Recent Changes to the Small Business Administration’s 8(a) Program took effect on March 14, 2011. This is the First major revision to the 8(a) program since 1998. Per the SBA, the goal of the rule changes were to better ensure that the benefits of the SBA flow to the intended recipients and to help prevent waste, fraud, and abuse. Read below for highlights of some of the key changes!
The new changes include additional restrictions on Joint Ventures. The 8(a) partner of the Joint Venture must now perform at least 40% of the work, including those awarded through a mentor-protégé agreement. The previous requirement was only that the small business perform a “significant portion of the work.” In addition, Joint Ventures awarded to an 8(a) firm will not be allowed to win more than 3 contracts during a 2-year period, and cannot subcontract work to a non-8(a) Joint Venture partner. The new rules also hold mentor firms more accountable: mentors who do not provide assistance to their protégés could face consequences ranging from stop-work orders to debarment. New record-keeping provisions will require the protégé firm to submit information reflecting the work breakdown within the Joint Venture.
The new rules also clarify the income & asset determination needed for 8(a) eligibility. For instance, the new rules exclude individual retirement accounts from the strict net worth calculations that are used to determine eligibility for the program. With regard to income requirements, the new rules raise the adjusted gross income to enter into the program from $200,000 to $250,000, and increase the adjusted gross income for continued eligibility for the program from $300,000 to $350,000. The total value of the participant’s assets necessary to enter the program has been raised from $3 million to $4 million, and the total assets necessary for continued eligibility has increased from $4 million to $6 million.
The rule changes limit the type and amount of fees an agent or representative can charge for assisting an 8(a) firm. Specifically, the language of this part of the new rule prohibits unreasonable fees as well as arrangements in which the fees are a percentage of the contract award or revenue.
The new rules also enhance SBA opportunities for military personnel, allowing owners of 8(a) firms called to active military status to elect to be temporarily suspended rather than lose any of their nine-year term in the program.
In addition to some of the items listed above, the new rules primarily focus on reforming and enhancing the transparency of Alaska Native Corporations (ANCs), 8(a) sub-entities that can win sole-source contracts of any size. For the first time, firms owned by ANCs or by Indian tribes, native Hawaiian organizations and community development corporations will be required to report financial benefits flowing back to their communities. Firms must now submit information relating to: funding of cultural programs, employment assistance, jobs, scholarships, internships, and subsistence activities. (The Final Rule, published in the Federal Register on February 11, 2011, provides an additional six months for the SBA to work with the ANCs to implement these particular provisions.)
The Small Business Administration provides a number of additional resources regarding the rule changes, including the text of the final rule. These are available at:http://www.sba.gov/content/revised-8a-regulations.