Government Contracting Database
Small Business Act Section 8(a)
To help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities, the government limits competition for certain contracts to businesses that participate in the 8(a) Business Development program.
According to www.sba.gov, disadvantaged businesses in the 8(a) program can:
- Compete for set-aside contracts in the program
- Get a Business Opportunity Specialist to help navigate federal contracting
- Form joint ventures with established businesses through the SBA’s mentor-protégé program
- Receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development
The website also lays out the following qualifications:
- Be a small business
- Not already have participated in the 8(a) program
- Be at least 51 percent owned and controlled by U.S. citizens who are economically and socially disadvantaged
- Be owned by someone whose personal net worth is $250,000 or less
- Be owned by someone whose average adjusted gross income for three years is $250,000 or less
- Be owned by someone with $4 million or less in assets
- Have the owner manage day-to-day operations and also make long-term decisions
- Have all its principals demonstrate good character
- Show potential for success and be able to perform successfully on contracts
The federal government fully defines who qualifies for the 8(a) program — including what counts as being economically and socially disadvantaged — in Title 13 Part 124 of the Code of Federal Regulations (CFR). You can also get a preliminary assessment of whether you qualify at the SBA’s Certify website.
13 CFR 124.103 defines who is socially disadvantaged. It states that a rebuttable presumption exists that Black Americans; Hispanic Americans; Native; Asian Pacific Americans; and members of other groups designated from time to time by SBA are socially disadvantaged. Being born in a country does not, by itself, suffice to make the birth country an individual’s country of origin for purposes of being included within a designated group. Credible evidence to the contrary is all that is required to overcome this presumption. 13 CFR 124.103(b)(2).
For people not among the designated groups, social disadvantage must be shown by a preponderance of the evidence with the following factors being considered:
- At least one objective distinguishing feature that has contributed to social disadvantage, such as race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged
- The disadvantage must be rooted in American Society
- It must be chronic or substantial
- The individual’s social disadvantage must have negatively impacted on his or her entry into or advancement in the business world. SBA will consider any relevant evidence in assessing this element, including experiences relating to education, employment, and business history
The statute provides examples and guidance on how to go about preparing and submitting this evidence, but it recommended that legal counsel be used in the process.
13 CFR 124.104 defines who exactly is considered economically disadvantaged. It defines economic disadvantage as an individual 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.” This requires the submission of personal financial information.
The SBA looks at income for the past three years (including bonuses and the value of company stock received in lieu of cash), personal net worth, and the fair market value of all assets, whether encumbered or not. This total may not exceed any of the pre-set personal income thresholds. 13 CFR 124.104(c).
The net worth of your company may not exceed $250,000 for entry into the program and thereafter it cannot exceed $750,000 to maintain “8(a)” status. For personal income, the threshold for entry is $250,000 and the continued eligibility is $350,000. 13 CFR 124.104(2),(3).
Updated: July 16, 2018