Significant Changes for Small Business Administration 8(a) Program

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On February 11, 2011, the U.S. Small Business Administration(“SBA”) released its Final Rule containing changes to the regulations governing the 8(a) Small Business Development Program (“8(a)program”). The 8(a) program provides assistance to socially and economically disadvantaged business owners in the form of business development services, including the opportunity to receive federal contracts on a sole-source or limited competition basis. The revised rules, which went into effect on March 14, 2011, contain many significant changes that apply both to businesses already in the 8(a)program and to those with pending applications to enter the 8(a)program. In addition to many substantive and technical changes, the SBA has provided better clarification on the criteria necessary to qualify for the 8(a) program.

Summary of Key Changes

Determination of Economic Disadvantage: The revised rules add clarity to the factors that determine whether an individual is “economically disadvantaged.” Specifically, a rebuttable presumption against a new applicant now arises if the applicant’s average Adjusted Gross Income (“AGI”) for the 3 years preceding the application exceeds $250,000. For continued eligibility after being admitted to the 8(a) program, the individual average AGI limit for the prior three-year period increases to $350,000. In addition, the SBA has added clarity on the issue of total asset value as a criteria for eligibility. Where the former rules allowed for the general consideration of the fair market value of an individual’s total assets in determining eligibility, the revised rules state specific maximum allowable thresholds for the value of total assets: $4 million for new applicants and $6 million for those seeking continued eligibility.

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