The “8(a) Program” for Small Businesses Owned and Controlled by the Socially and Economically Disadvantaged: Legal Requirements and Issues

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The “8(a) Program” for Small Businesses

Owned and Controlled by the Socially and

Economically Disadvantaged:

Legal Requirements and Issues

(name redacted)

Legislative Attorney

January 6, 2016

Congressional Research Service

7-....

www.crs.gov

R40744

The “8(a) Program” for Small Businesses

Summary

Commonly known as the “8(a) Program,” the Minority Small Business and Capital Ownership

Development Program is one of several federal contracting programs for small businesses. The

8(a) Program provides participating small businesses with training, technical assistance, and

contracting opportunities in the form of set-asides and sole-source awards. A “set-aside” is an

acquisition in which only certain contractors may compete, while a sole-source award is a

contract awarded, or proposed for award, without competition. In FY2014, the federal

government spent over $16 billion on contracts and subcontracts with 8(a) firms. Other programs

provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone).

Eligibility for the 8(a) Program is generally limited to small businesses “unconditionally owned

and controlled by one or more socially and economically disadvantaged individuals who are of

good character and citizens of and residing in the United States” that demonstrate “potential for

success.” Each of these terms is further defined by the Small Business Act, regulations

promulgated by the Small Business Administration (SBA), and judicial and administrative

decisions.

A “business” is generally a for-profit entity that has a place of business located in the United

States and operates primarily within the United States or makes a significant contribution to the

U.S. economy by paying taxes or using American products, materials, or labor. A business is

“small” if it is independently owned and operated; is not dominant in its field of operations; and

meets any definitions or standards established by the Administrator of Small Business. Ownership

is “unconditional” when it is not subject to any conditions precedent or subsequent, executory

agreements, or similar limitations. “Control” is not the same as ownership and includes both

strategic policy setting and day-to-day administration of business operations.

Members of certain racial and ethnic groups are presumed to be socially disadvantaged, although

individuals who do not belong to these groups may prove they are also socially disadvantaged. To

be economically disadvantaged, an individual must have a net worth of less than $250,000

(excluding ownership in the 8(a) firm and equity in one’s primary residence) at the time of entry

into the program. This amount increases to $750,000 for continuing eligibility. In determining

whether an applicant has good character, SBA looks for criminal conduct, violations of SBA

regulations, or debarment or suspension from federal contracting. For a firm to have “potential for

success,” it generally must have been in business in the field of its primary industry classification

for two years immediately prior to applying to the program. However, small businesses owned by

Alaska Native Corporations, Community Development Corporations, Indian tribes, and Native

Hawaiian Organizations are eligible for the 8(a) Program under somewhat different terms.

The 8(a) Program has periodically been challenged on the grounds that the presumption that

members of certain racial and ethnic groups are disadvantaged violates the constitutional

guarantee of equal protection. The outcomes in early challenges to the program varied, with some

courts finding that the plaintiffs lacked standing because they were not economically

disadvantaged. Most recently, two federal district court decisions found that the program is not

unconstitutional on its face because (1) “breaking down barriers to minority business

development created by discrimination and its lingering effects” constitutes a compelling

government interest; (2) the government had a strong basis in evidence for concluding that racebased action was necessary to further this interest; and (3) the 8(a) Program is narrowly tailored

to “minimize the burden on non-minority firms.” However, in one of these cases, the court did

find that the program was unconstitutional as applied in the military simulation and training

industry because the government conceded it had no evidence of discrimination in this industry.

The decision in one case was appealed. The litigation in the other has reportedly been settled.

Congressional Research Service

The “8(a) Program” for Small Businesses

Contents

Historical Development ................................................................................................................... 2

Origins of the 8(a) Program ...................................................................................................... 2

Federal Programs for Small Businesses .............................................................................. 2

Federal Programs for Racial and Ethnic Minorities............................................................ 3

1978 Amendments to the Small Business Act and Subsequent Regulations ...................... 4

Expansion of the 8(a) Program to Include “Disadvantaged” Groups........................................ 6

Current Requirements...................................................................................................................... 7

Requirements In General........................................................................................................... 7

Eligibility for the 8(a) Program........................................................................................... 7

Set-Asides and Sole-Source Awards Under Section 8(a) ................................................... 11

Other Requirements .......................................................................................................... 13

Requirements for Tribally, ANC-, NHO-, and CDC-Owned Firms ........................................ 15

Eligibility for the 8(a) Program......................................................................................... 15

Set-Asides and Sole-Source Awards ................................................................................. 19

Other Requirements .......................................................................................................... 19

Constitutionality of the 8(a) Program ............................................................................................ 20

Tables

Table 1. Groups Presumed to Be Socially Disadvantaged .............................................................. 5

Appendixes

Appendix. Comparison of the Requirements Pertaining to Different Types of 8(a) Firms ............. 1

Contacts

Author Contact Information ............................................................................................................ 6

Acknowledgments ........................................................................................................................... 6

Congressional Research Service

The “8(a) Program” for Small Businesses

ommonly known as the “8(a) Program,” the Minority Small Business and Capital

Ownership Development Program is one of several federal contracting programs for small

businesses.1 The 8(a) Program provides participating small businesses with training,

technical assistance, and contracting opportunities in the form of set-asides and sole-source

awards. A “set-aside” is an acquisition in which only certain contractors may compete, while a

sole-source award is a contract awarded, or proposed for award, without competition. Eligibility

for the 8(a) Program is generally limited to small businesses “unconditionally owned and

controlled by one or more socially and economically disadvantaged individuals who are of good

character and citizens of and residing in the United States” that demonstrate “potential for

success.”2 However, small businesses owned by Alaska Native Corporations (ANCs), Community

Development Corporations (CDCs), Indian tribes, and Native Hawaiian Organizations (NHOs)

are eligible for the 8(a) Program under somewhat different terms. In FY2014, the federal

government spent over $16 billion on contracts and subcontracts with 8(a) firms.3 Other programs

provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone).

The 8(a) and other programs for small businesses are of perennial interest to Congress, given that

It is the declared policy of the Congress that the Government should aid, counsel, assist,

and protect, insofar as is possible, the interests of small-business concerns in order to

preserve free competitive enterprise, to insure that a fair proportion of the total purchases

and contracts or subcontracts for property and services for the Government (including but

not limited to contracts or subcontracts for maintenance, repair, and construction) be

placed with small-business enterprises, to insure that a fair proportion of the total sales of

Government property be made to such enterprises, and to maintain and strengthen the

overall economy of the Nation.4

However, recent Congresses have had particular interest in the 8(a) Program because of the

recession of 2007-2009,5 its effects on minority-owned small businesses,6 and small businesses’

role in job creation.7

This report provides a brief history of the 8(a) Program, summarizes key requirements, and

discusses legal challenges alleging that the program’s presumption that members of certain racial

See generally CRS Report R41945, Small Business Set-Aside Programs: An Overview and Recent Developments in

the Law, by (name redacted) and (name redacted) (available upon request). The 8(a) Program takes its name from one

of the sections of the Small Business Act that authorizes it. The program is also governed by Section 7(j) of the act.

13 C.F.R. §124.101.

See Small Business Goaling Report: Fiscal Year 2014, available at https://www.fpds.gov/downloads/top_requests/

FPDSNG_SB_Goaling_FY_2014.pdf. The report on FY2015 has not yet been compiled.

Small Business Act of 1958, P.L. 85-536, §2(a), 72 Stat. 384 (July 18, 1958) (codified at 15 U.S.C. §631(a)).

See, e.g., Phil Izzo, Recession Over in June 2009, Wall Street J., September 20, 2010, available at

http://blogs.wsj.com/economics/2010/09/20/nber-recession-ended-in-june-2009/ (discussing the recession of 20072009).

See, e.g., Small Bus. Admin., The Small Business Economy: A Report to the President 3 (2009) (copy on file with the

author) (“The credit freeze in the short-term funding market had a devastating effect on the economy and small

firms.”); John Rosenthal, Tough Times Often Even Tougher on Minority Biz, Chicago Business, November 30, 2009,

available at http://www.chicagobusiness.com/article/20091128/ISSUE02/100032738/tough-times-often-even-tougheron-minority-biz.

See, e.g., Mark Trumbull, Why Obama Job Creation Plan Focuses on Small Business, The Christian Science Monitor,

December 8, 2009, available at http://features.csmonitor.com/politics/2009/12/08/why-obama-job-creation-planfocuses-on-small-business (noting that small businesses are reported to have created 65% of all new jobs in the United

States over the past 15 years).

Congressional Research Service

The “8(a) Program” for Small Businesses

and ethnic groups are socially disadvantaged violates the constitutional guarantee of equal

protection.

Historical Development

Origins of the 8(a) Program

The current 8(a) Program resulted from the merger of two distinct types of federal programs:

those seeking to assist small businesses in general and those seeking to assist racial and ethnic

minorities. This merger first occurred, as a matter of executive branch practice, in 1967 and was

given a statutory basis in 1978.

Federal Programs for Small Businesses

Congress first authorized a federal agency to enter into prime contracts with other agencies and

subcontract with small businesses for the performance of these contracts in 1942. The agency was

the Smaller War Plants Corporation (SWPC), which was created partly for this purpose, and

Congress gave it these powers in order to ameliorate small businesses’ financial difficulties while

also “mobiliz[ing] the productive facilities of small business in the interest of successful

prosecution of the war.”8 The SWPC’s subcontracting authority expired along with the SWPC at

the end of the World War II. However, in 1951, at the start of the Korean War, Congress created

the Small Defense Plants Administration (SDPA), which was generally given the same powers

that the SWPC had exercised.9 Two years later, in 1953, Congress transferred the SDPA’s

subcontracting authorities, among others, to the newly created Small Business Administration,10

with the intent that the SBA would exercise these powers in peacetime, as well as in wartime.11

When the Small Business Act of 1958 transformed the SBA into a permanent independent

agency, this subcontracting authority was included in Section 8(a) of the act.12 At its inception,

the SBA’s subcontracting authority was not limited to small businesses owned and controlled by

the socially and economically disadvantaged. Under the original Section 8(a), the SBA could

contract with any “small-business concerns or others,”13 but the SBA seldom, if ever, employed

this subcontracting authority, focusing instead upon its loan and other programs.14

Small Business Mobilization Act, P.L. 77-603, §4(f), 56 Stat. 351 (June 11, 1942).

Act of July 31, 1951, P.L. 82-96, §110, 65 Stat. 131.

P.L. 83-163, §207(c)-(d), 67 Stat. 230 (July 30, 1953).

See, e.g., H.Rept. 494, 83rd Cong., 1st sess., at 2 (1953) (stating that the SBA would “continue many of the functions

of the [SDPA] in the present mobilization period and in addition would be given powers and duties to encourage and

assist small-business enterprises in peacetime as well as in any future war or mobilization period”); S.Rept. 1714, 85th

Cong., 2nd sess., at 9-10 (1958) (stating that the act would “put[] the procurement assistance program on a peacetime

basis”).

P.L. 85-536, §8(a)(1)-(2), 72 Stat. 384 (July 18, 1958).

Id.

Thomas Jefferson Hasty, III, Minority Business Enterprise Development and the Small Business Administration’s

8(a) Program: Past, Present, and (Is There a) Future? 145 Mil. L. Rev. 1, 8 (1994) (“[B]ecause the SBA believed that

the efforts to start and operate an 8(a) program would not be worthwhile in terms of developing small business, the

SBA’s power to contract with other government agencies essentially went unused. The program actually lay dormant

for about fifteen years until the racial atmosphere of the 1960s provided the impetus to wrestle the SBA’s 8(a) authority

from its dormant state.”).

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The “8(a) Program” for Small Businesses

Federal Programs for Racial and Ethnic Minorities

Federal programs for racial and ethnic minorities began developing at approximately the same

time as those for small businesses, although there was initially no explicit overlap between them.

The earliest programs were created by executive orders, beginning with President Franklin

Roosevelt’s order on June 25, 1941, requiring that all federal agencies include a clause in

defense-related contracts prohibiting contractors from discriminating on the basis of “race, creed,

color, or national origin.”15 Subsequent Presidents followed Roosevelt’s example, issuing a

number of executive orders seeking to improve the employment opportunities of members of

various racial and ethnic groups.16 These executive branch initiatives took on new importance

after the Kerner Commission’s report on the causes of the urban riots of 1966 concluded that

African Americans would need “special encouragement” to enter the economic mainstream. 17

Presidents Lyndon Johnson and Richard Nixon laid the foundations for the present 8(a) Program

in the hope of providing such “encouragement.” Johnson created the President’s Test Cities

Program (PTCP), which involved a small-scale use of the SBA’s authority under Section 8(a) to

award contracts to firms willing to locate in urban areas and hire unemployed individuals, largely

African Americans, or sponsor minority-owned businesses by providing capital or management

assistance.18 However, under the PTCP, small businesses did not have to be minority-owned to

receive subcontracts under Section 8(a).19 Nixon’s program was larger and focused more

specifically on minority-owned small businesses.20 During the Nixon Administration, the SBA

promulgated its earliest regulations for the 8(a) Program. In 1970, the first of these regulations

articulated the SBA’s policy of using Section 8(a) to “assist small concerns owned by

disadvantaged persons to become self-sufficient, viable businesses capable of competing

effectively in the market place.”21 A later regulation, promulgated in 1973, defined

“disadvantaged persons” as including, but not limited to, “black Americans, Spanish-Americans,

oriental Americans, Eskimos, and Aleuts.”22 However, the SBA lacked explicit statutory authority

for focusing its 8(a) Program on minority-owned businesses until 1978,23 although courts

generally rejected challenges alleging that SBA’s implementation of the program was

unauthorized because it was “not specifically mentioned in statute.”24

Exec. Order No. 8802, 6 Federal Register 3,109 (June 25, 1941). Similar requirements were later imposed on nondefense contracts. See Exec. Order No. 9346, 8 Federal Register 7,182 (May 29, 1943).

See, e.g., Exec. Order No. 10308, 16 Federal Register 12,303 (December 3, 1951) (Truman); Exec. Order No. 10557,

19 Federal Register 5,655 (September 3, 1954) (Eisenhower); Exec. Order No. 10925, 26 Federal Register 1,977

(March 6, 1961) (Kennedy); Exec. Order No. 11458, 34 Federal Register 4,937 (March 7, 1969) (Nixon).

Report of the National Advisory Commission on Civil Disorders 21 (1968).

See, e.g., Hasty, supra note 14, at 11-12.

See, e.g., Jonathan J. Bean, BIG GOVERNMENT AND AFFIRMATIVE ACTION: THE SCANDALOUS HISTORY OF THE SMALL

BUSINESS ADMINISTRATION 66 (2001).

See Exec. Order No. 1625, 36 Federal Register 19,967 (October 13, 1971).

13 C.F.R. §124.8-1(b) (1970).

13 C.F.R. §124.8(c) (1973).

S. Rep. No. 95-1070, 95th Cong., 2nd sess., at 14 (1978) (“One of the underlying reasons for the failure of this effort is

that the program has no legislative basis.”); H.Rept. 95-949, 95th Cong., 2nd sess., at 4 (1978) (“Congress has never

extended legislative control over the activities of the 8(a) program, save through indirect appropriations, thereby

permitting program operations.… [The] program is not as successful as it could be.”).

See, e.g., Ray Billie Trash Hauling, Inc. v. Kleppe, 477 F.2d 696, 703-04 (5th Cir. 1973). In this case, the court

particularly noted that the SBA’s program was supported by congressional and presidential mandates issued after

enactment of the Small Business Act in 1958. Id. at 705.

Congressional Research Service

The “8(a) Program” for Small Businesses

1978 Amendments to the Small Business Act and Subsequent Regulations

In 1978, Congress amended the Small Business Act to give the SBA statutory authority for its

8(a) Program for minority-owned businesses.25 Under the 1978 amendments, SBA can only

subcontract under Section 8(a) with “socially and economically disadvantaged small business

concerns,”26 or businesses which are least 51% owned by one or more socially and economically

disadvantaged individuals and whose management and daily operations are controlled by such

individual(s).27

The 1978 amendments established a basic definition of “socially disadvantaged individuals,”

which included those who have been “subjected to racial or ethnic prejudice or cultural bias

because of their identity as a member of a group without regard to their individual qualities.”28

They also included congressional findings that “Black Americans, Hispanic Americans, Native

Americans, and other minorities” are socially disadvantaged.29 Thus, if an individual was a

member of one of these groups, he or she was presumed to be socially disadvantaged. Otherwise,

the amendments were generally seen to grant the SBA discretion to recognize additional groups

or individuals as socially disadvantaged based upon criteria promulgated in regulations.30 Under

P.L. 95-507, 92 Stat. 1757 (October 24, 1978).

Id. at §202.

Id. (codified at 15 U.S.C. §637(a)(4)(A)-(B)). Firms that are owned and controlled by Indian tribes, ANCs, or NHOs

were later included within the definition of a “socially and economically disadvantaged small business concern.” See

infra notes 36-43 and accompanying text.

Id. (codified at 15 U.S.C. §637(a)(5)).

Id. at §201 (codified, as amended, at 15 U.S.C. §631(f)(1)(C)). The meaning of “socially disadvantaged individuals”

was the subject of much debate at the time of the 1978 amendments. Some Members of Congress, perhaps focusing on

the SBA’s use of its authority under §8(a) in 1968-1970, viewed the 8(a) Program as a program for African Americans

and would have defined “social disadvantage” accordingly. See, e.g., Parren J. Mitchell, Federal Affirmative Action for

MBE’s: An Historical Analysis, 1 Nat’l Bar Ass’n Mag. 46 (1983). (Mitchell was a Member of the U.S. House of

Representatives and leader of the Congressional Black Caucus when the 1978 amendments were enacted.) Others

favored a somewhat broader view, including both African Americans and Native Americans on the grounds that only

those who did not come to the United States seeking the “American dream” should be deemed socially disadvantaged.

See, e.g., Testimony Before the House Comm. on Small Bus., Subcomm. on General Oversight & Minority Enter.,

Task Force on Minority Enter., 96th Cong., at 21 (1979). Yet others suggested that groups that are not racial or ethnic

minorities should be able to qualify as “socially disadvantaged,” or that individuals ought to be able to prove they are

personally socially disadvantaged even if they are not racial or ethnic minorities. See, e.g., H.Rept. 95-949, 95th Cong.,

2nd sess., at 9 (1978) (“[T]he committee intends that the SBA give most serious consideration to, among others, women

business owners” when determining which groups are socially disadvantaged.... [T]he bill does recognize that persons

falling outside of the racial and ethnic groups presumed to be disadvantaged, may nevertheless be disadvantaged.”).

The bill that passed the House defined “socially disadvantaged individuals,” in part, by establishing a rebuttable

presumption that African Americans and Hispanic Americans are socially disadvantaged, while the bill that passed the

Senate did not reference any racial or ethnic groups in defining “social disadvantage.” See, e.g., H.R. Conf. Rep. No.

95-1714, 95th Cong., 2nd sess., at 20 (1978); S.Rept. 95-1070, 95th Cong., 2nd sess., at 13-16 (1978). The conference

committee reconciling the House and Senate versions ultimately arrived at a definition of “socially disadvantaged

individuals” that was broader than the definition used in the SBA’s 1973 regulation and included “those who have been

subjected to racial or ethic prejudice or cultural bias because of their identity as a member of a group.” P.L. 95-507, at

§202. This definition did not incorporate the rebuttable presumption that members of certain groups are socially

disadvantaged included in the House bill. However, the conference bill included congressional findings that “Black

Americans, Hispanic Americans, Native Americans, and other minorities” are socially disadvantaged, thereby arguably

achieving similar effect. Id. at §201. Congress subsequently added “Asian Pacific Americans” and “Native Hawaiian

Organizations” to the groups whom it finds to be socially disadvantaged. See 15 U.S.C. §631(f)(1)(C)).

P.L. 95-507, at §201 (stating that the groups Congress finds to be socially disadvantaged “include,” but are “not

limited to,” those specified here); id. at §202 (authorizing the award of contracts to socially disadvantaged individuals);

H.Rept. 95-949, supra note 29, at 9 (expressing the view that Sections 201 and 202 of the bill provide “sufficient

discretion … to allow SBA to designate any other additional minority group or persons it believes should be afforded

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

these regulations, which include a three-part test for determining whether minority groups not

mentioned in the amendment’s findings are disadvantaged,31 the SBA recognized the racial or

ethnic groups listed in Table 1 as socially disadvantaged for purposes of the 8(a) Program.32 The

regulations also established standards of evidence to be met by individuals demonstrating

personal disadvantage and procedures for rebutting the presumption of social disadvantage

accorded to members of recognized minority groups.33

Table 1. Groups Presumed to Be Socially Disadvantaged

Group

Countries of Origin Included Within Group

Black Americans

n/a

Hispanic Americans

n/a

Native Americans

(including American

Indians, Eskimos,

Aleuts, Native

Hawaiians)

n/a

Asian Pacific

Americans

Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China

(including Hong Kong), Taiwan, Laos, Cambodia, Vietnam, Korea, The

Philippines, U.S. Trust Territory of the Pacific Islands (Republic of

Palau), Republic of the Marshall Islands, Federated States of

Micronesia, Commonwealth of the Northern Mariana Islands, Guam,

Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, Nauru

Subcontinent Asian

Americans

India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands,

Nepal

Source: Congressional Research Service, based on 13 C.F.R. §124.103(b).

The 1978 amendments also defined “economically disadvantaged individuals,” for purposes of

the 8(a) Program, as “those socially disadvantaged individuals whose ability to compete in the

free enterprise system has been impaired due to diminished capital and credit opportunities as

compared to others in the same business area who are not socially disadvantaged.”34 Later, the

SBA established by regulation that personal net worth of less than $250,000 at the time of entry

into the 8(a) Program ($750,000 for continuing eligibility) constitutes economic disadvantage.35

(...continued)

the presumption of social … disadvantage”).

See 13 C.F.R. §124.103(d)(2)(i)-(iii)(1980).

13 C.F.R. §124.103(b). Different groups are sometimes recognized as socially disadvantaged for purposes of other

programs, such as those of the Department of Commerce’s Minority Business Development Agency (MBDA). See 15

C.F.R. §1400.1(b). The SBA has rejected petitions from certain groups, including Hasidic Jews, women, disabled

veterans, and Iranian-Americans. See, e.g., George R. La Noue & John C. Sullivan, Gross Presumptions: Determining

Group Eligibility for Federal Procurement Preferences, 41 Santa Clara L. Rev. 103, 127-29 (2000). However, Hasidic

Jews are eligible to receive assistance from the MBDA, while women are deemed to be disadvantaged for purposes of

the Department of Transportation’s Disadvantaged Business Enterprise (DBE) program. See 49 U.S.C. §47113(a)(2)

(DBE program); 15 C.F.R. §1400.1(c) (MBDA program).

13 C.F.R. §124.103(c)(2) (standards of evidence for showing personal disadvantage); 13 C.F.R. §124.103(b)(3)

(mechanisms for overcoming the presumption of social disadvantage).

P.L. 95-507, §202.

See Small Bus. Admin., Minority Small Business and Capital Ownership Development Program: Final Rule, 54

Federal Register 34,692 (August 21, 1989) (codified, as amended, at 13 C.F.R. §124.104(c)). Some commentators have

estimated that 80 to 90% of Americans are economically disadvantaged under the SBA’s net-worth requirements. See,

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

Expansion of the 8(a) Program to Include “Disadvantaged” Groups

Although the 8(a) Program was originally established for the benefit of disadvantaged

individuals, in the 1980s, Congress expanded the program to include small businesses owned by

four “disadvantaged” groups.

The first owner-group to be included was Community Development Corporations (CDCs). A

CDC is

a nonprofit organization responsible to residents of the area it serves which is receiving

financial assistance under part A of this subchapter [42 U.S.C. §§9805 et seq.] and any

organization more than 50 percent of which is owned by such an organization, or

otherwise controlled by such an organization, or designated by such an organization for

the purpose of this subchapter [42 U.S.C. §§9801 et seq.].36

Congress created CDCs with the Community Development Act of 198137 and instructed the SBA

to issue regulations ensuring that CDCs could participate in the 8(a) Program.38

In 1986, two additional owner-groups—Indian tribes and Alaska Native Corporations (ANCs)—

became eligible for the 8(a) Program when Congress passed legislation providing that firms

owned by Indian tribes—which include ANCs39—were to be deemed “socially disadvantaged”

for purposes of the 8(a) Program.40 In 1992, ANCs were further deemed to be “economically

disadvantaged.”41

The final owner-group, that of Native Hawaiian Organizations (NHOs), was recognized in

1988.42 An NHO is defined as

any community service organization serving Native Hawaiians in the State of Hawaii

which (A) is a nonprofit corporation that has filed articles of incorporation with the

director (or the designee thereof) of the Hawaii Department of Commerce and Consumer

(...continued)

e.g., La Noue & Sullivan, supra note 32, at 108.

42 U.S.C. §9802.

P.L. 97-35, Ch. 8, Subch. A, 95 Stat. 489 (1981) (codified at 42 U.S.C. §§9801 et seq.).

Id. at §626, 95 Stat. 496 (codified at 42 U.S.C. §9815(a)(2)) (“Not later than 90 days after August 13, 1981, the

Administrator of the Small Business Administration, after consultation with the Secretary, shall promulgate regulations

to ensure the availability to community development corporations of such programs as shall further the purposes of this

subchapter, including programs under §637(a) of title 15.”).

P.L. 99-272, §18015, 100 Stat. 370 (1986) (codified at 15 U.S.C.§637(a)(13)) (defining “Indian tribe” to include

“any Indian tribe, band, nation, or other organized group or community of Indians, including any Alaska Native village

or regional or village corporation (within the meaning of the Alaska Native Claims Settlement Act (43 U.S.C.§1606))

which (A) is recognized as eligible for the special programs and services provided by the United States to Indians

because of their status as Indians, or (B) is recognized as such by the State in which such tribe, band, nation, group, or

community resides.”). An Alaska Native Corporation is “any Regional Corporation, Village Corporation, Urban

Corporation, or Group Corporation organized under the laws of the State of Alaska in accordance with the Alaska

Native Claims Settlement Act.” 13 C.F.R. §124.3. An Alaska Native is any “citizen of the United States who is a

person of one-fourth degree or more Alaskan Indian …, Eskimo, or Aleut blood, or a combination of those bloodlines.

The term includes, in the absence of proof of a minimum blood quantum, any citizen whom a Native village or Native

group regards as an Alaska Native if their father or mother is regarded as an Alaska Native.” 13 C.F.R. §124.3.

P.L. 99-272, §18015, 100 Stat. 370 (codified at 15 U.S.C. §637(a)(4)).

P.L. 102-415, §10, 106 Stat. 2115 (1992) (codified at 43 U.S.C. §1626(e)).

P.L. 100-656, §207, 102 Stat. 3861 (1988) (codified at 15 U.S.C. §637(a)(4)).

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The “8(a) Program” for Small Businesses

Affairs, or any successor agency, (B) is controlled by Native Hawaiians, and (C) whose

business activities will principally benefit such Native Hawaiians.43

Current Requirements

Under the current 8(a) Program, participating firms are eligible for set-asides or sole-source

awards of federal contracts, as well as training and technical assistance from SBA. Detailed

statutory and regulatory requirements govern eligibility for the Program; set-asides and solesource awards to 8(a) firms; and related issues. These requirements are generally the same for all

participants in the 8(a) Program, although there are instances where there are “special rules” for

8(a) firms owned by groups.44 An Appendix to this report compares the requirements applicable

to individual owners of 8(a) firms to those applicable to groups owning 8(a) firms (i.e., ANCs,

CDCs, NHOs, and Indian tribes).45

Requirements In General

Eligibility for the 8(a) Program

Eligibility for the 8(a) Program is limited to “small business[es] which [are] unconditionally

owned and controlled by one or more socially and economically disadvantaged individuals who

are of good character and citizens of and residing in the United States, and which demonstrate[]

potential for success.”46 Each of these terms is further defined by the Small Business Act;

regulations that the SBA has promulgated to implement Section 8(a); and judicial and

administrative decisions.47 The eligibility requirements are the same at the time of entry into the

8(a) Program and throughout the Program unless otherwise noted.48

“Business”

Except for small agricultural cooperatives, a “business” is a for-profit entity that has a place of

business located in the United States and operates primarily within the United States or makes a

significant contribution to the U.S. economy by paying taxes or using American products,

materials, or labor.49 For purposes of the 8(a) Program, businesses may take the form of

Id. (codified at 15 U.S.C. §637(a)(15)). A “Native Hawaiian” is “any individual whose ancestors were natives, prior

to 1778, of the area which now comprises the State of Hawaii.” 13 C.F.R. §124.3.

See, e.g., 13 C.F.R. §124.109(a) (“Special rules for ANCs. Small business concerns owned and controlled by ANCs

are eligible for participation in the 8(a) program and must meet the eligibility criteria set forth in §124.112 to the extent

the criteria are not inconsistent with this section.”) (emphasis in original).

See also archived CRS Report R40855, Contracting Programs for Alaska Native Corporations: Historical

Development and Legal Authorities, by (name redacted) and (name redacted)(discussing contracting with ANC-owned

firms through the 8(a) Program and other programs).

13 C.F.R. §124.101. The Office of Legal Counsel at the Department of Justice has opined that SBA regulations

limiting eligibility for the 8(a) Program to citizens do not deprive resident aliens of due process in violation of the Fifth

Amendment to the U.S. Constitution. See U.S. Dep’t of Justice, Office of Legal Counsel, Constitutionality of 13 C.F.R.

§124.103 Establishing Citizenship Requirement for Participation in 8(a) Program, 20 Op. O.L.C. 85 (1996).

The SBA’s Office of Hearings and Appeals has, for example, developed a seven-part test for determining whether a

small business is “unusually reliant” on a contractor that is used in determining affiliation. See Valenzuela Eng’g, Inc.

& Curry Contracting Co., Inc., SBA-4151 (1996).

See 13 C.F.R. §124.112(a) (“In order for a concern ... to remain eligible for 8(a) ... program participation, it must

continue to meet all eligibility criteria contained in [Section] 124.101 through [Section] 124.108.”).

13 C.F.R. §121.105(a)(1). “Business” is separately defined for small agricultural cooperatives. See 13 C.F.R.

(continued...)

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The “8(a) Program” for Small Businesses

individual proprietorships, partnerships, limited liability companies, corporations, joint ventures,

associations, trusts, or cooperatives.50

“Small”

A business is “small” if it is independently owned and operated; is not dominant in its field of

operations; and meets any definitions or standards established by the Administrator of the SBA.51

These standards focus primarily upon the size of the business as measured by the number of

employees or its gross income, but they also take into account the size of other businesses within

the same industry.52 For example, businesses in the field of “scheduled passenger air

transportation” are “small” if they have fewer than 1,500 employees, while those in the data

processing field are “small” if they have a gross income of less than $32.5 million.53

Affiliations between businesses, or relationships allowing one party control or the power of

control over another,54 generally count in size determinations, with the SBA considering “the

receipts, employees, or other measure of size of the concern whose size is at issue and all of its

domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.”55

Businesses can thus be determined to be other than small because of their involvement in joint

ventures,56 subcontracting arrangements,57 or franchise or license agreements,58 among other

things, provided that their income or personnel numbers, plus those of their affiliate(s), are over

the pertinent size threshold.

“Unconditionally owned and controlled”

Participants in the 8(a) Program must be “at least 51% unconditionally and directly owned by one

or more socially and economically disadvantaged individuals who are citizens of the United

States” unless they are owned by an ANC, CDC, NHO, or Indian tribe.59 Ownership is

“unconditional” when it is not subject to any conditions precedent or subsequent, executory

(...continued)

§121.105(a)(2).

13 C.F.R. §121.105(b).

15 U.S.C. §632(a)(1)-(2)(A).

13 C.F.R. §§121.101-121.109. The number of employees is the average number in each pay period for the preceding

12 calendar months. Where possible, gross income is based on the average for the last three completed fiscal years. It

includes all revenues, not just those from the firm’s primary industry. See IMDT, Inc., SBA-4121 (1995).

13 C.F.R. §121.201.

13 C.F.R. §121.103(a)(1). Control, or the power of control, need only exist. It need not be exercised for affiliation to

be found.

13 C.F.R. §121.103(a)(6).

13 C.F.R. §121.103(h) (“[A] specific joint venture entity generally may not be awarded more than three contracts

over a two year period, starting from the date of the award of the first contract, without the partners to the joint venture

being deemed affiliated for all purposes.”).

13 C.F.R. §121.103(h)(4) (“A contractor and its ostensible subcontractor are treated as joint venturers, and therefore

affiliates, for size determination purposes. An ostensible subcontractor is a subcontractor that performs primary and

vital requirements of a contract, or of an order under a multiple award schedule contract, or a subcontractor upon which

the prime contractor is unusually reliant.”).

13 C.F.R. §121.103(i) (“Affiliation may arise ... through ... common ownership, common management or excessive

restrictions on the sale of the franchise interest.”).

13 C.F.R. §124.105 (defining “unconditional ownership”). See also 15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring at least

51% unconditional ownership).

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The “8(a) Program” for Small Businesses

agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements

that could cause the benefits of ownership to go to another entity.60 Ownership is “direct” when

the disadvantaged individuals own the business in their own right and not through an

intermediary (e.g., ownership by another business entity or by a trust that is owned and controlled

by one or more disadvantaged individuals).61 Non-disadvantaged individuals and non-participant

businesses that own at least 10% of an 8(a) business may generally own no more than 10 to 20%

of any other 8(a) firm.62 Non-participant businesses that earn the majority of their revenue in the

same or similar line of business are likewise barred from owning more than 10% (increasing to

20%-30% in certain circumstances) of another 8(a) firm.63

Participants must also be controlled by one or more disadvantaged individuals.64 “Control is not

the same as ownership” and includes both strategic policy setting and day-to-day management

and administration of business operations.65 Management and daily business operations must also

be conducted by one or more disadvantaged individuals unless the 8(a) business is owned by an

ANC, CDC, NHO, or Indian tribe.66 These individuals must have managerial experience “of the

extent and complexity needed to run the concern” and generally must devote themselves full-time

to the business “during the normal working hours of firms in the same or similar line of

business.”67 A disadvantaged individual must hold the highest officer position within the

business.68 Non-disadvantaged individuals may otherwise be involved in the management of an

8(a) business, or may be stockholders, partners, limited liability members, officers, or directors of

an 8(a) business.69 However, they may not exercise actual control or have the power to control the

firm or its disadvantaged owner(s), or receive compensation greater than that of the highest-paid

officer (usually the CEO or President) without SBA approval.70

“Socially disadvantaged individual”

Socially disadvantaged individuals are “those who have been subjected to racial or ethnic

prejudice or cultural bias within American society because of their identities as members of

groups and without regard to their individual qualities.”71 Members of designated groups, listed in

Table 1, are entitled to a rebuttable presumption of social disadvantage for purposes of the 8(a)

Program,72 although this presumption can be overcome with “credible evidence to the contrary.”73

13 C.F.R. §124.3.

13 C.F.R. §124.105(a).

13 C.F.R. §124.105(h)(1). Ownership is limited to 10% when the 8(a) firm in is the “developmental stage” of the

8(a) Program and 20% when it is in the “transitional stage.” Id. For more on the developmental and transitional stages,

see infra notes 110-112 and accompanying text.

13 C.F.R. §124.105(h)(2).

15 U.S.C. §637(a)(4)(A)(i)-(ii) (requiring control of management and business operations); 13 C.F.R. §124.106.

13 C.F.R. §124.106.

Id.

13 C.F.R. §124.106 & §124.106(a)(3).

13 C.F.R. §124.106(a)(2).The individual must also be physically located in the United States. Id.

13 C.F.R. §124.106(e).

13 C.F.R. §124.106(e)(1) & (3).

13 C.F.R. §124.103(a). See also 15 U.S.C. §637(a)(5).

13 C.F.R. §124.103(b)(1). If required by the SBA, individuals claiming membership in these groups must

demonstrate that they held themselves out and are recognized by others as members of the designated group(s). 13

C.F.R. §124.103(b)(2).

13 C.F.R. §124.103(b)(3).

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The “8(a) Program” for Small Businesses

Individuals who are not members of designated groups must prove they are socially

disadvantaged by a preponderance of the evidence.74 Such individuals must show (1) at least one

objective distinguishing feature that has contributed to social disadvantage (e.g., race, ethnic

origin, gender, physical handicap, long-term residence in an environment isolated from

mainstream American society); (2) personal experiences of substantial and chronic social

disadvantage in American society; and (3) negative impact on entry into or advancement in the

business world.75 In assessing the third factor, the SBA will consider all relevant evidence

produced by the applicant, but must consider the applicant’s education, employment, and business

history to see if the totality of the circumstances shows disadvantage.76 Groups not included in

Table 1 may obtain listing by demonstrating disadvantage by a preponderance of the evidence.77

“Economically disadvantaged individual”

Economically disadvantaged individuals are “socially disadvantaged individuals whose ability to

compete in the free enterprise system has been impaired due to diminished capital and credit

opportunities as compared to others in the same or similar line of business who are not socially

disadvantaged.”78 Individuals claiming economic disadvantage must describe it in a personal

statement and submit financial documentation.79 The SBA will examine their personal income for

the past three years, their personal net worth, and the fair market value of the assets they own.80

However, principal ownership in a prospective or current 8(a) business is generally excluded

when calculating net worth, as is equity in individuals’ primary residence.81 For initial eligibility,

applicants to the 8(a) Program must have a net worth of less than $250,000.82 For continued

eligibility, net worth must be less than $750,000.83

“Good character”

In determining whether an applicant to, or participant in, the 8(a) Program possesses “good

character,” the SBA looks for criminal conduct; violations of SBA regulations; current debarment

or suspension from government contracting; managers or key employees who lack business

integrity; and the knowing submission of false information to the SBA.84

“Demonstrated potential for success”

For a firm to have demonstrated potential for success, it generally must have been in business in

the field of its primary industry classification for at least two full years immediately prior to the

13 C.F.R. §124.103(c)(1).

13 C.F.R. §124.103(c)(2)(i)-(iii).

13 C.F.R. §124.103(c)(2)(iii).

13 C.F.R. §124.103(d)(4). Groups petitioning for recognition as socially disadvantaged do not always obtain it. Over

the years, the SBA has rejected petitions from Hasidic Jews, women, disabled veterans, and Iranian-Americans. See

supra note 32.

13 C.F.R. §124.104(a). See also 15 U.S.C. §637(a)(6)(A).

13 C.F.R. §124.104(b)(1).

13 C.F.R. §124.104(c). See also 15 U.S.C. §637(a)(6)(E)(i)-(ii).

13 C.F.R. §124.104(c)(2).

Id.

13 C.F.R. §124.108(a)(1)-(5). For more on debarment and suspension, see CRS Report RL34753, Procurement

Debarment and Suspension of Government Contractors: Legal Overview, by (name redacted) .

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The “8(a) Program” for Small Businesses

date of its application to the 8(a) Program.85 However, the SBA may grant a waiver allowing

firms that have been in business for less than two years to enter the 8(a) Program when (1) the

disadvantaged individuals upon whom eligibility is based have substantial business management

experience; (2) the business has demonstrated the technical experience necessary to carry out its

business plan with a substantial likelihood of success; (3) the firm has adequate capital to sustain

its operations and carry out its business plan; (4) the firm has a record of successful performance

on contracts in its primary field of operations; and (5) the firm presently has, or can demonstrate

its ability to timely obtain, the personnel, facilities, equipment, and other resources necessary to

perform contracts under Section 8(a).86

Set-Asides and Sole-Source Awards Under Section 8(a)

Section 8(a) of the Small Business Act authorizes agencies to award contracts for goods or

services, or to perform construction work, to the SBA for subcontracting to small businesses

participating in the 8(a) Program.87 A “set-aside” is an acquisition in which only certain

contractors may compete, while a sole-source award is a contract awarded, or proposed for

award, without competition.88 Although the Competition in Contracting Act (CICA) generally

requires that agencies obtain “full and open competition through the use of competitive

procedures” when procuring goods or services, set-asides and sole-source awards are both

permissible under CICA. In fact, an 8(a) set-aside is a recognized competitive procedure.89

Agencies are effectively encouraged to subcontract through the 8(a) Program because there are

government-wide and agency-specific goals regarding the percentage of procurement dollars

awarded to “small disadvantaged businesses,” among others.90 Awards made via set-asides or on a

sole-source basis count toward these goals,91 and businesses participating in the 8(a) Program are

considered small disadvantaged businesses.92

13 C.F.R. §124.107. Specifically, “[i]ncome tax returns for each of the two previous tax years must show operating

revenues in the primary industry in which the applicant is seeking 8(a) ... certification.” 13 C.F.R. §124.107(a).

15 U.S.C. §637(a)(7)(A) (“reasonable prospects for success”); 13 C.F.R. §124.107(b)(1)(i)-(v).

SBA may delegate the function of executing contracts to the procuring agencies and often does so. See 13 C.F.R.

§124.501(a); Partnership Agreement Between the U.S. Small Business Administration and the U.S. Department of

Defense, January 7, 2013, available at http://www.sba.gov/sites/default/files/files/Department%20of%20Defense.pdf.

Set-asides may be total or partial. See 48 C.F.R. §19.501(a).

10 U.S.C. §2304(b)(2), 41 U.S.C. §3303(b) (CICA provisions authorizing set-asides for small businesses); 48 C.F.R.

§§6.203-6.207 (set-asides for small business generally, 8(a) small businesses, Historically Underutilized Business Zone

(HUBZone) small businesses, service-disabled veteran-owned small businesses, and women-owned small businesses).

CICA authorizes competitions excluding all sources other than small businesses when such competitions assure that a

“fair proportion of the total purchases and contracts for property and services for the Federal Government shall be

placed with small business concerns.” 41 U.S.C. §3104. CICA also permits sole-source awards when such awards are

made pursuant to a procedure expressly authorized by statute, or when special circumstances exist (e.g., urgent and

compelling circumstances). See 10 U.S.C. §2304(c)(1) (defense agency procurements) & 41 U.S.C. §§3301 & 3304(a)

(civilian agency procurements). For more on competition in federal contracting, see CRS Report R40516, Competition

in Federal Contracting: Legal Overview, by (name redacted) .

15 U.S.C. §644(g)(1)-(2). Currently, the government-wide goal is that 5% of all federal contract and subcontract

dollars be spent with small disadvantaged businesses, including 8(a) businesses. Most agencies also have a 5% goal.

See Small Business Goaling Report, supra note 3. The government-wide goal was met in FY2014, the most recent year

for which information is available, when 9.4% of all federal procurement dollars was spent with small disadvantaged

businesses. Id. Performance by the large procuring agencies varies, from 2.3% (Department of Energy) to 47.8%

(SBA). Id.

They also count toward a separate goal for the percentage of federal procurement dollars awarded to small businesses

generally. This latter goal is currently 23%.

See 13 C.F.R. §124.1002 (defining “small disadvantaged business”).

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The “8(a) Program” for Small Businesses

Discretion to Subcontract Through the 8(a) Program

There are few limits on agency discretion to subcontract through the 8(a) Program.93 However,

the SBA is prohibited by regulation from accepting procurements for award under Section 8(a)

when

1. the procuring agency issued a solicitation for or otherwise expressed publicly a

clear intent to reserve the procurement as a set-aside for small businesses not

participating in the 8(a) Program prior to offering the requirement to SBA for

award as an 8(a) contract;94

2. the procuring agency competed the requirement among 8(a) firms prior to

offering the requirement to SBA and receiving SBA’s acceptance of it;95 or

3. the SBA makes a written determination that “acceptance of the procurement for

8(a) award would have an adverse impact on an individual small business, a

group of small businesses located in a specific geographical location, or other

small business programs.”96

Additionally, SBA is barred from awarding an 8(a) contract, either via a set-aside or on a solesource basis, “if the price of the contract results in a cost to the contracting agency which exceeds

a fair market price.”97

Otherwise, agency officials may offer contracts to the SBA “in [their] discretion,” and the SBA

may accept requirements for the 8(a) Program “whenever it determines such action is necessary

or appropriate.”98 The courts and the Government Accountability Office (GAO) will generally not

See, e.g., AHNTECH, Inc., B-401092 (April 22, 2009) (“The [Small Business] Act affords the SBA and contracting

agencies broad discretion in selecting procurements for the 8(a) program.”).

Even in this situation, SBA may accept the requirement under “extraordinary circumstances.” 13 C.F.R. §124.504(a);

Madison Servs., Inc., B-400615 (December 11, 2008) (finding that extraordinary circumstances existed when the

agency’s initial small business set-aside was erroneous and did not reflect its intentions).

However, offers of requirements below the simplified acquisition threshold (generally $150,000) are assumed to

have been accepted if SBA does not reply within two days. 13 C.F.R. §124.503(a)(4)(i). See also Eagle Collaborative

Computing Servs., Inc., B-401043.3 (January 28, 2011) (finding that an agency properly awarded a sole-source

contract valued below the simplified acquisition threshold even though SBA never formally accepted the

requirements).

13 C.F.R. §124.504(a)-(c). The third provision applies only to preexisting requirements. It generally does not apply

to new contracts, follow-on or renewal contracts, or procurements conducted using simplified acquisition procedures.

Id. Also, under its regulations, SBA must presume an adverse impact when:

(A) The small business concern has performed the specific requirement for at least 24 months;

(B) The small business is performing the requirement at the time it is offered to the 8(a) ... program,

or its performance of the requirement ended within 30 days of the procuring activity’s offer of the

requirement to the 8(a) ... program; and

or more of its most recent annual gross sales (including those of its affiliates).

13 C.F.R. §124.504(c)(1)(i)(A)-(C).

15 U.S.C. §637(a)(1)(A); 48 C.F.R. §19.806(b). Fair market price is estimated by looking at recent prices for similar

items or work, in the case of repeat purchases, or by considering commercial prices for similar products or services,

available in-house cost estimates, cost or pricing data submitted by the contractor, or data from other government

agencies, in the case of new purchases. 15 U.S.C. §637(a)(3)(B)(i)-(iii); 48 C.F.R. §19.807(b) & (c).

15 U.S.C. §637(a)(1)(A). See also Totolo v. United States, 87 Fed. Cl. 680, 695 (2009) (“The manner in which [an

agency] assesses its needs is a business judgment and lies within its own discretionary domain.”); JT Constr. Co., B254257 (December 6, 1993) (stating that it is a business judgment, within the contracting officer’s discretion, to decide

not to set aside a competition for small businesses). For a time in 2008-2010, the federal courts and the Government

(continued...)

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The “8(a) Program” for Small Businesses

hear protests of agencies’ determinations regarding whether to procure specific requirements

through the 8(a) Program unless it can be shown that government officials acted in bad faith or

contrary to federal law.99

Monetary Thresholds and Subcontracting Mechanism Under 8(a)

Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded either

through a set-aside or on a sole-source basis, with the amount of the contract generally

determining the acquisition method used. When the anticipated total value of the contract,

including any options, is less than $4 million ($7 million for manufacturing contracts), the

contract is normally awarded without competition.100 In contrast, when the anticipated value of

the contract exceeds $4 million ($7 million for manufacturing contracts), the contract generally

must be awarded via a set-aside with competition limited to 8(a) firms so long as there is a

reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and

the award can be made at fair market price.101 Sole-source awards of contracts valued at $4

million ($7 million or more for manufacturing contracts) may only be made when (1) there is not

a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at

a fair market price, or (2) the SBA accepts the requirement on behalf of an 8(a) firm owned by an

Indian tribe, an ANC or, in the case of Department of Defense contracts, an NHO.102

Requirements valued at more than $4 million ($7 million for manufacturing contracts) cannot be

divided into several acquisitions at lesser amounts in order to make sole-source awards.103

Other Requirements

Other key requirements of the 8(a) Program include the following:



Inability to protest an 8(a) firm’s eligibility for an award: When the SBA makes

or proposes an award to an 8(a) firm, that firm’s eligibility for the award cannot

(...continued)

Accountability Office (GAO) found that set-asides for Historically Underutilized Business Zone (HUBZone) small

businesses had “precedence” over set-asides for 8(a) firms. See generally archived CRS Report R40591, Set-Asides for

Small Businesses: Recent Developments in the Law Regarding Precedence Among the Set-Aside Programs and SetAsides Under Indefinite-Delivery/Indefinite-Quantity Contracts, by (name redacted) . However, the Small Business Act

was amended on September 27, 2010, to remove the language that formed the basis for these decisions. Small Business

Jobs Act of 2010, P.L. 111-240, §1347,124 Stat. 2546-47 (September 27, 2010).

See, e.g., Rothe Computer Solutions, LLC, B-299452 (May 9, 2007).

100

15 U.S.C. §637(a)(16)(A). A noncompetitive award may be made under this authority so long as (1) the firm is

determined to be a responsible contractor for performance of the contract; (2) the award of the contract would be

consistent with the firm’s business plan; and (3) award of the contract would not result in the firm exceeding the

percentage of revenue from 8(a) sources forecast in its annual business plan. 15 U.S.C. §637(a)(16)(A)(i)-(iii).

101

15 U.S.C. §637(a)(1)(D)(ii); 48 C.F.R. §19.805-1(a). However, competitive awards for contracts whose anticipated

value is less than $4 million ($7 million for manufacturing contracts) can be made with the approval of the SBA’s

Associate Administrator for 8(a) Business Development. 15 U.S.C. §637(a)(1)(D)(i)(I)-(II); 48 C.F.R. §19.805-1(d).

102

48 C.F.R. §19.805-1(b)(1)-(2) (sole-source awards to tribally or ANC-owned firms); 48 C.F.R. §219.8051(b)(2)(A)-(B) (sole-source awards to NHO-owned firms). Prior to enactment of the National Defense Authorization

Act (NDAA) for FY2010, contracting officers making sole-source awards in reliance on the second exception did not

have to justify such awards or obtain approval of them from higher-level agency officials. The NDAA changed this by

requiring justifications, approvals, and notices for sole-source contracts in excess of $20 million awarded under the

authority of §8(a) analogous to those required for sole-source contracts awarded under the general contracting

authorities. Compare P.L. 111-84, §811, 123 Stat. 2405-06 (October 28, 2009) with 10 U.S.C. §2304(c) & (f)

(procurements of defense agencies); 41 U.S.C. §3304(a) & (e) (procurements of civilian agencies).

103

48 C.F.R. §19.805-1(c).

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The “8(a) Program” for Small Businesses



be challenged or protested as part of the solicitation or proposed contract award.

Instead, information concerning a firm’s eligibility for the 8(a) Program must be

submitted to SBA in accordance with separate requirements contained in Section

124.517 of Title 13 of the Code of Federal Regulations.104

Maximum of nine years in the 8(a) Program: Firms may participate in the 8(a)

Program for no more than nine years from the date of their admission into the

Program, although they may be terminated or graduate from the program before

nine years have passed.105

One-time eligibility for the 8(a) Program: Once a firm or a disadvantaged

individual upon whom a firm’s eligibility was based has exited the 8(a) Program

after participating in it for any length of time, neither the firm nor the individual

is generally eligible to participate in the 8(a) Program again.106 When at least

50% of the assets of one firm are the same as those of another firm, the firms are

considered identical for purposes of eligibility for the 8(a) Program.107

Limits on ownership of 8(a) firms by family members of current or former 8(a)

firm owners: Individuals generally may not use their disadvantaged status to

qualify a firm for the 8(a) Program if the individual has an immediate family

member who is using, or has used, his or her disadvantaged status to qualify a

firm for the 8(a) Program.108

Limits on the amount of 8(a) contracts that a firm may receive: 8(a) firms may

generally not receive additional sole-source awards once they have received a

combined total of competitive and sole-source awards in excess of $100 million,

in the case of firms whose size is based on their number of employees, or in

excess of an amount equivalent to the lesser of (1) $100 million or (2) five times

the size standard for the industry, in the case of firms whose size is based on their

revenues.109 Additionally, 8(a) firms in the “transitional stage,” or the last five

years of participation, must achieve annual targets for the amount of revenues

they receive from non-8(a) sources.110 These targets increase over time, with

firms required to attain 15% of their revenue from non-8(a) sources in the fifth

year; 25% in the sixth year; 35% in the seventh year; 45% in the eight year; and

55% in the ninth year.111 Firms that do not display the relevant percentages of

104

48 C.F.R. §19.805-2(d).

15 U.S.C. §636(j)(15) (nine-year term); 15 U.S.C. §637(a)(9) (termination and early graduation); 13 C.F.R.

§124.301 (exiting the program); 13 C.F.R. §124.302 (early graduation); 13 C.F.R. §124.303 (termination).

106

15 U.S.C. §636(j)(11)(B)-(C); 13 C.F.R. §124.108(b).

107

13 C.F.R. §124.108(b)(4).

108

13 C.F.R. §124.105(g)(1). SBA may waive this prohibition if the firms have no connections in terms of ownership,

control, or contractual relationships and certain other conditions are met. Id.

109

13 C.F.R. §124.519(a)(1)-(2). Contracts less than $100,000 are not counted in determining whether a firm has

reached the applicable limit. 13 C.F.R. §124.519(a)(3). The Administrator of the SBA may waive this requirement if

the head of the procuring agency determines that a sole-source award to a firm is necessary “to achieve significant

interests of the Government.” 13 C.F.R. §124.519(e). Even after they have received a combined total of competitive

and sole-source awards in excess of $100 million, or other applicable amount, firms may still receive competitive

contracts under the 8(a) Program. 13 C.F.R. §124.519(b).

110

15 U.S.C. §636(j)(10)(I)(i)-(iii); 13 C.F.R. §124.509(b)(1).

111

13 C.F.R. §124.509(b)(2).

105

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

revenue from non-8(a) sources are ineligible for sole-source 8(a) contracts

“unless and until” they correct the situation.112

Limitations on subcontracting: Although not only under the authority of Section

8(a) of the Small Business Act or applicable only to 8(a) businesses, limitations

on subcontracting require that small businesses receiving contracts under a setaside perform an amount of work that equals certain minimum percentages of the

amount paid under the contract.113 Specifically, small businesses must generally

perform at least 50% of the costs of the contract incurred for personnel with its

own employees, in the case of service contracts; and at least 50% of the cost of

manufacturing supplies or products (excluding the cost of materials), in the case

of manufacturing contracts.114

Requirements for Tribally, ANC-, NHO-, and CDC-Owned Firms

Tribes, ANCs, NHOs or CDCs themselves generally do not participate in the 8(a) Program.

Rather, businesses that are at least 51% owned by such entities participate in the 8(a) Program,115

although the rules governing their participation are somewhat different from those for the 8(a)

Program generally.116

Eligibility for the 8(a) Program

“Small”

Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be “small” under the SBA’s size

standards.117 However, certain affiliations with the owning entity or other business enterprises of

that entity are excluded in size determinations unless the Administrator of Small Business

determines that a small business owned by an ANC, CDC, NHO, or Indian tribe “[has] obtained,

or [is] likely to obtain, a substantial unfair competitive advantage within an industry category”

because of such exclusions.118 Other affiliations of small businesses owned by ANCs, CDCs,

NHOs, and Indian tribes can count in size determinations, and ANC-owned firms, in particular,

have been subjected to early graduation from the 8(a) Program because they exceeded the size

standards.119

112

13 C.F.R. §124.509(d)(1). This prohibition may be waived when the Director of the Office of Business

Development finds that denial of a sole-source contract would cause severe economic hardship for the firm, potentially

jeopardizing its survival, or when extenuating circumstances beyond the firm’s control caused it to miss its target. 13

C.F.R. §125.509(e).

113

15 U.S.C. §637(a)(14)(A)-(B); 15 U.S.C. §644(o); 13 C.F.R. §125.6; 48 C.F.R. §52.219-14.

114

15 U.S.C. §657s(a)(1)&(2); 13 C.F.R. §125.6(a)(1)-(2). There are separate provisions regarding the percentage of

work to be performed under construction contracts. See generally 13 C.F.R. §125.6(a)(3)-(4).

115

13 C.F.R. §124.109(c)(3)(i) (tribally and ANC-owned firms); 13 C.F.R. §124.110 (b) (NHO-owned firms); 13

C.F.R. §124.111(c) (CDC-owned firms).

116

13 C.F.R. §§124.109-124.111.

117

13 C.F.R. §124.109(c)(2) (tribally and ANC-owned firms); 13 C.F.R. §124.110(b) (NHO-owned firms); 13 C.F.R.

§124.111(c) (CDC-owned firms).

118

13 C.F.R. §124.109(c)(2)(iii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(b) (NHO-owned firms); 13

C.F.R. §124.111(c) (CDC-owned firms).

119

See, e.g., Valenzuela Eng’g, Inc. & Curry Contracting Co., Inc., SBA-4151 (1996) (rejecting a challenge to the size

of an ANC-owned firm because its subcontractor performed less than 25% of the work on the contract and was not its

affiliate); Gov’t Accountability Office, Increased Used of Alaska Native Corporations’ Special 8(a) Provisions Calls

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

“Business”

Firms owned by ANCs, CDCs, NHOs, and Indian tribes must be “businesses” under the SBA’s

definition.120 Although ANCs themselves may be for-profit or nonprofit, ANC-owned businesses

must be for-profit to participate in the 8(a) Program.121

“Unconditionally owned and controlled”

Firms owned by ANCs, CDCs, NHOs, or Indian tribes must be unconditionally owned and

substantially controlled by the ANC, CDC, NHO, or Indian tribe, respectively.122 However, under

SBA regulations, tribally or ANC-owned firms may be managed by individuals who are not

members of the tribe or Alaska Natives if the firm can demonstrate:

that the Tribe [or ANC] can hire and fire those individuals, that it will retain control of all

management decisions common to boards of directors, including strategic planning,

budget approval, and the employment and compensation of officers, and that a written

management development plan exists which shows how Tribal members will develop

managerial skills sufficient to manage the concern or similar Tribally-owned concerns in

the future.123

NHO-owned firms must demonstrate that the NHO controls the board of directors.124 However,

the individual who is responsible for the NHO-owned firm’s day-to-day management need not

establish personal social and economic disadvantage.125 CDCs are to be managed and have their

daily operations conducted by individuals with “managerial experience of an extent and

complexity needed to run the [firm].”126

“Socially disadvantaged”

As owners of prospective or current 8(a) firms, Indian tribes, ANCs, NHOs, and CDCs are all

presumed to be socially disadvantaged.127

(...continued)

for Tailored Oversight, GAO-06-399, at 29 (April 2006) (describing “early graduation” of ANC-owned 8(a) firms).

120

13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility

requirements where they are not contrary to or inconsistent with the special requirements for these entities); 13 C.F.R.

§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned

firms).

121

13 C.F.R. §124.109(a)(3).

122

13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility

requirements where they are not contrary to or inconsistent with the special requirements for these entities); 13 C.F.R.

§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned

firms).

123

13 C.F.R. §124.109(c)(4)(B).

124

13 C.F.R. §124.110(d).

125

Id.

126

13 C.F.R. §124.111(b).

127

13 C.F.R. §124.109(b)(1) (tribally and ANC-owned firms); 15 U.S.C. §637(a)(4)(A)(i)(II) (NHO-owned firms); 13

C.F.R. §124.110(a) (same); 13 C.F.R. §124.111(a) (CDC-owned firms); Small Disadvantaged Business Certification

Application: Community Development Corporation (CDC) Owned Concern, OMB Approval No. 3245-0317 (“A

Community Development Corporation (CDC) is considered to be a socially and economically disadvantaged entity if

the parent CDC is a nonprofit organization responsible to residents of the area it serves which has received financial

assistance under 42 U.S.C. 9805, et seq.”). SBA’s authority to designate CDCs as socially and economically

disadvantaged derives from Section 9815(a)(2) of Title 42 of the United States Code, which required SBA to

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

“Economically disadvantaged”

By statute, ANCs are deemed to be economically disadvantaged,128 and CDCs are similarly

treated as economically disadvantaged.129 Indian tribes and NHOs, in contrast, must establish

economic disadvantage at least once. Indian tribes must present data on, among other things, the

number of tribe members; the tribal unemployment rate; the per capita income of tribe members;

the percentage of the local Indian population above the poverty level; the tribe’s access to capital;

the tribe’s assets as disclosed in current financial statements; and all businesses wholly or

partially owned by tribal enterprises or affiliates, as well as their primary industry

classification.130 However, once a tribe has established that it is economically disadvantaged for

purposes of one 8(a) business, it need not reestablish economic disadvantage in order to have

other businesses certified for the 8(a) Program unless the Director of the Office of Business

Development requires it to do so.131

When determining whether an NHO is economically disadvantaged, SBA will consider “the

individual economic status of NHO’s members,” the majority of whom “must qualify as

economically disadvantaged” under the same standards as individual applicants to the 8(a)

Program.132 Specifically:

For the first 8(a) applicant owned by a particular NHO, individual NHO members must

meet the same initial eligibility economic disadvantage thresholds as individually-owned

8(a) applicants. For any additional 8(a) applicant owned by the NHO, individual NHO

members must meet the economic disadvantage thresholds for continued 8(a)

eligibility.133

“Good character”

When an organization owns an actual or prospective 8(a) firm, all members, officers, or

employees of that organization are generally not required to show good character. The regulations

governing tribally and ANC-owned firms explicitly address the issue, stating that the “good

character” requirement applies only to officers or directors of the firm, or shareholders owning

more than a 20% interest.134 NHO-owned firms may be subject to the same requirements in

practice.135 With CDC-owned firms, the firm itself and “all of its principals” must have good

character.136

(...continued)

“promulgate regulations to ensure the availability to community development corporations of such programs as shall

further the purposes of this subchapter, including programs under §637(a) of title 15.”

128

43 U.S.C. §1626(e)(1) (“For all purposes of Federal law, a Native Corporation shall be considered to be a

corporation owned and controlled by Natives and a minority and economically disadvantaged business enterprise if the

Settlement Common Stock of the corporation and other stock of the corporation held by holders of Settlement Common

Stock and by Natives and descendants of Natives, represents a majority of both the total equity of the corporation and

the total voting power of the corporation for the purposes of electing directors.”); 13 C.F.R. §124.109(a)(2) (similar).

129

See Small Disadvantaged Business Certification Application, supra note 129. See also 13 C.F.R. §124.111(a).

130

15 U.S.C. §637(a)(6)(A); 13 C.F.R. §124.109(b)(2)(i)-(vii).

131

13 C.F.R. §124.109(b).

132

13 C.F.R. §124.110(c)(1).

133

Id. If the NHO has no members, then a majority of the members of the board of directors must qualify as

economically disadvantaged.

134

13 C.F.R. §124.109(c)(7)(ii).

135

The regulations as to NHOs do not appear to address “good character.” However, in practice, when this has

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

“Demonstrated potential for success”

Firms owned by ANCs, CDCs, NHOs, and Indian tribes may provide evidence of “potential for

success” in several ways, including by demonstrating that

1. the firm has been in business for at least two years, as shown by individual or

consolidated income tax returns for each of the two previous tax years showing

operating revenues in the primary industry in which the firm seeks certification;

2. the individuals who will manage and control the daily operations of the firm have

substantial technical and management experience; the firm has a record of

successful performance on government or other contracts in its primary industry

category; and the firm has adequate capital to sustain its operations and carry out

its business plan; or

3. the owner-group has made a firm written commitment to support the operations

of the firm and has the financial ability to do so.137

The first of these ways for demonstrating potential for success is the same for individually owned

firms,138 and the second arguably corresponds to the circumstances in which SBA may waive the

requirement that individually owned firms have been in business for at least two years.139 There is

no equivalent to the third way for individually owned firms, and some commentators have

suggested that this provision could “benefit ANCs [and other owner groups] by allowing more

expeditious and effortless access to 8(a) contracts for new concerns without having to staff new

subsidiaries with experienced management.”140

Report of Benefits for Firms Owned By ANCs, Indian Tribes, NHOs, and CDCs

Although implementation of this requirement has been delayed,141 8(a) firms owned by ANCs,

CDCs, NHOs, and Indian tribes must submit information annually to the SBA showing

how the Tribe, ANC, NHO or CDC has provided benefits to the Tribal or native members

and/or the Tribal, native or other community due to the Tribe’s/ANC’s/NHO’s/CDC’s

participation in the 8(a) … program through one or more firms. This data includes

(...continued)

happened in the past, NHO-owned firms have often been treated the same as firms owned by Indian tribes.

136

13 C.F.R. §124.111(g).

137

13 C.F.R. §124.109(c)(6)(i)-(iii) (ANC- and tribally-owned firms); 13 C.F.R. §124.110(g)(1)-(3) (NHO-owned

firms); 13 C.F.R. §124.111(f)(1)-(3) (CDC-owned firms).

138

See supra note 85 and accompanying text.

139

See supra note 86 and accompanying text.

140

Daniel K. Oakes, Inching Toward Balance: Reaching Proper Reform of the Alaska Native Corporations’ 8(a)

Contracting Preferences, 40 Pub. Cont. L.J. 777 (2011).

141

Regulations promulgated by SBA in February 2011 provided that this reporting requirement would be effective “as

of September 9, 2011, unless SBA further delays implementation through a Notice in the Federal Register.” Small Bus.

Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business Status

Determinations: Final Rule, 76 Federal Register 8,222 (February 11, 2011). SBA appears to have delayed reporting

through four such notices, two announcing tribal consultations about the reporting requirements, and two seeking

comments on the reporting requirements pursuant to the Paperwork Reduction Act of 1995. See Small Bus. Admin.,

Notice: Extension of Comment Period for New 8(a) Business Development Program Reporting Requirements, 78

Federal Register 9,447 (February 8, 2013); Small Bus. Admin., 60 Day Notice and Request for Comments, 76 Federal

(May 13, 2011); Small Bus. Admin., Notice of Tribal Consultations, 76 Federal Register 12,273 (March 7, 2011).

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The “8(a) Program” for Small Businesses

information relating to funding cultural programs, employment assistance, jobs,

scholarships, internships, subsistence activities, and other services provided by the Tribe,

ANC, NHO or CDC to the affected community. 142

Set-Asides and Sole-Source Awards

Like other participants in the 8(a) Program, firms owned by ANCs, CDCs, NHOs, and Indian

tribes are eligible for 8(a) set-asides and may receive sole-source awards valued at less than $4

million ($7 million for manufacturing contracts). However, firms owned by ANCs and Indian

tribes can also receive sole-source awards in excess of $4 million ($7 million for manufacturing

contracts) even when contracting officers reasonably expect that that at least two eligible and

responsible 8(a) firms will submit offers and the award can be made at fair market price.143 NHOowned firms may receive sole-source awards from the Department of Defense under the same

conditions.144

Other Requirements

Firms owned by ANCs, CDCs, NHOs, and Indian tribes are governed by the same regulations as

other 8(a) firms where certain of the “other requirements” are involved, including (1) inability to

protest an 8(a) firm’s eligibility for an award;145 (2) maximum of nine years in the 8(a) Program

(for individual firms);146 and (3) limits on subcontracting.147 However, the requirements for such

firms differ somewhat from those for other 8(a) firms where one-time eligibility for the 8(a)

Program; limits on majority ownership of 8(a) firms; and limits on the amount of 8(a) contracts

that a firm may receive are involved. Firms owned by ANCs, CDCs, NHOs, and Indian tribes

may participate in the 8(a) Program only one time.148 However, unlike the disadvantaged

individuals upon whom other firms’ eligibility for the 8(a) Program is based, ANCs, CDCs,

NHOs, and Indian tribes may confer eligibility for the 8(a) Program upon firms on multiple

occasions and for an indefinite period.149 Additionally, although ANCs, CDCs, NHOs, and Indian

tribes may not own 51% or more of a firm obtaining the majority of its revenues from the same

142

13 C.F.R. §124.604.

An Act To Amend the Small Business Act To Reform the Capital Ownership Development Program, and for Other

Purposes; P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); 48 C.F.R.

§19.805-1(b)(2).

144

The authority for DOD to make sole-source awards to NHO-owned firms of contracts valued at more than $4

million ($7 million for manufacturing contracts) even if contracting officers reasonably expect that offers will be

received from at least two responsible small businesses existed on a temporary basis in 2004-2006 and became

permanent in 2006. See Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the

Gulf of Mexico, and Pandemic Influenza Act of 2006, P.L. 109-148, §8020, 119 Stat. 2702-03 (December 30, 2005)

(“[Provided] [t]hat, during the current fiscal year and hereafter, businesses certified as 8(a) by the Small Business

Administration pursuant to section 8(a)(15) of Public Law 85-536, as amended, shall have the same status as other

program participants under section 602 of P.L. 100-656 ... for purposes of contracting with agencies of the Department

of Defense.”); 48 C.F.R. §219.805-1(b)(2)(A)-(B).

145

48 C.F.R. §19.805-2(d).

146

13 C.F.R. §124.109(a) & (b) (requiring tribally and ANC-owned firms to comply with the general eligibility

requirements where they are not contrary to or inconsistent with special requirements for these entities); 13 C.F.R.

§124.110(a) (similar provision for NHO-owned firms); 13 C.F.R. §124.111(a) (similar provision for CDC-owned

firms).

147

15 U.S.C. §644(o); 15 U.S.C. §657s; 13 C.F.R. §125.6; 48 C.F.R. §52.219-14.

148

13 C.F.R. §124.109(a) & (b) (ANC- and tribally-owned firms); 13 C.F.R. §124.110(a) (NHO-owned firms); 13

C.F.R. §124.111(a) (CDC-owned firms).

149

Id.; 15 U.S.C. §636(j)(11)(B)-(C).

143

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The “8(a) Program” for Small Businesses

“primary” industry in which another firm they own or owned currently operates or has operated

within the past two years, there are no limits on the number of firms they may own that operate in

other primary industries.150 Moreover, ANCs, CDCs, NHOs, and Indian tribes may own multiple

firms that earn less than 50% of their revenue in the same “secondary” industries.151 Finally, firms

owned by ANCs, CDCs, NHOs, and Indian tribes may continue to receive additional sole-source

awards even after they have received a combined total of competitive and sole-source 8(a)

contracts in excess of the dollar amount set forth in Section 124.519 of Title 13 of the Code of

Federal Regulations, while individually owned firms may not.152 However, firms owned by any

of these four types of entities are subject to the same requirements regarding the percentages of

revenue received from non-8(a) sources at various stages of their participation in the 8(a)

Program as other 8(a) firms.153

Constitutionality of the 8(a) Program

The 8(a) Program has periodically been challenged on the grounds that the presumption that

members of certain racial and ethnic groups are disadvantaged violates the constitutional

guarantee of equal protection. The outcomes in early challenges to the program varied, with some

courts finding that the plaintiffs lacked standing to bring such challenges because they were not

economically disadvantaged, or were otherwise ineligible for the program;154 and other courts

finding that the program was unconstitutional as applied in specific cases.155 More recently, in its

2012 decision in DynaLantic Corporation v. U.S. Department of Defense, the U.S. District Court

for the District of Columbia found that the 8(a) Program was not unconstitutional on its face

because (1) “breaking down barriers to minority business development created by discrimination

150

13 C.F.R. §124.109(c)(3)(ii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(e) (NHO-owned firms); 13

C.F.R. §124.111(d) (CDC-owned firms). These regulations also provide that an 8(a) firm owned by an ANC, CDC,

NHO, or Indian tribe may not, within its first two years in the 8(a) Program, receive a sole-source contract that is a

follow-on to an 8(a) contract currently performed by an 8(a) firm owned by that entity, or previously performed by an

8(a) firm owned by that entity that left the program within the past two years. Id. In addition, there are restrictions on

the percentage of work that may be performed by any non-8(a) venturer(s) in joint ventures involving 8(a) firms. See

generally 13 C.F.R. §124.513.

151

13 C.F.R. §124.109(c)(3)(ii) (tribally and ANC-owned firms); 13 C.F.R. §124.110(e) (NHO-owned firms); 13

C.F.R. §124.111(d) (CDC-owned firms).

152

13 C.F.R. §124.519(a). See supra note 109.

153

13 C.F.R. §124.509.

154

See, e.g., Ray Baillie Trash Hauling, 477 F.3d at 710 (“The plaintiffs never applied for participation in the section

8(a) program. Furthermore, they do not even contend that they are socially or economically disadvantaged and

therefore eligible for participation in the program.”); SRS Techs., Inc. v. U.S. Dep’t of Defense, No. 96-1484, 1997

U.S. App. LEXIS 10143 (4th Cir., May 6, 1997) (“SBA’s requirement of economic disadvantage for entry into the 8(a)

Program is a race-neutral criterion. It was by virtue of this race-neutral criterion that plaintiff failed to qualify for a

contract award, and its standing to challenge the race-conscious criteria is therefore lacking.”). But see C.S. McCrossan

Constr. Co., Inc. v. Cook, No. 95-1345-HB, 1996 U.S. Dist. LEXIS 14721 (D.N.M., April 2, 1996) (“Although

Defendants attempt to characterize this set-aside program as one based on size and economic status of the owner, the

fact remains that ‘economic disadvantage’ requires a showing of ‘social disadvantage’ which then implicates the racebased challenge. … Plaintiff is not seeking admission into the 8(a) program. It is challenging the government’s

preferential treatment towards 8(a) program participants in the bidding of the job order contract.”).

155

See, e.g., Cortez III Service Corp. v. Nat’l Aeronautics & Space Admin., 950 F. Supp. 357, 361 (D.D.C. 1996)

(finding that the 8(a) Program is facially constitutional, but that “agencies have a responsibility to decide whether there

has been a history of discrimination in the particular industry at issue” prior to procuring requirements through the 8(a)

Program); Fordice Constr. Co. v. Marsh, 773 F. Supp. 867 (S.D. Miss. 1990) (“The court … finds that the United States

Army Corps of Engineers failed to give consideration to the impact of a 100% set-aside upon non-§8(a) eligible

contractors in the Vicksburg area.”).

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The “8(a) Program” for Small Businesses

and its lingering effects” constitutes a compelling government interest; (2) the government had a

strong basis in evidence for concluding that race-based action was necessary to further this

interest; and (3) the 8(a) Program is narrowly tailored to “minimize the burden on non-minority

firms.”156 However, the court found that the program was unconstitutional as applied in the

military simulation and training industry because the Department of Defense (DOD) conceded it

had “no evidence of discrimination, either in the public or private sector, in the simulation and

training industry.”157

Particularly in its rejection of the facial challenge to the 8(a) Program, the court emphasized

certain aspects of the program’s history and requirements when finding that the government had

articulated a compelling interest for the program and had a strong basis in evidence for its actions.

Specifically, the court rejected the plaintiff’s assertion that the 8(a) Program was “not truly

remedial,” but rather favored “virtually all minority groups … over the larger pool of citizens,”

because non-minority individuals may qualify for the program, and all 8(a) applicants must

demonstrate economic disadvantage.158 The court also noted that the history of the 8(a) program

prior to 1978 (when Congress expressly authorized set-asides for disadvantaged small businesses)

had evidenced that race-neutral methods were insufficient to promote contracting with minorityowned small businesses.159 The court further noted that the 8(a) Program was intended to be a

business development program, not a means to “channel contracts” to minority firms;160 that

Section 8(a) of the Small Business Act expressly provides that awards may be made through the

8(a) Program only when SBA determines that “such action is necessary and appropriate”;161 and

that the act requires the President and SBA to report annually to Congress on the program,

thereby ensuring that Congress has evidence as to whether there is a “continuing compelling need

for the program.”162 Similarly, in finding that the program was narrowly tailored to meet the

government’s interests, the court noted (1) that goals for contracting with small disadvantaged

businesses are purely aspirational, and there are no penalties for failing to meet them;163 (2) the

156

885 F. Supp. 2d 237, 251, 271 (D.D.C. 2012).

Id. at 265-66. However, the court did suggest that, with the requisite evidence, the government could use the 8(a)

Program to make awards in the military simulation and training industry. Id. at 292. The court further characterized this

industry as a “highly skilled” one, which arguably differentiates it from certain other industries in which DOD and

other federal agencies seek to award 8(a) contracts. Id. at 281. Questions about the availability of qualified minority

contractors may be less likely in industries that are not seen as highly skilled. See, e.g., Danielle Ivory, Minority

Vendors Say Awards Program at Risk on U.S. Court Ruling, Bloomberg Gov’t, September 13, 2012 (quoting Alan

Chvotkin, counsel and executive vice president of the Professional Services Council, as saying that the DynaLantic

ruling may “open the door to more lawsuits,” and “[t]he implications across the government could be significant”).

158

885 F. Supp. 2d at 252. The court also rejected DynaLantic’s argument that the government may only seek to

remedy discrimination by a government entity, or by private individuals directly using government funds to

discriminate. The court viewed these arguments as foreclosed by prior decisions holding that, under the Fourteenth

Amendment, the government may implement race-conscious programs “to prevent itself from acting as a ‘passive

participant’ in private discrimination in the relevant industries or markets.” Id. (quoting City of Richmond v. J.A.

Croson, 488 U.S. 469, 492 (1989)).

159

Id. at 255 (“Reports prepared by the GAO and investigations conducted by both the executive and legislative

branches prior to the 1978 codification showed that the Section 8(a) program had fallen far short of its goal to develop

businesses owned by disadvantaged individuals, and that one reason for this failure was that the program had no

legislative basis.”).

160

Id. at 256 (quoting H.Rept. 1714, 95th Cong., 2nd sess., at 22-23 (1978)).

161

Id. at 252-53.

162

Id. at 258. DynaLantic had asserted that post-enactment evidence of discrimination should not be considered.

However, the court concluded that it was proper to consider such evidence, particularly where the “statute is over thirty

years old and the evidence used to justify Section 8(a) [at the time of its enactment] is stale for purposes of determining

a compelling interest in the present.” Id.

157

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nine-year limits on program participation for individual owners and firms;164 and (3) that SBA

may not accept a requirement for the 8(a) Program if it determines that doing so will have a

adverse effect on another small business or group of small businesses.165 The court emphasized

that the last two factors, in particular, helped ensure that race-conscious remedies do not “last

longer than the discriminatory effects [they are] designed to eliminate,”166 and “work the least

harm possible to other innocent persons competing for the benefit.”167

A 2015 decision by the U.S. District Court for the District of Columbia in Rothe Development,

Inc. v. Department of Defense subsequently adopted the reasoning of the DynaLantic court in

finding that the 8(a) Program is not unconstitutional on its face.168 In so doing, the court noted the

same attributes of the 8(a) Program that the DynaLantic court had emphasized. In particular, in its

brief discussion, the court noted the following six factors:

1. alternative, race-neutral remedies had proved unsuccessful in addressing the

discrimination targeted here;

2. the 8(a) Program is “appropriately flexible” because it imposes no quotas and

prescribes no consequences for failure to meet the aspirational goals as to the

percentage of federal contract dollars awarded to small disadvantaged businesses;

3. the program is neither under- nor over-inclusive, since it “does not provide that

every member of a minority group is disadvantaged”;

4. the program imposes temporal limits on individuals’ participation in the program,

and SBA continuously monitors participants’ eligibility;

5. the aspirational goals for contracting with small disadvantaged businesses are

“numerically proportionate” to the evidence regarding the availability of minority

firms that are ready, able, and willing to perform government contracts; and

6. various aspects of the 8(a) Program minimize the program’s burden on nonminority firms (e.g., SBA cannot accept a contract for award through the 8(a)

Program if it determines that doing so would have an “adverse impact” on other

small businesses).169

The decision in Rothe has been appealed to the U.S. Court of Appeals for the District of

Columbia Circuit.170 The litigation in DynaLantic, however, was reportedly settled by the parties

while their appeals to the D.C. Circuit were pending.171

(...continued)

163

Id. at 282-86.

164

Id. at 287-88.

165

Id. at 289-91.

166

Adarand Constructors, Inc. v. Peña, 515 U.S. 200, 238 (1995).

167

Grutter v. Bollinger, 539 U.S. 306, 341 (2003).

168

No. 12-cv-0744 (KBJ), 2015 U.S. Dist. LEXIS 72925, at *60-*61 (D.D.C., June 5, 2015) (“[T]his Court concurs

with the DynaLantic court’s conclusion that the strict scrutiny standard has been met, and that the Section 8(a) program

is facially constitutional despite its reliance on race-conscious criteria. In so holding, this Court incorporates by

reference the reasoning in Parts III.A through III.D.1.(c) and Part III.E of the DynaLantic memorandum opinion, and

adopts it as its own.”) (internal citations omitted). The Rothe court also rejected the plaintiffs allegation that the 8(a)

Program violates the non-delegation doctrine because Congress did not articulate “any intelligible principle to limit the

Executive’s discretion in deciding whether racial, ethnic or cultural bias occurred or even what constitutes a racial,

ethnic, or cultural group.” See id. at *22, *65-*69.

169

Id. at *59-*60.

170

See, e.g., Jon M. DeVore and Melinda L. Meade Meyers, Rothe Development, Inc. v. Department of Defense: D.C.

(continued...)

Congressional Research Service

The “8(a) Program” for Small Businesses

(...continued)

District Court Upholds Constitutionality of 8(a) Program, Appeal Underway, available at http://birchhorton.com/

presentations/Victory_in_D_C_District_Court_in_Rothe_Case_re_Constitutionality_of_8(a)_Program.pdf.

171

See, e.g., Center for Individual Rights, DynaLantic Corp. v. Dep’t of Defense: Feds End 19-Year Battle with

DynaLantic, January 31, 2014, available at https://www.cir-usa.org/cases/dynalantic-corp-v-department-of-defense/

(reporting that the district court had approved an agreement between the parties that, among other things, bars the

federal government from awarding any contracts in DynaLantic’s industry for two years). After that time, the

government reportedly must notify the court if it plans to begin making awards through the 8(a) Program in

DynaLantic’s industry and demonstrate that it has a strong basis in evidence for reinstating the program. Id.

Congressional Research Service

The “8(a) Program” for Small Businesses

Appendix. Comparison of the Requirements

Pertaining to Different Types of 8(a) Firms

NHOOwned 8(a)

Firms

8(a) Firms

Generally

Tribally Owned

8(a) Firms

ANC-Owned

8(a) Firms

“Small”

Independently

owned and

operated; not

dominant in field

of operation;

meets size

standards (15

U.S.C. §631(a))

All affiliations

count (13 C.F.R.

§121.103)

Independently

owned and

operated; not

dominant in field

of operation;

meets size

standards (15

U.S.C. §631(a))

Affiliations based

on the tribe or

tribal ownership,

among others, do

not count (15

U.S.C.

§636(j)(10)(J)(ii);

13 C.F.R.

§124.109(c)(2))

Independently

owned and

operated; not

dominant in field

of operation;

meets size

standards (15

U.S.C. §631(a))

Affiliations

based on the

ANC or

ownership by

the ANC,

among others,

do not count

(15 U.S.C.

§636(j)(10)(J)(ii);

13 C.F.R.

§124.109(c)(2))

Independently

owned and

operated; not

dominant in

field of

operation;

meets size

standards (15

U.S.C. §631(a))

Affiliations

based on the

NHO or

ownership by

the NHO,

among others,

do not count

(15 U.S.C.

§636(j)(10)(J)(ii

); 13 C.F.R.

§124.110(c))

Independently

owned and

operated; not

dominant in field of

operation; meets

size standards (15

U.S.C. §631(a))

Affiliations based

on the CDC or

ownership by the

CDC, among

others, do not

count (15 U.S.C.

§636(j)(10)(J)(ii); 13

C.F.R. §124.111(c))

“Business”

For-profit entity

with its place of

business in the

United States;

operates

primarily within

the United States

or makes a

significant

contribution to

the U.S. economy

(13 C.F.R.

§121.105(a)(1))

For-profit entity

with its place of

business in the

United States;

operates primarily

within the United

States or makes a

significant

contribution to

the U.S. economy

(13 C.F.R.

§121.105(a)(1))

For-profit entity

with its place of

business in the

United States;

operates

primarily within

the United

States or makes

a significant

contribution to

the U.S.

economy (13

C.F.R.

§121.105(a)(1))

Although ANC

may be

nonprofit, ANCowned firms

must be forprofit to be

eligible for 8(a)

Program (13

C.F.R.

§124.109(a)(3))

For-profit

entity with its

place of

business in the

United States;

operates

primarily

within the

United States

or makes a

significant

contribution

to the U.S.

economy (13

C.F.R.

§121.105(a)(1)

)

For-profit entity

with its place of

business in the

United States;

operates primarily

within the United

States or makes a

significant

contribution to the

U.S. economy (13

C.F.R.

§121.105(a)(1))

“Uncondition

ally owned

and

controlled”

At least 51%

unconditionally

and directly

owned by one or

At least 51%

tribally owned (13

C.F.R.

§124.109(b))

Management may

At least 51%

ANC-owned

(13 C.F.R.

§124.109(a)(3))

Management

At least 51%

NHO-owned

(13 C.F.R.

§124.110(a))

NHO must

At least 51% CDCowned (13 C.F.R.

§124.111(a))

Management and

daily business

Category

Congressional Research Service

CDC-Owned

8(a) Firms

The “8(a) Program” for Small Businesses

NHOOwned 8(a)

Firms

8(a) Firms

Generally

Tribally Owned

8(a) Firms

ANC-Owned

8(a) Firms

disadvantaged

individuals who

are U.S. citizens

(13 C.F.R.

§124.105)

Management and

daily business

operations must

be conducted by

one or more

disadvantaged

individuals (13

C.F.R. §124.106)

be conducted by

individuals who

are not members

of the tribe

provided that the

SBA determines

that such

management is

necessary to

assist the

business’s

development,

among other

things (13 C.F.R.

§124.109(c)(4)(B))

may be

conducted by

individuals who

are not Alaska

Natives

provided that

the SBA

determines that

such

management is

necessary to

assist the

business’s

development,

among other

things (13 C.F.R.

§124.109(c)(4)(B

))

control the

board of

directors, but

individual who

is responsible

for day-to-day

management

need not

establish

personal social

and economic

disadvantage

(13 C.F.R.

§124.110(d))

operations to be

conducted by

individuals having

managerial

experience of an

extent and

complexity needed

to run the firm (13

C.F.R. §124.111(b))

“Socially

disadvantaged

individual”

Members of

designated

groups presumed

to be socially

disadvantaged;

other individuals

may prove

personal

disadvantage by a

preponderance

of the evidence

(13 C.F.R.

§124.103)

Indian tribes

presumed to be

socially

disadvantaged (43

U.S.C. §1626(e);

15 U.S.C.

§637(a)(4)(A)-(B);

13 C.F.R.

§124.109(b)(1))

ANCs

presumed to be

socially

disadvantaged

(43 U.S.C.

§1626(e); 15

U.S.C.

§637(a)(4)(A)(B); 13 C.F.R.

§124.109(b)(1))

NHOs

presumed to

be socially

disadvantaged

(43 U.S.C.

§1626(e); 15

U.S.C.

§637(a)(4)(A)(B); 13 C.F.R.

§124.109(b)(1)

)

CDCs presumed to

be socially

disadvantaged (42

U.S.C. §9815(a)(2))

“Economically

disadvantaged

individual”

Financial

information (e.g.,

personal income,

personal net

worth, fair

market value of

assets) must

show diminished

financial capital

and credit

opportunities (13

C.F.R. §124.104)

Tribe must prove

economic

disadvantage the

first time a tribally

owned firm

applies to the 8(a)

Program;

thereafter, a tribe

need only prove

economic

disadvantage at

the request of the

SBA (13 C.F.R.

§124.109(b)(2))

Deemed to be

economically

disadvantaged

(43 U.S.C.

§1626(e); 13

C.F.R.

§124.109(a)(2))

For first

applicant to

8(a) Program,

NHO

members must

meet the same

initial eligibility

economic

disadvantage

thresholds as

individuallyowned 8(a)

applicants; for

later

applicants,

NHO

members must

meet the

economic

disadvantage

thresholds for

continued 8(a)

eligibility (13

C.F.R.

CDCs presumed to

be economically

disadvantaged (42

U.S.C. §9815(a)(2))

Category

Congressional Research Service

CDC-Owned

8(a) Firms

The “8(a) Program” for Small Businesses

Category

8(a) Firms

Generally

Tribally Owned

8(a) Firms

ANC-Owned

8(a) Firms

NHOOwned 8(a)

Firms

CDC-Owned

8(a) Firms

§124.110(c)(1)

“Good

character”

No criminal

conduct or

violations of SBA

regulations;

cannot be

debarred or

suspended from

government

contracting (13

C.F.R.

§124.108(a))

No criminal

conduct or

violations of SBA

regulations;

cannot be

debarred or

suspended from

government

contracting (13

C.F.R.

§124.108(a))

Requirement

applies only to

officers, directors,

and shareholders

owning more than

a 20% interest in

the business, not

to all members of

the tribe (13

C.F.R.

§124.109(c)(7)(B)(

ii))

No criminal

conduct or

violations of

SBA regulations;

cannot be

debarred or

suspended from

government

contracting (13

C.F.R.

§124.108(a))

Requirement

applies only to

officers,

directors, and

shareholders

owning more

than a 20%

interest in the

business, not to

all ANC

shareholders

(13 C.F.R.

§124.109(c)(7)(B

)(ii))

No criminal

conduct or

violations of

SBA

regulations;

cannot be

debarred or

suspended

from

government

contracting

(13 C.F.R.

§124.108(a))

Regulations do

not address to

whom

requirements

applya

No criminal

conduct or

violations of SBA

regulations; cannot

be debarred or

suspended from

government

contracting (13

C.F.R. §124.108(a))

Requirements apply

to the firm and “all

its principals” (13

C.F.R. §124.111(g))

“Demonstrate

d potential for

success”

Firm must

generally have

been in business

in primary

industry for at

least two full

years prior to

date of

application to

8(a) Program

unless SBA grants

a waiver; waiver

based on 5

conditionsb (13

C.F.R. §124.107)

Firm must have

been in business

in primary

industry for at

least two full

years prior to

date of application

to 8(a) Program;

individuals who

will manage firm

must have

substantial

experience, and

firm must have

had successful

performance and

adequate capital;

or Tribe must

have made

written

commitment to

support the firm

and have the

financial ability to

do so

(13 C.F.R.

§124.109(c)(6)(i)(iii)

Firm must have

been in business

in primary

industry for at

least two full

years prior to

date of

application to

8(a) Program;

individuals who

will manage firm

must have

substantial

experience, and

firm must have

had successful

performance

and adequate

capital; or ANC

must have made

written

commitment to

support the firm

and have the

financial ability

to do so

(13 C.F.R.

§124.109(c)(6)(i)

-(iii)

Firm must

have been in

business in

primary

industry for at

least two full

years prior to

date of

application to

8(a) Program;

individuals

who will

manage firm

must have

substantial

experience,

and firm must

have had

successful

performance

and adequate

capital; or

NHO must

have made

written

commitment

to support the

firm and have

the financial

Firm must have

been in business in

primary industry

for at least two full

years prior to date

of application to

8(a) Program;

individuals who will

manage firm must

have substantial

experience, and

firm must have had

successful

performance and

adequate capital; or

CDC must have

made written

commitment to

support the firm

and have the

financial ability to

do so

(13 C.F.R. §124.111

(f)(1)-(3)

Congressional Research Service

The “8(a) Program” for Small Businesses

Category

8(a) Firms

Generally

Tribally Owned

8(a) Firms

ANC-Owned

8(a) Firms

NHOOwned 8(a)

Firms

CDC-Owned

8(a) Firms

ability to do so

(13 C.F.R.

§124.110

(g)(1)-(3)

Sole-source

awards

With contracts

valued at over $4

million ($7

million for

manufacturing

contracts), solesource awards

permissible only

if there is not a

reasonable

expectation that

at least two

eligible 8(a) firms

will submit offers

and the award

can be made at

fair market price

(48 C.F.R.

§19.805-1(b)(1)(2))

Can be made with

contracts valued

at over $4 million

($7 million for

manufacturing

contracts) even if

there is a

reasonable

expectation that

at least two

eligible 8(a) firms

will submit offers

and the award can

be made at fair

market price (15

U.S.C.

§637(a)(1)(D)(i)(ii); 48 C.F.R.

§19.805-1(b)(1)(2))

Can be made

with contracts

valued at over

$4 million ($7

million for

manufacturing

contracts) even

if there is a

reasonable

expectation that

at least two

eligible 8(a)

firms will submit

offers and the

award can be

made at fair

market price (15

U.S.C.

§637(a)(1)(D)(i)(ii); 48 C.F.R.

§19.805-1(b)(1)(2))

Can be made

with

Department of

Defense

contracts

valued at over

$4 million ($7

million for

manufacturing

contracts)

even if there is

a reasonable

expectation

that at least

two eligible

8(a) firms will

submit offers

and the award

can be made at

fair market

price (48

C.F.R.

§219.8051(b)(2)(A)(B)).

Otherwise

cannot be

made unless

there is not a

reasonable

expectation

that at least

two eligible

8(a) firms will

submit offers

and the award

can be made at

fair market

price (48

C.F.R.

§19.8051(b)(1)-(2))

With contracts

valued at over $4

million ($7 million

for manufacturing

contracts), solesource awards

permissible only if

there is not a

reasonable

expectation that at

least two eligible

8(a) firms will

submit offers and

the award can be

made at fair market

price (48 C.F.R.

§19.805-1(b)(1)-(2))

Inability to

protest

eligibility for

award

Firm’s eligibility

for award cannot

be challenged or

protested as part

of the solicitation

or proposed

contract award

(48 C.F.R.

§19.805-2(d))

Firm’s eligibility

for award cannot

be challenged or

protested as part

of the solicitation

or proposed

contract award

(48 C.F.R.

§19.805-2(d))

Firm’s eligibility

for award

cannot be

challenged or

protested as

part of the

solicitation or

proposed

contract award

Firm’s

eligibility for

award cannot

be challenged

or protested

as part of the

solicitation or

proposed

contract

Firm’s eligibility for

award cannot be

challenged or

protested as part

of the solicitation

or proposed

contract award (48

C.F.R. §19.8052(d))

Congressional Research Service

The “8(a) Program” for Small Businesses

Category

8(a) Firms

Generally

Tribally Owned

8(a) Firms

ANC-Owned

8(a) Firms

NHOOwned 8(a)

Firms

(48 C.F.R.

§19.805-2(d))

award (48

C.F.R.

§19.805-2(d))

CDC-Owned

8(a) Firms

Maximum of

nine years in

the 8(a)

Program

Firm receives “a

program term of

nine years” but

could be

terminated or

graduated early

(13 C.F.R.

§124.2)

Firm receives “a

program term of

nine years” but

could be

terminated or

graduated early

(13 C.F.R. §124.2)

Firm receives “a

program term of

nine years” but

could be

terminated or

graduated early

(13 C.F.R.

§124.2)

Firm receives

“a program

term of nine

years” but

could be

terminated or

graduated

early (13

C.F.R. §124.2)

Firm receives “a

program term of

nine years” but

could be

terminated or

graduated early (13

C.F.R. §124.2)

One-time

eligibility for

8(a) Program

Applies to both

disadvantaged

owners and firms

(13 C.F.R.

§124.108(b))

Applies only to

tribally owned

firms, not tribes

(15 U.S.C.

§636(j)(11)(B)(C))

Applies only to

ANC-owned

firms, not ANCs

(15 U.S.C.

§636(j)(11)(B)(C))

Applies only to

NHO-owned

firms, not

NHOs (15

U.S.C.

§636(j)(11)(B)(C))

Applies only to

CDC-owned firms,

not CDCs (15

U.S.C.

§636(j)(11)(B)-(C))

Limits on the

amount of

8(a) contracts

that a firm

may receive

No source

awards possible

once the firm has

received

combined total of

competitive and

sole-source 8(a)

contracts in

excess of the

dollar amount set

forth in 13 C.F.R.

§124.519 (13

C.F.R.

§124.519(a))

Firms must

receive an

increasing

percentage of

revenue from

non-8(a) sources

throughout their

participation in

the 8(a) Program

(13 C.F.R.

§124.509(b))

Can make solesource awards

even when a firm

has received

combined total of

competitive and

sole-source 8(a)

contracts in

excess of the

dollar amount set

forth in 13 C.F.R.

§124.519 (13

C.F.R.

§124.519(a))

Firms must

receive an

increasing

percentage of

revenue from

non-8(a) sources

throughout their

participation in

the 8(a) Program

(13 C.F.R.

§124.509(b))

Can make solesource awards

even when a

firm has

combined total

of competitive

and sole-source

8(a) contracts in

excess of the

dollar amount

set forth in 13

C.F.R. §124.519

(13 C.F.R.

§124.519(a))

Firms must

receive an

increasing

percentage of

revenue from

non-8(a)

sources

throughout their

participation in

the 8(a)

Program (13

C.F.R.

§124.509(b))

Can make

sole-source

awards even

when a firm

has combined

total of

competitive

and solesource 8(a)

contracts in

excess of the

dollar amount

set forth in 13

C.F.R.

§124.519 (13

C.F.R.

§124.519(a))

Firms must

receive an

increasing

percentage of

revenue from

non-8(a)

sources

throughout

their

participation in

the 8(a)

Program (13

C.F.R.

§124.509(b))

Combined total of

competitive and

sole-source 8(a)

contracts in excess

of the dollar

amount set forth in

13 C.F.R. §124.519

not explicitly

addressed in

regulation

Firms must receive

an increasing

percentage of

revenue from non8(a) sources

throughout their

participation in the

8(a) Program (13

C.F.R. §124.509(b))

Source: Congressional Research Service.

Congressional Research Service

The “8(a) Program” for Small Businesses

The rules governing NHO- and/or CDC-owned firms do not address this issue, and although the general

rules apply where no “special rules” exist, it seems unlikely that NHO- and/or CDC-owned firms are

treated differently than tribally or ANC-owned firms in this regard.

These criteria include (1) the management experience of the disadvantaged individual(s) upon whom

eligibility is based; (2) the business’s technical experience; (3) the firm’s capital; (4) the firm’s performance

record on prior federal or other contracts in its primary field of operations; and (5) whether the firm

presently has, or can demonstrate its ability to timely obtain, the personnel, facilities, equipment, and other

resources necessary to perform contracts under Section 8(a).

Author Contact Information

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov

, 7-....

Acknowledgments

Former CRS legislative attorney, (name redacted), coauthored this report.

Congressional Research Service

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