A little under a year ago, during the final night of a Vegas weekend, I found myself looking over the city lights from my hotel room window. The only thought in my head was “I wish I didn’t have to leave.” Alas, I boarded the plane the next morning and flew home.
I can only imagine that this same sentiment (or something like it) is shared by countless firms participating in the SBA’s 8(a) business development program when nearing their graduation. Fortunately, Congress has proposed lengthening the participation period for one additional year for current program participants. It looks like 8(a) contractors may not have to leave, just yet.
Vegas wistfulness aside, this is huge news.
Currently, the SBA’s 8(a) regulations limit participation in the 8(a) program to nine years. After that, the participant “graduates” out of the 8(a) program. The limit is designed to achieve the 8(a) program’s goal of providing a limited business development boost to accelerate the development of socially and economically disadvantaged businesses. Consequently, the nine-year time limitation has long been a hallmark of the program.
In a somewhat surprising departure, Congress has proposed extending the period of participation by one year in the 2021 National Defense Authorization Act (“NDAA”). As the proposed act succinctly explains, “a small business concern participating in the program established under section 8(a) of the Small Business Act (15 U.S.C. 22637) on or before September 9, 2020, may elect to extend such participation by a period of 1 year[.]” That’s it. Participants in the 8(a) program on September 9, 2020 may elect to extend their participation by one year.
Importantly, the option to extend the period of performance is not impacted by a participant’s decision to suspend 8(a) participation in response to COVID-19. This is sure to be welcome news to 8(a) firms that took advantage of program suspension in the face of COVID-19 challenges.
While straight forward, there are nevertheless some devils in the details. Foremost, the proposed language in the 2021 NDAA only applies to 8(a) participants in the program as of September 9, 2020. Under the current proposed language, participants admitted to the program after September 9, 2020 will not be eligible for the extension.
Furthermore, Congress may be naïve about the challenges associated with revising the 8(a) program. While the 2021 NDAA appears to view the participation period extension as a “minor” change, the implementation is likely more complicated. The 8(a) program is structured with the expectation that participation will end after nine years (or less). Extending the performance period without making corresponding changes will likely lead to ambiguities in the regulations.
A prime example of this is the business development targets system the 8(a) program utilizes to encourage diversified development. The 8(a) regulations provide business development targets for obtaining work outside the 8(a) program. Failing to meet a target will cause an 8(a) participant to be ineligible for sole-source work. These targets, however, do not anticipate a tenth year of participation. They also do not start until the fifth year of program participation.
So, how does Congress expect the SBA to address these challenges to extending the program participation period?
¯\_(ツ)_/¯
The proposed 2021 NDAA is silent regarding the larger implications of the change. What is clear is that updating the SBA’s regulations will not be as simple as changing “nine” to “ten.”
Ultimately, the proposed language is good news for 8(a) contractors that have seen their participation stifled by the impacts of COVID-19. Implementation of the change may prove to be more complicated than Congress anticipates, however.
* * *
Keep in mind that the NDAA, as it currently exists, is not yet finalized. The Conference Report still needs to be passed by both the House and Senate, and then signed by the President. Once passed, the SBA will only have 15 days to update its regulations. With this timetable, it’s likely to be hard to make a comprehensive overhaul of the program to address some of the regulatory challenges associated with the extension. Regardless, it appears current 8(a) contractors may not need to head for the airport just yet.
We’ll keep you posted on any developments. But if you have questions about small business federal contracting, please give us a call.
“Let’s Make it an Even Ten.” Congress Proposes To Grant Current 8(A) Participants an Extra Year. was last modified: December 9th, 2020 by