July 26, 2023
The SBA’s 8(a) Business Development Program
Background
Definition of Socially Disadvantaged
Through the 8(a) Business Development Program,
Socially disadvantaged individuals have been subjected to racial
Congress aims to help small “socially and economically
or ethnic prejudice or cultural bias within American society
disadvantaged” business owners overcome barriers to
because of their identities as members of groups and without
participating in federal contracting. The program,
regard to their individual qualities (15 U.S.C. §637(a)(5)). The
established under Section 8(a) of the Small Business Act in
SBA considers socially disadvantaged individuals to include:
1978, gives explicit statutory authority for program
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activities previously implemented through regulations. For

Black Americans;
eligible businesses, the 8(a) program creates federal
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Hispanic Americans;
contracting preferences such as contract set-asides and sole-
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Native Americans (Alaska Natives, Native Hawaiians, or
source contracts. Set-asides limit contract competition to
enrol ed members of a federally or state recognized
businesses in the 8(a) program. Sole-source awards are
Indian Tribe);
made to selected 8(a) program participants without
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Asian Pacific Americans (persons with origins from
competition.
Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei,
Japan, China (including Hong Kong), Taiwan, Laos,
Agency purchasing officials may choose to award contracts
Cambodia (Kampuchea), Vietnam, Korea, The Philippines,
under this program in order to reach annual goals for
U.S. Trust Territory of the Pacific Islands (Republic of
contracting with small disadvantaged businesses (see CRS
Palau), Republic of the Marshall Islands, Federated States
Insight IN12018, Federal Small Business Contracting
of Micronesia, the Commonwealth of the Northern
Goals). Under the authority of the Small Business Act, the
Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga,
SBA accepts procurements from other federal agencies and
Kiribati, Tuvalu, or Nauru);
may then award contracts to program participants through
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either a set-aside or sole-source award, typically depending

Subcontinent Asian Americans (persons with origins from
on the value of the contract award.
India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the
Maldives Islands, or Nepal).
In addition to contracting preferences, the program provides
participants with business development support, including
Program Details
mentorship, training, and counseling. These services are
intended to enhance participants’ competitiveness and their
Eligibility Requirements
long-term viability as businesses. Statutory authority for the
Businesses that meet eligibility criteria and obtain 8(a)
program is contained in Sections 7(j), 8(a), and 8(d) of the
program certification may participate in the program for
Small Business Act. This In Focus provides an overview of
nine years, at which point they are no longer eligible for
the program’s requirements as well as issues for Congress.
contracting preferences. Eligible firms must meet all of the
following criteria, described at 13 C.F.R. §124:
Definition of Economically Disadvantaged
Economically disadvantaged individuals are those whose ability
1. Are small in size, according to size
to compete in the free enterprise system has been impaired
standards established by the SBA;
due to diminished capital and credit opportunities (15 U.S.C.
2. Are of good character, which relates to an
§637(a)(6)). They must have a net worth of less than $850,000
applicant’s criminal conduct, their
and an adjusted gross income averaged over the three
incarceration, parole, or probation
preceding years of $400,000 or less. Funds invested in an
pursuant to crimes involving business
Individual Retirement Account (IRA) or other official
integrity, their violations of any SBA
retirement account wil not be considered in determining an
regulations, and their submission of false
individual’s net worth. Ownership interest in the applicant
information to the SBA;
firm and the equity in the individual’s primary personal
3. Demonstrate potential for success, which
residence is excluded from net worth calculations as well. In
a firm can generally do by operating and
addition, the fair market value of all his or her assets (including
receiving contracts in the private or
his or her primary residence and the value of the applicant
public sectors, in its primary industry, for
firm) must not exceed $6.5 mil ion.
at least two full years immediately prior

to applying for the program (although the
SBA may waive this two-year
requirement under certain conditions);
4. Are at least 51% unconditionally and
directly owned by one or more socially
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The SBA’s 8(a) Business Development Program
and economically disadvantaged
Sole-source awards in excess of the above thresholds may
individuals who are citizens of the United
be made only when (1) there is not a reasonable expectation
States (or owned by an Alaska Native
that at least two eligible and responsible 8(a) firms will
Corporation (ANC), Native Hawaiian
submit offers at a fair market price; or (2) the SBA accepts
Organizations (NHO), Community
the contract on behalf of certain group-owned firms, such as
Development Corporations (CDC), or
those owned by Indian tribes. Participant firms owned by
Indian tribe).
ANCs and Indian tribes may receive sole-source awards in
excess of the thresholds from any agency and NHO-owned
Selected Program Features
firms may receive such sole-source awards from the
The SBA also provides various forms of business assistance
Department of Defense.
to program participants. To enhance their ability to manage
federal contracts, firms may receive training, individual
Once they have been awarded more than $168,500,000 in
counseling, and management assistance and executive
8(a) contract awards, participant firms owned by
development—all provided through SBA District Office
individuals may not receive any additional 8(a) sole-source
staff and SBA partners such as Small Business
awards, though they can still receive set-asides. This
Development Centers (SBDCs), trade and professional
amount is set forth at 13 C.F.R. §124.519. SBA will not
associations, local service providers, and SCORE—a
count awards less than $250,000 towards this limit. Firms
nonprofit business mentor network. The Small Business Act
owned by ANCs, CDCs, NHOs, and Indian tribes are not
also authorizes the SBA to provide direct or guaranteed
subject to this maximum total award amount and may
loans to program participants, on its own or with lenders.
continue to receive sole-source awards beyond it.
During their nine years in the program, participants
Issues for Congress
complete a developmental stage in the first four years and a
Issues of potential congressional concern for the 8(a)
transitional stage over the last five years. In the transitional
program include performance measurement and program
stage, program participants must actively pursue non-8(a)
reporting and oversight. SBA may require technical support
contracts in order to reach required annual targets for non-
or additional resources to fully implement recommended
8(a) revenue. These targets increase over time, as described
solutions.
at 13 C.F.R. §124.509(b); 15% of their revenue from non-
8(a) sources in the fifth year, 25% in the sixth year, 30% in
The SBA’s Office of Inspector General (OIG) identified the
the seventh year, 40% in the eighth year, and 50% in the
“management and monitoring” of the 8(a) Business
ninth year. The goal is for firms to successfully compete for
Development Program as a top management and
federal contracts without 8(a) program assistance after
performance challenge for the agency in FY2023. The OIG
completing the program by the ninth year. If the SBA
highlighted the lack of an effective IT system to monitor
determines that a participant did not make good faith efforts
program participants’ progress as a key issue. It also noted
to meet these targets, the participant becomes ineligible for
the need for consistent procedures for measuring business
sole-source awards.
development. In 2022, the OIG found, “There was no
mechanism in place to ensure that SBA consistently
A participating business may “graduate” from the program
reviewed business plans and goals and then objectively
by reaching its business development goals or may exit the
monitored business development progress.” According to
program after nine or fewer years. Once a participant has
the OIG, the SBA has begun to build a system to track
left the program, neither the firm nor the owner of that firm
participant progress but would need to complete this effort
is eligible to participate in the program again. However, if
for the agency to effectively evaluate firm progress and
ANCs, CDCs, NHOs, and Indian tribes own multiple
program outcomes.
businesses, these groups may participate more than once via
a firm that has not previously participated in the program.
In addition to measuring participant and program outcomes,
issues with reporting those outcomes present an oversight
8(a) Contract Award Limitations
challenge for Congress. The Government Accountability
The SBA is barred from awarding an 8(a) contract, either
Office (GAO) has reported a pattern of multiyear delays in
via a set-aside or on a sole-source basis, if the cost to the
8(a) program reporting. GAO determined that manual data
contracting agency exceeds “a fair market price” (15 U.S.C.
collection and validation, implementation of a new data
§637(a)(1)(A)). Additional prohibitions on SBA accepting
system, and the timing of certification for federal contract
8(a) contracts exist although agencies can offer contracts to
data have contributed to delays and will likely continue to
the SBA “in [their] discretion,” and the SBA may accept
affect the timeliness of reports to Congress. GAO
them “whenever it determines such action is necessary or
recommended that SBA document the procedures for the
appropriate” (15 U.S.C. §637(a)(1)(A)).
reporting process and is waiting for the agency to
implement the recommendation. The SBA OIG appears to
When an 8(a) contract’s anticipated value, including
agree with GAO’s determinations, writing that the SBA
options, is less than $4.5 million (or $7.5 million for
needs to improve data collection on the program in order to
manufacturing contracts), the contract is typically awarded
meet its reporting requirements.
on a sole-source basis without competition. When the
anticipated value exceeds these thresholds, it generally must
R. Corinne Blackford, Analyst in Small Business and
be awarded via a set-aside.
Economic Development Policy
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The SBA’s 8(a) Business Development Program

IF12458


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