Big changes may be coming to the 8a Certification Program. For businesses currently in the 8a Certification Program or those planning on applying for entrance into the 8a Program, there are some potential major modifications on the way. In a significant development on July 19th, 2023, a federal judge in Tennessee made a decision that affects the Small Business Administration’s (SBA) 8(a) program. The court declared that the SBA’s use of a “rebuttable presumption of social disadvantage” is no longer valid. This ruling could have important implications for small businesses seeking admission into the program or current 8a participants.
Background and Legal Context
Let’s start with a bit of background. The 8(a) program, which falls under the Small Business Act, helps small businesses that are socially and economically disadvantaged by providing them access to government contracts. The SBA defined socially and economically disadvantaged individuals as those who faced prejudice or bias due to their race, ethnicity, or cultural background, regardless of their individual qualifications. The rebuttable presumption of social disadvantage includes certain minority groups, such as Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, Subcontinent Asian Americans, and other groups designated by the SBA. This presumption allowed members of these groups to qualify for the 8(a) program without individual proof of social disadvantage.
The Case and Court Ruling
In a court case involving Ultima Services Corporation (Ultima), a small business that offers administrative and technical support services, the issue of racial discrimination and equal protection rights came to light. Ultima, which is owned and operated by a white woman, claimed that it lost out on contract opportunities and suffered financially because it was not part of the 8(a) program.
The federal court carefully examined the situation and applied strict scrutiny analysis, looking at whether the SBA’s use of the rebuttable presumption was appropriate. The court found that the presumption did not meet the required standards and violated Ultima’s right to equal protection under the law. As a result, the court ruled that the SBA and the Department of Agriculture (USDA) should no longer use the rebuttable presumption in administering the 8(a) program.
Implications and Takeaways
The court’s decision could have noteworthy implications for businesses looking to participate in the 8(a) program. Moving forward, applicants from groups previously presumed to be socially disadvantaged will need to provide a “preponderance of evidence” to prove their social disadvantage based on specific criteria. This means that the application process may become more complex and may require more effort on the part of businesses seeking admission.
The court has not yet determined further remedies, so we’ll have to wait and see how this impacts the future of the 8(a) program. While the immediate focus is on eliminating the use of the rebuttable presumption, it remains to be seen if there will be additional restrictions or challenges to the program’s constitutionality down the line.
Current 8a Participants
Currently, there are 6,333 active 8a certified businesses. Here is a breakdown of new participants in the 8a Certification Program from the last 10 years.
2023: 461 certified (YTD)
2022: 723 certified
2021: 676 certified
2020: 699 certified
2019: 500 certified
2018: 408 certified
2017: 583 certified
2016: 994 certified
2015: 732 certified
2014: 365 certified
For businesses currently participating in the 8(a) program, there shouldn’t be an immediate impact from this ruling. However, it’s essential to keep an eye on any updates or changes that may arise in light of this decision. Going forward, the SBA will need to reevaluate its criteria for qualifying disadvantaged businesses, making it necessary for applicants to demonstrate specific instances of social disadvantage to be eligible for the program.
As the parties prepare for the next hearing on August 31st for potential remedies, government contractors and agencies will closely follow these developments. The SBA and the USDA will need to navigate the changing legal landscape cautiously, especially during a time of increased government contracting activity.
If you are considering applying for the 8a Program, it may be to your advantage to do it sooner than later.
ABOUT THE AUTHOR: Abraham Xiong, CCM
Mr. Xiong is a small business advocate, social entrepreneur, executive trainer, technology enthusiast, business coach, and community leader. He is the Founder of www.GovAssociation.org and www.GovGenie.com, which are organizations assisting small businesses to access more contract opportunities in the B2G marketplace.