The Small Business Administration (SBA) recently made significant changes to the requirements for establishing socially disadvantaged status in the 8(a) Business Development Program. The SBA 8(a) program, which has been in operation since 1978, provides participating small businesses with training, technical assistance, and contracting opportunities through set-aside and sole-source awards. The recent changes to the program were prompted by a July 2023 court ruling that found that the SBA's previous practice of presuming social disadvantage for certain racial and ethnic groups was unconstitutional.
The case that prompted the change stems from a lawsuit filed by Ultima, a small business government contractor based in Tennessee owned by a non-Hispanic White woman ineligible for 8(a) contracts. The U.S. District Court for the Eastern District of Tennessee ruled in her favor and overturned the SBA’s use of presumed racial and ethnic disadvantage to qualify applicants. The opinion relies partly on the Supreme Court's recent ruling striking down affirmative action in college admissions.
The new requirements mandate all 8(a) participants whose eligibility would have relied upon the presumption of social disadvantage due to their belonging to historically marginalized groups to submit a narrative about their personal social disadvantages. The narrative should explain how the individual has experienced significant obstacles to success in business, education, or employment due to their race, ethnicity, gender, or other factors.
The changes to the 8(a) program's social disadvantage requirements are a significant development for small businesses seeking to participate and, for some, a barrier. It will be interesting to see how this change affects interest in the program and federal contracting, which is already perceived as challenging by small businesses.
New 8(a) applications have been temporarily suspended while the SBA reviews the new requirements. Businesses in the program are urged to prepare a social disadvantage narrative to remain eligible for future awards.
Here are some of the elements required for the social disadvantage narrative:
In our increasingly multicultural society, we must ensure that socially and economically disadvantaged businesses have a fair shot at winning federal procurement contracts and that the process to do so remains accessible to all. This is essential to leveling the playing field and creating a more equitable economy.
The SBA has been a crucial partner to small businesses in their efforts to compete and grow. That commitment was reiterated recently by SBA Administrator Isabella Casillas Guzman who said, “…the SBA and Biden-Harris Administration remain committed to supporting this crucial program and the small business owners who have helped drive America’s strong economic growth.”
We hope the SBA reopens the registration process soon so that the program's benefits continue to be extended to those who have faced significant obstacles due to their race, ethnicity, gender, or other factors.
Minority small businesses are driving the U.S. economy, particularly women-owned firms. Forty percent of U.S. businesses are women-owned. Black women represent the fastest-growing segment of entrepreneurs, and there are over 2 million Latina-owned businesses in the country. Large corporations have become increasingly interested in supporting small businesses over the last two years. Just recently, Macy’s announced plans to invest $30 million to help minority-owned businesses in retail scale, and there have been a number of other announcements.
What’s important to note here is that many of these companies are in it for the long haul. When minority businesses thrive, business owners and employees reinvest those funds in their communities. Thriving communities stimulate a healthy economy, resulting in more discretionary spending, benefiting all businesses. But companies looking to partner with minority-owned businesses must do so from a place of empathy and authenticity. How organizations show up in diverse communities matters. Helping small businesses scale isn’t a box to be checked, but a long-term commitment to business equity.
The U.S. federal government is the largest purchaser of goods and services in the world. For small businesses negatively impacted by the pandemic over the past two years, this may offer a glimmer of hope as many attempt to pivot to stay afloat. While several businesses were forced to close due to losses, new businesses were formed by laid-off or dissatisfied workers.
But new firms are more vulnerable to economic swings. (more…)
This time last year, America was fresh off the high of a change in executive leadership. Americans started rolling up their sleeves for COVID-19 vaccinations, and the nation was undergoing a racial awakening generations in the making. Then a week into the new year, democracy was breached, and the ensuing fallout would test the ideals of what it means to be American. In our 2021 ThinkNow year-end report we examine the economic highs and lows of the past twelve months, and how consumers, in their resilience, have weathered the storms by tapping into their power and wielding it to demand a fair and just society for all. (more…)
The American economy depends on jobs created by small businesses, which account for 64% of new jobs created every year. Some of the best-run U.S. small businesses are those participating in the Small Business Administration’s 8(a) program. The annual review required to maintain eligibility in the program can seem onerous to some, but it ensures participating firms are adequately capitalized and operating in a stable manner.
An annual business plan review is beneficial to all companies, but for 8(a) firms, the mandate prompts them to align their efforts with changes in the market to ensure they have a plan to respond. (more…)
A couple of years ago, I had a conversation with an SBA Business Opportunity Specialist who was lamenting the absence of SBA 8(a) program applicants. At the time, she was seeing three to five businesses graduate the Small Business Set-Aside program for every new one applying. I did the math and realized most of the graduating 8(a)s enrolled during the Great Recession. By 2018 things were going well enough in the economy that perhaps small businesses felt that pursuing government work was not worth their time and energy.
Due to COVID-19, however, the economy is once again unsteady. (more…)