If you own a small business that’s part of the federal contracting 8(a) Business Development Program and you’re a little on edge these days, you’re not alone.
Recently, there has been fallout from a Supreme Court decision, which some would call a general assault on diversity, equity and inclusion initiatives. Unfortunately, that ruling has many business owners fearing the demise of the 8(a) business development program.
A recent turning point came when the U.S. District Court for the Eastern District of Tennessee declared that the Small Business Administration’s rebuttable presumption of social disadvantage automatically granted to certain people violated the equal protection rights of a nonminority government contractor. That shift prohibits SBA’s use of the rebuttable presumption based on race, ethnic origin, gender or physical handicap in administering the program.
As a result, the SBA has temporarily suspended new applications for the 8(a) program and is currently contemplating how this impacts not only pending and future 8(a) applicants, but in some cases current participants.
It is not surprising that this turn of events is causing considerable confusion and anxiety in the 8(a) world. Here are some observations concerning how to hold steady as the dominoes continue to fall and how program participants look to stay in step, with program applicants wondering if their documents will ever be accepted.
If your company was admitted to the 8(a) Program because the qualifying owner(s) established his or her social disadvantage by a preponderance of the evidence through submitting a social disadvantage narrative, that’s good. No further action is required.
However, if you gained admission to the program via the essentially automatic rebuttable presumption, you’ll need to submit a detailed social disadvantage narrative and should have received notice already. That narrative should include facts and details about the substantial, continuous disadvantage that the qualifying owner(s) has endured due to race, ethnic origin, gender or physical handicap and explain how it has impacted the individual’s access to/upward movement in their careers or success of their business.
If your company was admitted to the program before August 2016, the person qualifying generally was required to submit an economic disadvantage narrative that detailed diminished business and financial opportunities as compared to other businesses/individuals who are not socially disadvantaged.
If you’ve already prepared such an economic narrative submission, you probably have a good starting point for your social disadvantage narrative.
If your 8(a) Program application is pending and was submitted incorporating the rebuttable presumption, SBA will now require a social disadvantage narrative that contains answers to specific questions for the SBA to continue processing it ― even though there is not yet any clear guidance on when applications will reopen. Until then, it would be wise to work on a social disadvantage narrative based on the above guidance.
Also, if your business gained admission to the 8(a) program based on the rebuttable presumption, your next move should be to submit a social disadvantage narrative that details the hardship that the qualifying person has endured that resulted in a flagging bottom line.
Again, if you were admitted to the 8(a) program before August 2016, your company more than likely submitted an economic disadvantage narrative at that time that detailed diminished revenues and credit opportunities when compared to those that are owned by individuals who are not socially disadvantaged.
If your company previously prepared an economic disadvantage narrative, but not the detailed social impact narrative, now is the time to prepare to submit your detailed social disadvantage narrative.
Other disruption details
● The aforementioned social disadvantage narrative must be submitted to, and reviewed and approved by, SBA headquarters, not your local district office. Details regarding when and where to submit such a narrative will be forthcoming by the SBA.
● This change does not impact previously awarded contracts, including in-scope modifications and priced options. Those awards were made under the previous rules, so there’s no issue there. Still, an affirmative finding of social disadvantage will be required for unpriced options on 8(a) contracts; 8(a) set-aside orders, under a non-8(a) governmentwide Acquisition Contracts/Indefinite Delivery-Indefinite Quantity; 8(a) sole-source orders under an 8(a) GWAC/IDIQ (i.e., STARS III); and 8(a) contract novations (defined as the replacement of one of the parties in an agreement between two parties, with the consent of all three parties involved).
● For those businesses that are part of an 8(a) joint venture, its eligibility for 8(a) contracts is dependent on the status of the qualifying 8(a) party. Therefore, the same affirmative finding of social disadvantage will be required prior to any award.
● While this decision impacts individually owned firms, it does not impact entity-owned firms, such as those owned by Indian tribes, Alaska native corporations and Native Hawaiian organizations.
What to do?
With all applications currently suspended, understand that if your application remains pending and was submitted on the basis of the rebuttable presumption, SBA will now require a social disadvantage narrative in order to continue processing your submission.
Until some clear guidance is offered concerning when applications will reopen, the most prudent approach is to refine your social disadvantage narrative, as suggested.
Gloria Larkin is President and CEO of TargetGov, and a national expert in business development in the government markets. Email [email protected], visit www.targetgov.com or call toll-free 1-866-579-1346 x 325 for more information.