Just under one year ago, we wrote about the Small Business Administration’s (SBA) proposed rule regarding implementing a certification requirement for Women-Owned Small Businesses (WOSBs) / Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) and revised economic disadvantage criteria for 8(a) eligibility. SBA’s final rule was recently published, implementing just that. The rule will impact businesses seeking to compete for government contracts under the WOSB and 8(a) Business Development programs.
WOSB / EDWOSB Certification
Effective October 15, 2020, WOSB / EDWOSBs will be required to be certified as such in order to pursue WOSB / EDWOSB set-asides, as well as those seeking to be awarded a multiple-award contract with pools reserved for WOSB / EDWOSBs. Notably, the new regulation provides that, in order to submit an offer on a specific WOSB / EDWOSB set-aside requirement, the company must either be certified as a WOSB / EDOWSB or “represent that it has submitted a complete application for WOSB or EDWOSB certification to SBA or a third-party certifier and has not received a negative determination regarding that application . . . .”
The rule explains that a company may apply to SBA for WOSB / EDWOSB certification, and that it may submit evidence that it is either a women-owned and controlled small business certified by the Department of Veterans Affairs’ Center for Verification and Evaluation as a Service-Disabled Veteran-Owned Small Business or Veteran-Owned Small Business or certified as a WOSB / EDWOSB by an approved third-party certifier. Additionally, a certified 8(a) participant qualifies as an EDWOSB. The final rule states that SBA will make a determination within 90 days after receipt of a complete package, whenever practical. If SBA or a third-party certifier declines certification, that concern must wait 90 days to reapply, and there is no appeal process.
While self-certification will no longer be accepted as of October 15, 2020, the other regulations regarding the certification process are set to be effective on July 15, 2020. It appears that SBA may be providing for a three-month window to allow companies to seek certification prior to October 15, 2020, but it is currently unknown as to exactly when SBA will begin accepting WOSB / EDWOSB applications.
8(a) Economic Disadvantage Eligibility Criteria
As it applies to the 8(a) program regulations, the final rule is effective July 15, 2020. Through the final rule, SBA has revised the 8(a) initial economic disadvantage criteria to be consistent with the EDWOSB requirements. Accordingly, there will no longer be a distinction between initial entry into and continued eligibility for the 8(a) program. The three economic disadvantage criteria will be as follows: $750,000 net worth, $350,000 adjusted gross income, and $6 million total assets.
Notably, SBA has also revised the regulation to provide that funds invested in an individual retirement account or other official retirement account “will not be considered in determining an individual’s net worth.” Presently, the regulation does not speak to an individual’s age, but SBA has interpreted the regulation to state that if an individual has reached retirement age, then it will include the value of such account in calculating an individual’s net worth. The revised regulation clarifying that the value of a legitimate retirement account, regardless of the account holder’s age, is not included will be a welcome change. The same exclusion should also apply for purposes of the total assets test.