SBA Issues More Guidance on Use of 8(a) Program During Ultima Injunction

The U.S. Small Business Administration (SBA) continues to navigate the impact of the injunction entered in Ultima Servs. Corp. v. U.S. Dep't of Agric., No. 2:20-CV-00041-DCLC-CRW, 2023 WL 463348 (E.D. Tenn. July 19, 2023) enjoining the use of SBA's "rebuttable presumption" of social disadvantage for certain enumerated groups in the administration of the SBA's 8(a) Business Development Program.

On Sept. 19, 2023, SBA issued new guidance about how federal agencies may continue using the 8(a) program while the injunction remains in effect. SBA has also provided guidance and FAQs for current 8(a) participants, current 8(a) applicants with applications in process and potential 8(a) applicants interested in applying to the 8(a) program. Among other things, this guidance is intended to help 8(a) contractors (or potential future 8(a) contractors) working with federal customers to determine eligibility for 8(a) awards. This blog highlights key aspects of the new guidance.

SBA Issues "Social Disadvantage Qualification List" of Eligible 8(a) Concerns for Use by Agencies

SBA stated it is developing a list of eligible 8(a) concerns for use by federal agencies on the MAX.gov platform. SBA reports that this list is updated daily as new firms are added and includes all individually owned small businesses in the 8(a) program that have established social disadvantage without the use of the presumption. It also includes 8(a) participants that initially relied on the rebuttable presumption but have recently submitted personal social disadvantage narratives and which have been approved by SBA. SBA's list, which is only available for government review, also includes 8(a) participants that did not rely on the rebuttable presumption, such as individually owned firms that previously established social disadvantage, as well as entity-owned 8(a) participants owned by Alaska Native Corporations (ANCs), tribes, Native Hawaiian Organizations (NHOs) and community development corporations (CDCs). This list will help federal agencies quickly and accurately determine which concerns are eligible for new 8(a) contracts and sole source awards, notwithstanding the existence of the injunction.

Although SBA has stated it will not distribute this list of currently eligible 8(a) concerns outside the government, firms which SBA has deemed remain eligible for the 8(a) program should have received a letter from SBA stating the firm has established its individual social disadvantage. SBA intends for 8(a) participants to share their eligibility letter with procuring agencies and teaming partners in order to confirm their current eligibility.

SBA states that it will continue to work with agencies to prioritize the review of firms for inclusion on its Social Disadvantage Qualification List that agencies have been identified as being in line for award. Agencies should continue to follow their existing partnership agreement with SBA and, where applicable, send offer letters for new 8(a) awards exceeding the Simplified Acquisition Threshold (SAT) and wait the customary time period for SBA's acceptance. If the firm is already on SBA's Social Disadvantage Qualification List, the agency may presume SBA's acceptance after expiration of the required waiting period. If the firm is not yet on the list but the firm has submitted its personal social disadvantage narrative, SBA has stated it will prioritize and expedite its review of that narrative. SBA goes on to state that review time varies depending on the complexity of a firm's social disadvantage narrative, but reviews were averaging five days as of Sept. 6, 2023. SBA stated that it has expanded its review team "substantially" to "speed up" the process.

While 8(a) awards below the SAT are subject to a much-shorter SBA review period (2-3 working days), an agency must still ensure that a firm is on the Social Disadvantage Qualification List before making a new 8(a) award below the SAT.

SBA Clarifies that Personal Social Disadvantaged Need Not Be Re-Established for Certain 8(a) Awards and Contract Actions

In its earlier guidance, SBA clarified that individually owned small businesses that relied on the presumption of social disadvantage must reestablish personal social disadvantage in order to be eligible for future 8(a) contracts. SBA has now clarified how the Ultima injunction applies to task order awards and actions under existing 8(a) contracts (such as the exercise of options and in-scope modifications).

Regarding a competitive 8(a) order under an existing 8(a)-restricted multiple award indefinite-delivery, indefinite quantity (IDIQ) contract, SBA's position is that these are not subject to an affirmative determination of eligibility by SBA prior to award. This is consistent with SBA's existing regulations that provide 8(a) status for competitive 8(a) task orders is determined at the time of initial offer for the 8(a) IDIQ contract. Consistent with this policy, even a contractor who has exited the 8(a) program may still be eligible for a competitive task order under a previously awarded 8(a) set-aside contract. (See 13 C.F.R. § 124.105(i)(iii); 13 C.F.R. § 124.521(e)(1), (e)(4).) SBA's guidance states that this policy applies to the 8(a) MAS Pool on the General Services Administration (GSA) Federal Supply Schedule and when using other government-wide IDIQs restricted to 8(a) concerns, such as the 8(a) STARS III vehicle.

SBA also clarified that this authority does not apply to competitive 8(a) task orders set-aside for 8(a) holders of an unrestricted (non-8(a)) multiple award contract. Instead, agencies must confirm that the intended awardee is an eligible 8(a) participant and on SBA's Social Disadvantage Qualification List in order to be eligible for a new 8(a) set-aside task order under an unrestricted IDIQ contract. This guidance is also consistent with SBA's regulations, which provide that 8(a) status for competitive or sole source 8(a) task orders under unrestricted IDIQ contracts is determined at the time of task order award. (See 13 C.F.R. § 124.503(i)(2).)

Likewise, SBA stated that an agency must verify a contractor's 8(a) eligibility (including establishment of social disadvantage without relying on the presumption) when making a sole source "directed" task order award, whether under an 8(a)-restricted IDIQ contract or an unrestricted IDIQ contract. This guidance is in accord with SBA's existing regulation at 13 C.F.R. § 124.503(i)(1)(iv)(A) (sole source task order under 8(a) IDIQ contract) and § 124.503(i)(2) (sole source 8(a) task order under unrestricted IDIQ contract).

In addition, SBA clarified that agencies may exercise options and agree to in-scope modifications of existing 8(a) contracts that were awarded before the Ultima injunction took effect on July 19, 2023. As SBA explained: "For any contract placed into the 8(a) Program prior to July 19, 2023 (the date of the court's order in Ultima), agencies may allow continued performance under the existing contract period, exercise priced options, and execute in-scope modifications without consulting with SBA." This guidance is consistent with SBA's regulations at 13 C.F.R. § 124.514(b) (option period) and § 124.514(d) (in-scope modifications).

However, for all new 8(a) contracts awarded after July 19, 2023, "it must either be awarded to a firm that doesn't need a new social disadvantage determination (i.e., entity-owned Participants, or individual-owned Participants that previously established their personal social disadvantage in their application to participate in the 8(a) Program) or to one whose social disadvantage has been determined by SBA after the decision in Ultima and prior to award."

SBA Issues Guidance for Current 8(a) Participants

SBA's guidance also includes important information for current 8(a) contractors and answers to frequently asked questions the agency is receiving in light of the Ultima decision. Below are a few highlights from this new guidance.

• SBA's guidance provides that "[c]onsistent with existing regulations, 8(a) participants will need to establish social disadvantage only once for their program term, unless there are ownership/control or other changes which affect eligibility."
• Current 8(a) participants should continue to submit their annual review and continuing eligibility materials to SBA, and SBA will interpret the firm's certification that it remains eligible in the 8(a) program as representation that there have been no changes to the information the 8(a) participant previously submitted for program eligibility purposes.
• For 8(a) participants whose status is based on multiple disadvantaged individuals, each disadvantaged individual is required to submit an individual social disadvantage narrative.

SBA Issues Guidance for Current 8(a) Applicants with Applications in Process and Potential 8(a) Applicants Interested in the Program

Finally, SBA has issued new guidance for current applicants to the 8(a) program, as well as for those that are interested in applying to the 8(a) program in the future. SBA has temporarily suspended new 8(a) application submissions to comply with the court's decision in Ultima, regardless of whether the concern is individually or entity-owned, despite the Ultima decision being limited to individually owned concerns. This guidance indicates that SBA intends to reopen applications, which is encouraging news for the small business community.

A few highlights from this guidance are summarized below.

• For applications currently in process, SBA's guidance provides that if SBA finds a social disadvantage narrative submitted lacks detail, applicants will have an opportunity to revise narratives and will not be rejected outright. SBA's guidance also makes clear that the social disadvantage narrative must also explain how the examples discussed directly impact the individual's entry or advancement in the business world.
• For entity-owned firms whose applications are in process (i.e., firms owned by tribes, ANCs or NHOs), SBA's new guidance reiterates that these firms are not required to submit narratives to apply for the 8(a) program, as the Ultima decision does not impact entity-owned firms.
• SBA's guidance states it is updating the form and anticipates its reopening soon. It encourages potential applicants to use the Certify Knowledge Base to begin to compile the materials required for a successful application to the 8(a) program.

How We Can Help

Holland & Knight's Government Contracts Group will continue to monitor 8(a) program developments as SBA continues to respond to the Ultima injunction and subsequent decisions in the case. For questions about SBA's guidance, its specific impact on your company and how to work with federal customers to determine eligibility to make 8(a) awards for new requirements and under existing contracts, please contact the authors.