Transcript The Small Business Administration’s New Size and 8(a

The Small Business
Administration’s New Size and
8(a) Regulations
Kym Nucci
SBA Update
 February 11, 2011 – The Small Business
Administration (SBA) published its final rules changing
many of the size and Section 8(a) regulations. The
new rules became effective on March 14, 2011.
Changes to Part 121 Size Regulations
 The rule previously stated that the same joint venture
(JV) entity could not submit more than three offers
over a two-year period. Now the same JV entity may
submit unlimited offers but can only receive three
contract awards over a two-year period.
Changes to Part 121 Size Regulations
 A mentor-protégé JV agreement must be approved by
SBA before the JV can receive an 8(a) award. SBA
approval is not needed for a non-8(a) award; however,
the JV agreement must comply with § 124.513
requirements in order to receive the affiliation
exemption in the event of a size protest against the JV.
Changes to Part 121 Size Regulations
 The rules clarify that the non-manufacturer rule does not
apply to service contracts or to the services component of
a mixed contract. The rules also add a qualification
requirement that a non-manufacturer now must take
ownership or possession of the items with its personnel,
equipment or facilities in a manner consistent with
industry practice.
Changes to Part 124 Section 8(a) Regulations
Changes to Part 124 Section 8(a) Regulations
 To establish economic disadvantage, an individual’s
adjusted gross income and net worth cannot exceed
$250,000 and his/her assets cannot exceed $4 million.
 Net worth will not include monies in qualifying IRAs and
income will not include monies paid to the applicant by an
S corporation, LLC or partnership if the monies are
reinvested in the firm or used to pay taxes.
 A spouse’s financial situation may be considered by SBA if
the spouse played a role in the business or lent money to
the firm.
Changes to Part 124 Section 8(a) Regulations
 An immediate family member of a current or former
8(a) Participant may not use his/her disadvantaged
status to qualify another concern for the 8(a) program,
but this prohibition may be waived by SBA under
certain conditions.
 A disadvantaged individual called to active duty may
designate one or more persons to control the daily
operations or may elect to suspend 8(a) Participant
status during the active duty call-up period.
Changes to Part 124 Section 8(a) Regulations
 The 8(a) member of a separate legal entity JV must
own at least 51 percent of the JV entity and must
receive profits that are commensurate with the work
it performs.
 For an unpopulated JV or a JV populated only with
administrative personnel, the 8(a) member must
perform at least 40 percent of the work performed by
the JV, which must comply with the percentage or
work requirements at § 124.510, and the work must
be more than administrative or ministerial in nature.
Changes to Part 124 Section 8(a) Regulations
 For a populated JV, the 8(a) member must demonstrate
what it will gain from contract performance and how such
performance will assist in its business development. Also,
the non-8(a) JV member and its affiliates are prohibited
from acting as a subcontractor to the populated JV.
 Numerous changes were made to the mentor-protégé
regulation at § 124.520 to clarify existing practices and to
add certain requirements. If a mentor fails to provide the
promised assistance to the protégé, the rules now provide
consequences for such failure.
Changes to Part 124 Section 8(a) Regulations
 The rules state that a follow-on procurement to an
8(a) contract must remain in the 8(a) program unless
the SBA agrees to release it for non-8(a) competition.
 Also, the competitive thresholds have been increased
to $6.5 million for manufacturing and $4 million for all
other procurements.