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Agencies Must Justify Award of Large 8(a) Contracts

CSA Federal Government Contracts Management Newsletter

Is your small company a member of the 8(a) business development program and have you either currently been awarded or plan to pursue high dollar set-aside federal contracts? If so, agencies must now justify the award of contracts on a sole source basis to 8(a) certified companies that are in excess of $20 million.

The Federal Acquisition Regulation (FAR) Councils are adding new controls to the 8(a) program specifically designed to reduce the likelihood of small companies passing through most of the work to large vendors. Under the 8(a) program, companies owned by racial minorities such as Alaskan Native Corporations, Native American firms or others that fall into a similar category, must do at least 51 percent of the work under the contract.

"That justification and approval does not mean there is a cap on sole source contracts," said Dan Gordon, administrator in the Office of Federal Procurement Policy. “There can continue to be large sole source contracts to the 8(a)s, but if there is one, there needs to be a justification and approval."

Congress required the change to the FAR in the 2010 Defense Authorization bill. It comes after the Small Business Administration, which runs the 8(a) program, suspended GTSI last October from obtaining any new work after allegations that an Alaskan Native Corporation acted as a front and passed through a majority of the work to the company. SBA eventually reinstated GTSI after several senior officials resigned.

This issue is challenging for the administration because it wants to promote competition, but also wants to support small business socioeconomic programs such as 8(a). The government frequently sees that the intended benefits of the contracts are not getting back to the communities and the administration wants to ensure that the intended disadvantaged communities are reaping the benefits of being a government contractor.

Along with this new rule, the FAR Councils also published an interim rule establishing a new order of priority of set-aside programs, placing 8(a), Historically Underutilized Business Zone (HUBZone), woman owned small businesses (WOSBs) and service disabled veteran owned small businesses (SDVOSBs) on the same level. In the past, the 8(a) program always had the top priority, but Congress in the Small Business Jobs Act of 2010 wanted to eliminate any confusion over which program contracting officers should look to first.

"This clarifies that contracting officers can exercise discretion when determining whether a requirement will be restricted to small business concerns under the 8(a), HUBZone or SDVOSB programs," the interim rule states. "This interim rule is intended to address the recent statutory clarification and make clear that there is no order of precedence among the 8(a), HUBZone, WOSB, or SDVOSB programs. However, if a requirement has been accepted by SBA under the 8(a) Program, it must remain in the 8(a) program unless SBA agrees to its release."

The new rule is clear: the government is placing tighter controls on sole source contract awards exceeding $20 million to 8(a) firms to ensure that the actual small business is performing at least 51 percent of the work and to confirm that these companies’ large business partners are not siphoning off this work for themselves. To find out more about how to ensure that your company is in full compliance with its small business sole source contracts, please contact CSA at clientresults@csaassociates.com.

About CSA Contracts Management Services

CSA is a professional services firm providing strategic guidance and operational performance solutions to Government and commercial clients. CSA contracts management services are provided to the Federal Government and Federal Government contractors to help them prepare, manage, and close out Government contracts. CSA services for Federal Government contractors can include RFP compliance reviews, on-going and surge support for contract administration needs, bid protest preparation and contract close out services: For more information about CSA Contract Management services contact CSA at clientresults@csaassociates.com.