SBA Update on 8(a) Program in Light of Ultima Decision

In a webinar sponsored by the National 8(a) Association, the U.S. Small Business Administration's (SBA) Associate General Counsel for Procurement Law John Klein provided an update on SBA's implementation of the recent Ultima decision. The U.S. District Court for the Eastern District of Tennessee held that the SBA's and U.S. Department of Agriculture's (USDA) use of a "rebuttable presumption" of social disadvantage for certain minority groups to qualify for inclusion in the SBA's 8(a) Business Development Program (the 8(a) Program) violates the Fifth Amendment's Due Process Clause.

SBA has taken the position that the Ultima ruling only applies to individually owned firms that relied on membership in a presumptively socially disadvantaged group to establish their 8(a) eligibility. Thus, any new applications or applications currently pending with SBA – even if they were submitted before the Ultima ruling – that relied upon the rebuttable presumption will now have to develop a narrative demonstrating specific social disadvantage and submit that narrative for SBA review and approval. SBA advised that the context of that narrative should track the requirements found in 13 C.F.R. § 124.103(c). SBA informed that it is in the process of updating the 8(a) application to include new questions for individually owned firms that are consistent with the Ultima ruling. The SBA's current suspension of new 8(a) application submissions will remain in effect until the application is updated.

SBA also advised that the Ultima ruling will not affect the eligibility of individually owned firms that previously demonstrated specific social disadvantage under 13 C.F.R. § 124.103(c) or entity-owned firms (tribes, Alaskan Native Corporations (ANCs), Native Hawaiian Organizations (NHOs) and community development corporations (CDCs)).

Additionally, existing 8(a) contracts will not be affected by the Ultima ruling, and agencies are allowed to exercise priced options and issue in-scope modifications. However, because SBA views unpriced options as a new contracting action that requires SBA's approval, then prior to exercising an unpriced option, any individually owned entity that previously relied on the rebuttable presumption will now have to demonstrate specific social disadvantage.

SBA informed that additional guidance will be posted in the coming days, and Holland & Knight's Government Contracts Group will provide updates once that guidance is released.