Bottom-line, up front: If you do nothing, you may lose your 8(a) minority owned, small business status.
This applies to you if you are an 8(a) certified company or have submitted an application with the Small Business Administration for your 8(a) status. We’ll go over some background and then dive in for steps you should take to be ready.
WHAT LED UP TO THIS?
The courts have been active since the Supreme Court ruled against Harvard and University of North Carolina regarding affirmative action this summer. Those rulings sent ripples through academic admissions communities, but also made the federal contracting industry take notice. If preferential treatment of certain classes of people is not constitutional for college admissions, how can it be legal for government contracting preferences? Separate politics and personal opinion from this conversation if possible. Several have commented on how wrong or right these rulings have been. This blog is more focused on the practical aspect.
Just last month, Judge Corker from the Eastern District of Tennessee ruled there needed to be some changes. This gets super wonky, but to sum things up, before this ruling, the Small Business Administration (SBA) allowed for Minorities to be granted qualification for that requirement of the Federal Acquisition Regulation for the 8(a) Business Development Program under rebuttable presumption. Judge Corker ruled rebuttable presumption violates equal protection under the Fifth Amendment of the US Constitution. Wow, that’s a lot. Said differently, the SBA used to say being Black was enough to qualify as being discriminated against. Because you are 25% (heritage) or more a minority category (Black, Hispanic, etc), you were presumed to have been discriminated against in your lifetime and therefore you qualified for the 8(a) program. Other qualifications apply, but that’s the big one.
WHAT DOES THIS MEAN?
That has now changed. And if you are an active, certified 8(a) PLEASE check your email for an email over the last couple weeks from firstname.lastname@example.org. It is real and you need to take action.
The SBA has been ordered to address the situation and has come up with a plan. They (SBA) held an information session on 24 August to discuss the plan and provide guidance.
I have spoken to several of my clients as well as SBA District Offices from across the country but please valid for yourself. You need to write a “social disadvantage narrative from your firm’s qualifying owner”. This means you will need to write down at least two examples of when you felt discriminated against due to your minority status. You need to have that narrative ready to go. Each SBA District may handle this slightly differently. Communicate with your district office to find out details.
Person to talk to -> SBA District Offices, Business Opportunity Specialist 8(a) Program
Generally speaking, I have found the SBA District Offices (Business Opportunity Specialist 8(a) Program) will assign an SBA Analyst to each company and review their narrative. The SBA Analyst will determine if the narrative is sufficient or not. If sufficient, the company will maintain their 8(a) status. If you have a pending 8(a) Sole Source Award, reach out to your Contracting Officer (who is about to make the Sole Source Award) and have them coordinate with your SBA District Officer. If you do not have a pending award, prepare your narrative and be ready for the SBA Analyst to make contact.
RESOURCES FOR YOUR NARRATIVE:
HOW SBA DETERMINS DSIADVANTAGE
"SBA must determine that the discrimination or bias experienced by an individual is chronic, substantial, and has occurred within American society (not another country). Additionally, the discrimination must have negatively impacted the individual’s entry or advancement in the business world."
KEY ELEMENTS OF A SOCIAL DISADVANTAGE NARRATIVE
"Social disadvantage narratives should contain the following elements:
An indication of which identity or identities is/are the basis of social disadvantage.
Descriptions of incidents in which bias or discrimination has occurred.
Generally, narratives are sufficient at a length of 3 pages, but may require more or fewer pages. SBA will request additional information, if needed."
Everything pending award is on hold until you go through this process, so be warned.
This ruling will likely result in the SBA no longer using the rebuttable presumption standard and shift to this social narrative application for future companies. If your company applied for 8(a) using the social narrative standard, then you should not have to do this again. I recommend confirming that with your SBA District Office though.
There are real impacts to this ruling and the end of the Federal Fiscal Year is just about the absolute worst time for this to happen. That said, I will say the SBA is moving extremely quickly on this process and pushing out information as best they can. I will also say the impression I took away from their 24 August information session was one of helpfulness and trying to be compliant with the judge’s ruling while also helping small businesses keep their certification.
This is a live topic and more information will follow as the story develops.
FULL TEXT OF THE SBA EMAIL:
"Dear 8(a) Participant:
You are receiving this notice because SBA requires additional information to determine your firm’s continuing eligibility for the 8(a) Business Development (BD) Program in accordance with 13 CFR 124.103(c).
As you may be aware, on July 19, 2023, the U.S. District Court for the Eastern District of Tennessee issued a ruling affecting the 8(a) BD Program. In this ruling, the Court decided that SBA could not presume individuals to be socially disadvantaged based on their membership in one of the identified groups, such as Asian Pacific Americans, Black Americans, Hispanic Americans, Subcontinent Asian Americans, and Native Americans.
To comply with the Court’s order, SBA is requiring all 8(a) Participants whose program eligibility is based upon one or more individuals who relied upon the presumption of social disadvantage to establish their individual social disadvantage by completing a social disadvantage narrative.
Our records indicate that your firm’s eligibility is based on an individual or individual(s) who relied upon the presumption of social disadvantage. Therefore, to maintain your firm’s continuing eligibility for the 8(a) BD program, and receipt of contracts authorized under the 8(a) Program (15 U.S.C. 637), a social disadvantage narrative from your firm’s qualifying owner(s) is required. Each owner claiming disadvantaged status must submit a narrative. To assist you with writing the narrative please review the resource guide available from the Certify Knowledge Base .
Please be advised that your firm should complete and submit the required narrative as soon as possible if you have a pending contract offer or award authorized under the 8(a) BD Program (15 U.S.C. 637). When your District Office Servicing Business Opportunity Specialist receives the 8(a) offer letter from the Federal contracting agency, they will reach out to you to obtain your social disadvantage narrative and provide further guidance on how to submit it to SBA. An individual-owned 8(a) Participant that previously relied on the presumption of social disadvantage to support its eligibility will be ineligible for new 8(a) contracts until SBA affirmatively determines that the individual(s) upon whom eligibility is based has established personal social disadvantage.
If your firm does not have a pending contract offer or award under the 8(a) BD Program authority (15 U.S.C. 637) please continue to review the resource guide and stand by to receive notification regarding the process to submit your narrative through Certify.SBA.gov in the near future. Please wait for this notification and the instructions for submission.
Once an 8(a) participant has submitted a narrative to SBA, and if SBA determines that the firm’s owner(s) has demonstrated personal social disadvantage, the Participant will receive an approval letter indicating it has established social disadvantage and may continue to receive 8(a) contracts and otherwise participate in the 8(a) BD Program. Consistent with existing regulations, 8(a) Participants will only need to establish social disadvantage once for their program term, unless there are ownership/control or other changes which affect eligibility.
SBA will be conducting an optional information session on Thursday, August 24, 2023, to review who should prepare a social disadvantage narrative and the elements required for a narrative. Click here to register for the information session. Registration is required. SBA intends to offer additional sessions in the future.
Thank you for your attention to this request.
If at any time you need assistance or have questions, please don’t hesitate to contact SBA via email at email@example.com ."