The Small Business Administration has begun outreach to current participants in its 8(a) Business Development Program regarding the impact of the U.S. District Court for the Eastern District of Tennessee’s July 19, 2023 decision enjoining SBA from applying a rebuttable presumption of social disadvantage to individuals of certain racial and ethnic groups.
For 8(a) Participants whose program eligibility is based upon one or more individuals that relied upon the presumption of social disadvantage 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), such participants will be required to establish their individual social disadvantage by completing a social disadvantage narrative. No new 8(a) contracts can be awarded to these entities until SBA affirmatively determines that the individual(s) upon whom eligibility is based has established personal social disadvantage.
The speed with which SBA is contacting such entities to submit social disadvantage narratives depends on whether entities have pending offers or awards under the 8(a) Program—firms with pending offers or awards are currently being contacted, while firms without pending 8(a) bids are being advised to “stand by to receive notification regarding the process to submit your narrative through Certify.SBA.gov in the near future.” Upon SBA’s review of the social disadvantage narrative, if such disadvantage has been demonstrated, SBA will send the Participant an approval letter indicating that it has established social disadvantage and may continue to receive 8(a) contracts and otherwise participate in the 8(a) BD Program.
For 8(a) Participants that previously established social disadvantage through the submission of a social disadvantage narrative and for all entity-owned participants (such as firms owned by Indian tribes, Alaska Native Corporations, or Native Hawaiian Organizations), SBA and the Department of Justice do not read the Court’s decision as impacting such entities. Nonetheless such entities should be on the lookout for a communication from SBA, as SBA indicated it will be sending a letter that confirms such entities satisfy the social disadvantage requirements and may proceed with 8(a) federal contract awards.
With respect to the 8(a) annual review process, SBA advises that 8(a) Participants should continue to submit their annual review and continuing eligibility materials to SBA.
Notably, given the changes and SBA outreach resulting from the Court’s decision, SBA has temporarily suspended new 8(a) application submissions.
A few pieces of practical guidance for all 8(a) Participants whose program eligibility is based upon one or more individuals who relied upon the presumption of social disadvantage:
- SBA has published the following guidance on drafting social disadvantage narratives.
- SBA outreach on this question may not necessarily come from an entity’s Business Opportunity Specialist (or BOS).
- Regardless of timing, such entities will need to submit social disadvantage narratives and so if remaining in the 8(a) Program is a priority, 8(a) Participants should consider crafting their narrative immediately to be prepared to demonstrate compliance with the requirements.
On August 31, 2023, the Court is holding a hearing in Ultima Servs. Corp. v. Dep’t of Ag., No. 20-cv-0041 (E.D. Tenn.) and SBA has indicated that it will update this interim guidance as necessary.
For further information, please contact:
Olivia Lynch, Partner, Crowell & Moring