Proposed Changes to the 8a Regulations

Mentor Protégée Program – Currently only the size of the protégée and not the mentor is looked at when a decision is being made to approve a mentor-protégée agreement. The first proposed change makes the size standard for the mentor to under 100 million in annual revenues. Currently a protégée is only allowed to participate in 2 mentor-protégée agreements in the lifetime of the business. If a mentor-protégée agreement is unsuccessful and fails, this counts against the 2 allowable agreements. The next proposed change removes the penalty for a failed mentor-protégée agreement if the failure happens in the first 18 months of the agreement. Currently, there is no limit on how many proposals can be submitted on one project by a mentor – so right now a mentor can submit on the same project with multiple protégées. The proposed rules states that a mentor can only propose once on a project with one protégée. Currently, in a mentor-protégée proposal, they can propose on either the primary or secondary NAICS code without demonstrating knowledge in the secondary NAICS code. The proposed rule would require a demonstration of knowledge/experience in the secondary NAICS code at the annual review. The next proposed change to the regulation will wrap both all small businesses into the same rules for mentor-protégée and not just 8a.
Joint Ventures – Under the current rule, a joint venture agreement can only bid on 3 contracts in a 2-year period. The proposed change allows for multiple contracts in a 2-year period. Currently, in a joint venture agreement if security clearances are required, both parties PLUS the facility must have a security clearance. The proposed change takes away the facility requirement. The proposed rule also eliminates many of the joint venture approval requirements for competitive 8a contracts. This does not eliminate the joint venture approval requirements for sole source. The proposed rule also disallows substitution of joint venture partners who exceed the size standard for long-term contracts prior to recertification.
8a Ownership – Under current regulation, if one is related to the owner of the 8a business, i.e. child, sibling, spouse, they cannot start their own 8a company. Under the proposed change, if the business is separately owned and operated, then they can make application to the 8a program.
Reapplication if 8a or HUBZone Denied – Under current regulation, if an individual or entity is denied 8a approval, they must wait 1 year to reapply. Under HUBZone, it is currently 90 days before one can reapply. The proposed rule takes it to 45 days to reapply for either certification.
Changing NAICS Code – Under current regulation, there is no appeal process to change one’s NAICS code. The proposed change will create an appeal process.
Business Plan – Currently, an 8a company must have an approved business plan before getting awarded a contract. The proposed change states that an 8a company must get their business plan approved within 6 months after being awarded a project. However, if they do not heed to the 6-month deadline, that 6 months is taken off the end of the 9-year length of the program.
Bona fide Place of Business – Under current regulation, a company must prove they have a bona fide place of business where they will be performing the contract. Under the proposed change, that requirement is taken away.
Multiple-Award Contracts – The proposed rule requires contracting officers to assign the most appropriate NAICS code to each order under a multiple-award contract. The proposed rules also require a contractor to re-certify as to size and status in order to receive orders under blanket purchase agreements. This will prevent an 8a contractor from exceeding its size standard and still can bid on the 8a set-aside multiple award contract.
Certification – Currently, if a an 8a prime contractor is using a minority owned subcontractor to perform work, they must provide documentation that the subcontractor is a minority owned entity. The proposed rule will allow a prime to rely on the self-certification of its subcontractor, provided the prime does not have reason to doubt the certification. The proposed rule states that if a party to a joint venture becomes acquired or merges, only that partner must re-certify in order to qualify the joint venture. Additionally, the proposed rule states that if a firm merge between proposal submission and award, it will not qualify for the award if it did not re-certify. Under the proposed rule, tribal entities are not required to re-certify where ownership changes, however the 51% ownership requirement by the ultimate ownership cannot change.
Subcontracting – The proposed rule states that an 8a prime contractor cannot subcontract over 85% of the work on the contract to non-8a entities. Service-disabled veterans, (SDV’s) cannot subcontract over 75% of the work on the contract to non-SDV entities. Currently, the percentage of work done by subcontractors on an 8a project is calculated on labor and material cost. The proposed rule change calculates the work done by subcontractors on the total contract amount. The proposed rule also requires that contracting officers consider past performance of first-tier subcontractors for certain bundled or consolidated contracts and for multiple award contracts over a certain dollar threshold.
Women Owned Business – The proposed rule would allow a woman owned business to be eligible for a contract award if their application to become a woman owned entity is pending.
Tribally-Owned 8a Firms – Under the proposed rule, if the SBA changes the primary NAICS code of a program participant because they have not been operating in their designated primary code for the past three years, another tribal entity can be immediately qualified to apply using that NAICS code: although the program participant stated that code as its primary NAICS codes, it really was not the primary, so that code is now available for another 8a applicant. Under the proposed rule, the potential for success requirement can be satisfied by a letter from a Section 17 corporation or some other economic development corporation or tribally owned holding company, if it can show financial strength. Under the proposed rule tribal entities will not be required to submit small business subcontracting plans, if they are small for the NAICS code assigned to the contract. The excessive withdrawal rule will not be applied to entities at least 51% owned by a tribe.

Additionally, the proposed rule will provide clarification of SBA policy on voluntary withdrawals and early graduation from the 8a program and under some circumstances, allow firms to seek and obtain a multiple contract waiver from the sole-source restrictions for failure to comply with the business activity targets where certain extenuating circumstances exist that apply to multiple contracts.

If you have any questions or would like to comment to the SBA before the February 7th deadline to email me at [email protected]