In a previous blog post, we covered the Small Business Administration’s (SBA) consolidation of the 8(a) Business Development (BD) Mentor-Protégé Program and the All Small Mentor-Protégé Program. Beyond consolidating the programs, SBA also made a host of additional changes to the 8(a) Program, almost all of which took effect on November 16, 2020. As with consolidation, most of the changes—including those discussed below—are intended to reduce burden on small businesses and streamline the 8(a) Program.
At a practical level, the most impactful changes for current and future 8(a) Program participants concern the revised reapplication period; follow-on contracts and sole-source awards; the immediate family member rule; and changes in ownership. Each of these changes appears in the Final Rule covering Consolidation of Mentor-Protégé Programs and Other Government Contracting Amendments (85 FR 66146-01, 2020-19428.pdf (govinfo.gov)), and the Federal Regulations (13 C.F.R. Part 124).
Reapplication Period (13 C.F.R. § 124.207)
One of the most significant changes to the 8(a) Program involves reducing the waiting period for applicants reapplying to the Program. Previously, unsuccessful applicants had to wait 12 months from the date of a final agency decision to reapply for admission into the Program. Now, that timeframe has been cut to 90 days. SBA explained that the “change will reduce the number of appeals to [OHA] and greatly reduce the costs associated with appeals borne by disappointed applicants.” The reduction does come with a tradeoff, however. Unsuccessful applicants must now forego the previously-available reconsideration process, which involved appealing the determination to the SBA’s Office of Hearings and Appeals (OHA). Given the time and expense of an OHA appeal, applicants will likely view the 90-day reconsideration period as a welcome change.
Follow-On Contracts (13 C.F.R. § 124.3)
SBA also clarified what counts as a follow-on contract for purposes of the 8(a) Program. Under 13 C.F.R. § 124.504(d)(1), “where a procurement is awarded as an 8(a) contract, its follow-on or renewable acquisition must remain in the 8(a) BD program unless SBA agrees to release it for non-8(a) competition.” Despite this language, there was confusion as to what exactly qualified as a follow-on contract.
In order to address the uncertainty, SBA added a multi-part definition to the regulations explaining follow-on requirements or contracts:
The determination of whether a particular requirement or contract is a follow-on includes consideration of whether the scope has changed significantly, requiring meaningful different types of work or different capabilities; whether the magnitude or value of the requirement has changed by at least 25 percent for equivalent periods of performance; and whether the end user of the requirement has changed. As a general guide, if the procurement satisfies at least one of these three conditions, it may be considered a new requirement. However, meeting any one of these conditions is not dispositive that a requirement is new. In particular, the 25 percent rule cannot be applied rigidly in all cases. Conversely, if the requirement satisfies none of these conditions, it is considered a follow-on procurement.
13 C.F.R. § 124.3.
In addition to the definition, the regulation amended 13 C.F.R. § 124.504 to make clear that contracting officers must receive SBA’s approval prior to releasing any follow-on procurement from the 8(a) BD Program.
Sole-Source Awards (13 C.F.R. § 124.501(g))
SBA clarified eligibility requirements for sole-source awards under the 8(a) Program. In the Final Rule, SBA explained that a Participant’s eligibility for 8(a) sole-source awards is determined at the time SBA accepts a requirement for the 8(a) Program. And, in instances where a Participant graduates from the Program prior to the actual sole-source award, the award cannot be made to that Participant.
SBA also revised regulations regarding the value of sole-source awards Participants are eligible to receive. While the previous version of 13 C.F.R. § 124.519 was NAICS dependent, the new version eliminates this point of confusion and states that a “Participant may not receive sole source 8(a) contract awards where it has received a combined total of competitive and sole source 8(a) contracts in excess of $100,000,000 during its participation in the 8(a) BD program, regardless of its primary NAICS code.”
As with the previous changes, these are aimed at reducing confusion for 8(a) Participants and encouraging greater participation in the Program.
The Immediate Family Rule (13 C.F.R. § 124.105(g))
Finally, SBA amended 13 C.F.R. § 124.105(g) to provide greater clarity in situations where an applicant has an immediate family member that has used his or her disadvantaged status to qualify another current or former Participant in the Program. The purpose of the regulation is to ensure that individuals do not unduly benefit from the 8(a) BD Program by taking advantage of the 8(a) certification of a family member. Under the previous version of the regulation, the applicant firm was required to demonstrate that “no connection exist[ed]” between the applicant and the other current or former family-member Participant. SBA determined that this rule was “too harsh,” and that a firm should not be penalized for having an immediate family member participate in the 8(a) Program.
To address the issue, SBA replaced the former “no connection exists” standard with a new test for determining whether entities are truly separate.” Under the new, more relaxed standard, family entities cannot:
- Be connected by any common ownership or management, regardless of the amount or position;
- Have a contractual relationship that is not conducted at arm’s length;
- Share common facilities; or
- Operate in the same primary NAICS code and the individual seeking to qualify the applicant concern does not have management or technical experience in that primary NAICS code.
13 C.F.R. § 124.105(g).
While this new “truly separate” test is still somewhat harsh, it is less so than the previous “no connection exists” standard. It also encapsulates SBA’s thinking that “an individual should not be required to avoid all contact with the business of an immediate family member.” Instead, he or she should merely have to demonstrate that the two businesses are truly separate and distinct entities.
As with the previously-discussed regulations, these changes are emblematic of SBA’s efforts to clarify and simply the 8(a) Program in an effort to boost participation.