The SBA’s 8(a) Business Development Program

The SBA’s 8(a) Business Development Program

Updated May 29, 2024
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)). Prior
established under Section 8(a) of the Small Business Act in
to a July 2023 ruling in a federal district court case (Ultima
1978, gives explicit statutory authority for program
Servs. Corp. v. U.S. Department of Agriculture), the SBA applied a
activities previously implemented through regulations. For
“presumption of social disadvantage” to individuals applying
eligible businesses, the 8(a) program creates federal
for its 8(a) program from the following groups: Asian Pacific
contracting preferences such as contract set-asides and sole-
Americans, Black Americans, Hispanic Americans,
source contracts. Set-asides limit contract competition to
Subcontinent Asian Americans, and Native Americans. Due to
businesses in the 8(a) program. Sole-source awards are
the district court ruling that the SBA cannot presume social
made to selected 8(a) program participants without
disadvantage based on ethnic or racial group membership, the
competition.
SBA stopped presuming social disadvantage. All program
applicants must now submit a personal narrative to the SBA
Agency purchasing officials may choose to award contracts
that demonstrates their social disadvantage, a procedure that
under this program in order to reach annual goals for
had already been required of individuals who were not
contracting with small disadvantaged businesses (SDBs; see
members of one of the racial groups listed above. For more
CRS Insight IN12018, Federal Small Business Contracting
information on the SBA’s response to the legal challenge, see
Goals). Under the authority of the Small Business Act, the
CRS Insight IN12245, SBA’s 8(a) Business Development Program
Small Business Administration (SBA) accepts
Responds to District Court Ruling.
procurements from other federal agencies and may then
award contracts to program participants through either a
Program Details
set-aside or a sole-source award, typically depending on the
value of the contract award.
Eligibility Requirements
In addition to contracting preferences, the program provides
Businesses that meet eligibility criteria and obtain 8(a)
participants with business development support, including
program certification may participate in the program for
mentorship, training, and counseling. These services are
nine years, at which point they are no longer eligible for
intended to enhance participants’ competitiveness and their
contracting preferences. Eligible firms must meet all of the
long-term viability as businesses. Statutory authority for the
following criteria, described at 13 C.F.R. §124:
program is contained in Sections 7(j), 8(a), and 8(d) of the
Small Business Act. This In Focus provides an overview of
1. Are small in size, according to size
the program’s requirements as well as issues for Congress.
standards established by the SBA;
2. Are of good character, which relates to an
Definition of Economically Disadvantaged
applicant’s criminal conduct, their
Economically disadvantaged individuals are those whose ability
incarceration, parole, or probation
to compete in the free enterprise system has been impaired
pursuant to crimes involving business
due to diminished capital and credit opportunities (15 U.S.C.
integrity, their violations of any SBA
§637(a)(6)). They must have a net worth of less than $850,000
regulations, and their submission of false
and an adjusted gross income averaged over the three
information to the SBA;
preceding years of $400,000 or less. Funds invested in an
3. Demonstrate potential for success, which
Individual Retirement Account (IRA) or other official
a firm can generally do by operating and
retirement account will not be considered in determining an
receiving contracts in the private or
individual’s net worth. Ownership interest in the applicant
public sectors, in its primary industry, for
firm and the equity in the individual’s primary personal
at least two full years immediately prior
residence is excluded from net worth calculations as well. In
to applying for the program (although the
addition, the fair market value of all his or her assets (including
SBA may waive this two-year
his or her primary residence and the value of the applicant
requirement under certain conditions);
firm) must not exceed $6.5 million.
4. Are at least 51% unconditionally and

directly owned by one or more socially
and economically disadvantaged
individuals who are citizens of the United
States (or owned by an Alaska Native
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The SBA’s 8(a) Business Development Program
Corporation [ANC], Native Hawaiian
submit offers at a fair market price, or (2) the SBA accepts
Organization [NHO], Community
the contract on behalf of certain group-owned firms, such as
Development Corporation [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. The SBA will
associations, local service providers, and SCORE—a
not count awards less than $250,000 toward this limit.
nonprofit business mentor network. The Small Business Act
Firms owned by ANCs, CDCs, NHOs, and Indian tribes are
also authorizes the SBA to provide direct or guaranteed
not 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
Since program eligibility and application changes occurred
transitional stage over the last five years. In the transitional
following the district court ruling in Ultima Servs. Corp. v.
stage, program participants must actively pursue non-8(a)
U.S. Department of Agriculture, Congress may be
contracts in order to reach required annual targets for non-
interested in program application processing issues as well
8(a) revenue. These targets increase over time, as described
as whether agency contracting with SDBs has been affected
at 13 C.F.R. §124.509(b): 15% of their revenue from non-
by 8(a) program changes. The government seeks to award a
8(a) sources in the fifth year, 25% in the sixth year, 30% in
percentage of contracting dollars to SDBs each fiscal year,
the seventh year, 40% in the eighth year, and 50% in the
and while all 8(a) participants meet the definition of SDB,
ninth year. The goal is for firms to successfully compete for
not all SDBs are in the 8(a) program; 8(a) program changes
federal contracts without 8(a) program assistance after
may impact contracting not just with program participants
completing the program by the ninth year. If the SBA
but with SDBs overall.
determines that a participant did not make good faith efforts
to meet these targets, the participant becomes ineligible for
Additional issues of potential congressional concern for the
sole-source awards.
8(a) program include performance measurement and
program reporting and oversight. The SBA may require
A participating business may “graduate” from the program
technical support or additional resources to fully implement
by reaching its business development goals or may exit the
recommended solutions.
program after nine or fewer years. Once a participant has
left the program, neither the firm nor the owner of that firm
The SBA’s Office of Inspector General (OIG) identified the
is eligible to participate in the program again. However, if
“management and monitoring” of the 8(a) Business
ANCs, CDCs, NHOs, and Indian tribes own multiple
Development Program as a top management and
businesses, these groups may participate more than once via
performance challenge for the agency in FY2023. The OIG
a firm that has not previously participated in the program.
highlighted the lack of an effective information technology
(IT) system to monitor program participants’ progress as a
8(a) Contract Award Limitations
key issue. It also noted the need for consistent procedures
The SBA is barred from awarding an 8(a) contract, either
for measuring business development. In 2022, the OIG
via a set-aside or on a sole-source basis, if the cost to the
found, “There was no mechanism in place to ensure that
contracting agency exceeds “a fair market price” (15 U.S.C.
SBA consistently reviewed business plans and goals and
§637(a)(1)(A)). Additional prohibitions on the SBA
then objectively monitored business development
accepting 8(a) contracts exist, although agencies can offer
progress.” According to the OIG, the SBA has begun to
contracts to the SBA “in [their] discretion,” and the SBA
build a system to track participant progress but would need
may accept them “whenever it determines such action is
to complete this effort for the agency to effectively evaluate
necessary or appropriate” (15 U.S.C. §637(a)(1)(A)).
firm progress and program outcomes.
When an 8(a) contract’s anticipated value, including
In addition to measuring participant and program outcomes,
options, is less than $4.5 million (or $7.5 million for
issues with reporting those outcomes present an oversight
manufacturing contracts), the contract is typically awarded
challenge for Congress. The Government Accountability
on a sole-source basis without competition. When the
Office (GAO) has reported a pattern of multiyear delays in
anticipated value exceeds these thresholds, it generally must
8(a) program reporting.
be awarded via a set-aside.
R. Corinne Blackford, Analyst in Small Business and
Sole-source awards in excess of the above thresholds may
Economic Development Policy
be made only when (1) there is not a reasonable expectation
that at least two eligible and responsible 8(a) firms will
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The SBA’s 8(a) Business Development Program

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