financial
Tribe must prove
Deemed to be
For first
CDCs presumed to
disadvantaged
information (e.g.,
economic
economically
applicant to
be economically
individual”
personal income,
disadvantage the
disadvantaged
8(a) Program,
disadvantaged (42
personal net
first time a tribally (43 U.S.C.
NHO
U.S.C. §9815(a)(2))
worth, fair
owned firm
§1626(e); 13
members must
market value of
applies to the 8(a) C.F.R.
meet the same
assets) must
Program;
§124.109(a)(2))
initial eligibility
show diminished
thereafter, a tribe
economic
financial capital
need only prove
disadvantage
and credit
economic
thresholds as
opportunities (13 disadvantage at
individually-
C.F.R. §124.104)
the request of the
owned 8(a)
SBA (13 C.F.R.
applicants; for
§124.109(b)(2))
later
applicants,
NHO
members must
meet the
economic
disadvantage
thresholds for
continued 8(a)
eligibility (13
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The “8(a) Program” for Small Businesses
NHO-
8(a) Firms
Tribally Owned
ANC-Owned
Owned 8(a)
CDC-Owned
Category
Generally
8(a) Firms
8(a) Firms
Firms
8(a) Firms
C.F.R.
§124.110(c)(1)
“Good
No criminal
No criminal
No criminal
No criminal
No criminal
character”
conduct or
conduct or
conduct or
conduct or
conduct or
violations of SBA
violations of SBA
violations of
violations of
violations of SBA
regulations;
regulations;
SBA regulations;
SBA
regulations; cannot
cannot be
cannot be
cannot be
regulations;
be debarred or
debarred or
debarred or
debarred or
cannot be
suspended from
suspended from
suspended from
suspended from
debarred or
government
government
government
government
suspended
contracting (13
contracting (13
contracting (13
contracting (13
from
C.F.R. §124.108(a))
C.F.R.
C.F.R.
C.F.R.
government
§124.108(a))
§124.108(a))
§124.108(a))
contracting
Requirements apply
(13 C.F.R.
to the firm and “all
Requirement
Requirement
§124.108(a))
its principals” (13
applies only to
applies only to
C.F.R. §124.111(g))
officers, directors, officers,
Regulations do
and shareholders
directors, and
not address to
owning more than shareholders
whom
a 20% interest in
owning more
requirements
the business, not
than a 20%
applya
to all members of
interest in the
the tribe (13
business, not to
C.F.R.
all ANC
§124.109(c)(7)(B)(
shareholders
ii))
(13 C.F.R.
§124.109(c)(7)(B
)(ii))
“Demonstrate
Firm must
Firm must have
Firm must have
Firm must
Firm must have
d potential for general y have
been in business
been in business
have been in
been in business in
success”
been in business
in primary
in primary
business in
primary industry
in primary
industry for at
industry for at
primary
for at least two full
industry for at
least two full
least two full
industry for at
years prior to date
least two full
years prior to
years prior to
least two full
of application to
years prior to
date of application date of
years prior to
8(a) Program;
date of
to 8(a) Program;
application to
date of
individuals who will
application to
individuals who
8(a) Program;
application to
manage firm must
8(a) Program
will manage firm
individuals who
8(a) Program;
have substantial
unless SBA grants must have
will manage firm
individuals
experience, and
a waiver; waiver
substantial
must have
who will
firm must have had
based on 5
experience, and
substantial
manage firm
successful
conditionsb (13
firm must have
experience, and
must have
performance and
C.F.R. §124.107)
had successful
firm must have
substantial
adequate capital; or
performance and
had successful
experience,
CDC must have
adequate capital;
performance
and firm must
made written
or Tribe must
and adequate
have had
commitment to
have made
capital; or ANC
successful
support the firm
written
must have made
performance
and have the
commitment to
written
and adequate
financial ability to
support the firm
commitment to
capital; or
do so
and have the
support the firm NHO must
financial ability to
and have the
have made
(13 C.F.R. §124.111
do so
financial ability
written
(f)(1)-(3)
to do so
commitment
(13 C.F.R.
to support the
§124.109(c)(6)(i)-
(13 C.F.R.
firm and have
Congressional Research Service
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The “8(a) Program” for Small Businesses
NHO-
8(a) Firms
Tribally Owned
ANC-Owned
Owned 8(a)
CDC-Owned
Category
Generally
8(a) Firms
8(a) Firms
Firms
8(a) Firms
(iii) §124.109(c)(6)(i)
the financial
-(iii)
ability to do so
(13 C.F.R.
§124.110
(g)(1)-(3)
Sole-source
With contracts
Can be made with Can be made
Can be made
With contracts
awards
valued at over $4 contracts valued
with contracts
with
valued at over $4
mil ion ($6.5
at over $4 million
valued at over
Department of million ($6.5 million
million for
($6.5 million for
$4 million ($6.5
Defense
for manufacturing
manufacturing
manufacturing
million for
contracts
contracts), sole-
contracts), sole-
contracts) even if
manufacturing
valued at over
source awards
source awards
there is a
contracts) even
$4 million
permissible only if
permissible only
reasonable
if there is a
($6.5 million
there is not a
if there is not a
expectation that
reasonable
for
reasonable
reasonable
at least two
expectation that
manufacturing
expectation that at
expectation that
eligible 8(a) firms
at least two
contracts)
least two eligible
at least two
will submit offers
eligible 8(a)
even if there is
8(a) firms will
eligible 8(a) firms
and the award can firms will submit a reasonable
submit offers and
will submit offers
be made at fair
offers and the
expectation
the award can be
and the award
market price (15
award can be
that at least
made at fair market
can be made at
U.S.C.
made at fair
two eligible
price (48 C.F.R.
fair market price
§637(a)(1)(D)(i)-
market price (15 8(a) firms will
§19.805-1(b)(1)-(2))
(48 C.F.R.
(ii); 48 C.F.R.
U.S.C.
submit offers
§19.805-1(b)(1)-
§19.805-1(b)(1)-
§637(a)(1)(D)(i)-
and the award
(2))
(2))
(ii); 48 C.F.R.
can be made at
§19.805-1(b)(1)-
fair market
(2))
price (48
C.F.R.
§219.805-
1(b)(2)(A)-
(B)).
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))
Inability to
Firm’s eligibility
Firm’s eligibility
Firm’s eligibility
Firm’s
Firm’s eligibility for
protest
for award cannot
for award cannot
for award
eligibility for
award cannot be
eligibility for
be chal enged or
be chal enged or
cannot be
award cannot
challenged or
award
protested as part
protested as part
challenged or
be chal enged
protested as part
of the solicitation of the solicitation
protested as
or protested
of the solicitation
or proposed
or proposed
part of the
as part of the
or proposed
Congressional Research Service
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The “8(a) Program” for Small Businesses
NHO-
8(a) Firms
Tribally Owned
ANC-Owned
Owned 8(a)
CDC-Owned
Category
Generally
8(a) Firms
8(a) Firms
Firms
8(a) Firms
contract award
contract award
solicitation or
solicitation or
contract award (48
(48 C.F.R.
(48 C.F.R.
proposed
proposed
C.F.R. §19.805-
§19.805-2(d))
§19.805-2(d))
contract award
contract
2(d))
(48 C.F.R.
award (48
§19.805-2(d))
C.F.R.
§19.805-2(d))
Maximum of
Firm receives “a
Firm receives “a
Firm receives “a
Firm receives
Firm receives “a
nine years in
program term of
program term of
program term of “a program
program term of
the 8(a)
nine years” but
nine years” but
nine years” but
term of nine
nine years” but
Program
could be
could be
could be
years” but
could be
terminated or
terminated or
terminated or
could be
terminated or
graduated early
graduated early
graduated early
terminated or
graduated early (13
(13 C.F.R.
(13 C.F.R. §124.2)
(13 C.F.R.
graduated
C.F.R. §124.2)
§124.2)
§124.2)
early (13
C.F.R. §124.2)
One-time
Applies to both
Applies only to
Applies only to
Applies only to Applies only to
eligibility for
disadvantaged
tribally owned
ANC-owned
NHO-owned
CDC-owned firms,
8(a) Program
owners and firms firms, not tribes
firms, not ANCs firms, not
not CDCs (15
(13 C.F.R.
(15 U.S.C.
(15 U.S.C.
NHOs (15
U.S.C.
§124.108(b))
§636(j)(11)(B)-
§636(j)(11)(B)-
U.S.C.
§636(j)(11)(B)-(C))
(C))
(C))
§636(j)(11)(B)-
(C))
Limits on the
No source
Can make sole-
Can make sole-
Can make
Combined total of
amount of
awards possible
source awards
source awards
sole-source
competitive and
8(a) contracts
once the firm has even when a firm
even when a
awards even
sole-source 8(a)
that a firm
received
has received
firm has
when a firm
contracts in excess
may receive
combined total of combined total of
combined total
has combined
of the dollar
competitive and
competitive and
of competitive
total of
amount set forth in
sole-source 8(a)
sole-source 8(a)
and sole-source
competitive
13 C.F.R. §124.519
contracts in
contracts in
8(a) contracts in and sole-
not explicitly
excess of the
excess of the
excess of the
source 8(a)
addressed in
dollar amount set dollar amount set
dollar amount
contracts in
regulation
forth in 13 C.F.R.
forth in 13 C.F.R.
set forth in 13
excess of the
§124.519 (13
§124.519 (13
C.F.R. §124.519
dollar amount
Firms must receive
C.F.R.
C.F.R.
(13 C.F.R.
set forth in 13
an increasing
§124.519(a))
§124.519(a))
§124.519(a))
C.F.R.
percentage of
§124.519 (13
revenue from non-
Firms must
Firms must
Firms must
C.F.R.
8(a) sources
receive an
receive an
receive an
§124.519(a))
throughout their
increasing
increasing
increasing
participation in the
percentage of
percentage of
percentage of
Firms must
8(a) Program (13
revenue from
revenue from
revenue from
receive an
C.F.R. §124.509(b))
non-8(a) sources
non-8(a) sources
non-8(a)
increasing
throughout their
throughout their
sources
percentage of
participation in
participation in
throughout their revenue from
the 8(a) Program
the 8(a) Program
participation in
non-8(a)
(13 C.F.R.
(13 C.F.R.
the 8(a)
sources
§124.509(b))
§124.509(b))
Program (13
throughout
C.F.R.
their
§124.509(b))
participation in
the 8(a)
Program (13
C.F.R.
§124.509(b))
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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).
Author Contact Information
Kate M. Manuel
Legislative Attorney
kmanuel@crs.loc.gov, 7-4477
Acknowledgments
Former CRS legislative attorney, John R. Luckey, co-authored this report.
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