Office of Small and Disadvantaged Business Utilization

Small Business Program Policy Manual

Small Business Administration 8(a) Business Development Program

A. BACKGROUND

This philosophy expresses the basis for Federal programs supporting minority business enterprise, begun in 1969. At that time, Federal contracts were viewed as an effective means to stimulate the growth of the minority business community. Section 8(a) of the Small Business Investment Act of 1958 was determined to be an appropriate mechanism for awarding those contracts.

Section 8(a) authorized the SBA to enter into prime contracts with Federal agencies and to subcontract the performance of the contract to small business concerns or others. Executive Order No. 11458, signed by President Nixon on March 5, 1969, authorized the use of this provision to assist minority businesses, and established the "8(a) Program", as it is commonly called. That authority was later superseded by Executive Order No. 11625 of October 13, 1971.

Public Law (P.L.) 95-507, enacted in 1978, gave the 8(a) program statutory authority, more exacting eligibility criteria and a more clearly defined mission.

The Business Opportunity Development Reform Act of 1988, P.L. 100-656, has refocused the 8(a) program on its original business development objectives. The process for determining eligibility has been decentralized and simplified, the program participation term has been expanded to nine years and divided into a developmental stage and a transitional stage, more emphasis has been placed on business planning, participating concerns can no longer be dependent on sole-source contracts, and competition has been introduced for larger procurements. The changes enacted in P.L. 100-656 are a sweeping effort to ensure that 8(a) program participants develop the ability to compete in the open marketplace.

B. AUTHORITY AND IMPLEMENTATION

The 8(a) program is authorized under Sections 7(j) and 8(a) of the Small Business Investment Act, as amended. Also refer to the 13 Code of Federal Regulations Part 124 and the Federal Acquisition Regulations Part 19.8.

C. IDENTIFYING PROCUREMENTS FOR THE 8(a) PROGRAM

1. Types of Suitable Procurements

   All procurement opportunities, including those under the Simplified Acquisition Threshold, should be considered as a possible candidate for the 8(a) program. 8(a) contractors are capable of performing virtually every type of manufacturing, service and construction contract.

   There are no limitations on the type or size of 8(a) procurements. However, for procurements with service or construction NAICS codes, competition among eligible 8(a) concerns is required when the estimated value of the procurement, including all options, exceeds $3 million. For procurements with manufacturing NAICS codes, the threshold for competition is $5 million. (FAR 19.805-1) The criteria for 8(a) competitions are the same as for other set-aside programs; that is, a reasonable expectation of receiving offers from at least two eligible 8(a) concerns and making award at a fair market price, if the procurement will exceed the 8(a) competition threshold. For indefinite quantity-indefinite delivery type contracts, the determination of whether the competition threshold is exceeded will be based on the maximum value of the procurement.

   A proposed 8(a) requirement should not have been publicly synopsized as a small business set-aside and performed most recently by a small business. The procurement should also not require excessive subcontracting to be performed by other than the prospective 8(a) contractor (FAR 52.219-14).

2. Repetitive Set-Aside Policy

   Once a product or service has been acquired successfully by a contracting office on the basis of an 8(a) set-aside, all future requirements for that specific product or service must be acquired using 8(a) set-aside procedures. This policy applies unless the contracting officer determines that there are no eligible 8(a) contractors available for procurements below the threshold for competition, or that there is not a reasonable expectation that offers will be obtained from at least two eligible 8(a) concerns, for procurements exceeding the threshold for competition, and that award cannot be made at a fair market price.

3. Sources Sought Notices

   HHS supports the posting notices at least 15 days prior to the issuance of a solicitation. Furthermore, it encourages contracting activities to post such notices if the contract office intends to solicit and negotiate with only one source.

D. OFFERING PROCUREMENTS TO THE SBA

When a suitable procurement (over $100,000) has been identified, the contracting officer offers it to the SBA for award under the 8(a) program. A sample offering letter is shown at Appendix 5-1. The offering letter must state the applicable NAICS code and size standard for the procurement, and include a copy of the statement of work. The proposed procurement can be offered for the 8(a) program in general, on behalf of a specific 8(a) firm, or for 8(a) competition.

For single source requirements, other than construction, the offering letter should be sent to the SBA district office that services the nominated 8(a) firm. For single source construction requirements, the offering letter should be sent to the SBA district office where the work is to be performed. For competitive requirements, other than construction, the offering letter should be sent to the SBA district office servicing the geographical area in which the contracting office is located. All requirements for 8(a) construction competition should be forwarded to the SBA district office servicing the geographical area in which all or the major portion of the construction is to be performed.

1. General Offers for the 8(a) Program

   If a proposed procurement below the threshold for competition is offered for the 8(a) program in general, the SBA will select the 8(a) contractor to perform based on the capabilities, approved level of contract support in the business plan, and compliance with the competitive business mix requirements, if applicable. The contractor must meet the procuring agency's technical needs, but the final contractor selection rests with the SBA. SBA will promote the equitable geographic distribution of 8(a) sole source contracts.

2. Offers for a Particular 8(a) Contractor

   If an 8(a) contractor has performed identical or similar work previously, or has marketed its capabilities in a certain area, a proposed procurement can be offered to the SBA on behalf of that contractor. Prior to offering procurements in this way, the bureau SBPM or contracting officer should contact the SBA field office where the company's business plan is administered to verify that the contractor is a small business in the NAICS code to be performed, has not exceeded its business plan support level and is in compliance with the competitive business mix targets. If a search letter has been received from the SBA, the offering letter should reference it.

3. Technical Competition

   With the advent of price competition in the 8(a) program, SBA will no longer approve separate technical competitions for the purpose of identifying a single contractor with which to negotiate price. UNDER NO CIRCUMSTANCES MAY A LIMITED TECHNICAL COMPETITION BE CONDUCTED FOR SOLE SOURCE PROCUREMENTS. CONTRACTING AND PROGRAM OFFICES SHALL NOT USE THIS TECHNIQUE. However, informal technical presentations may be used to select an 8(a) firm for single source procurements under the $3 million competitive threshold.

4. Informal Technical Presentations

   A small business may market its capabilities to program officials, acquisition officials and other key stakeholders.

   Contracting officers may invite several 8(a) contractors (usually from three to seven) to give presentations on their capability to perform a specific procurement. The bureau shall not require the contractors to develop elaborate technical presentations or to otherwise incur bid and proposal costs at this stage. In order to enable the 8(a) concerns to focus their presentations, the contracting officer may develop a list of salient characteristics and/or necessary expertise to perform the procurement. This list may be given to each of the invited contractors, with a statement that the list is not inclusive and is not the statement of work (SOW). DO PROVIDE THE SOW. If the SOW is issued, SBA will consider that the procuring agency has initiated a competitive procurement.

   The CO, and if possible, the SBPM, shall attend the presentations with the program office staff. The CO or SBPM shall make clear to all in attendance that the presentation is a marketing effort and not a commitment to offer a contract. No cost information may be solicited. After listening to the presentation, appropriate questions about the contractor's capabilities may be asked. Based on the informal technical presentations, bureau procurement, small business, and program personnel should select one 8(a) contractor with which to continue the acquisition process. An offering letter should be submitted to SBA on behalf of that concern (see 2. above).

5. Offers for Competitive Procurements

   For procurements which exceed the threshold for competition, the offering letter should identify any geographic conditions which are important for contract performance and list the names of 8(a) contractors, if any, which have already expressed an interest in the procurement. Additionally, identify any search letters which have been sent for that procurement.

6. SBA Response

   SBA will evaluate the offer and within 5 working days from receipt of the offer, either accept or reject the proposed procurement for the 8(a) program. Prior to accepting the offer, SBA will determine whether this would have an adverse impact on another small business. An adverse impact is generally considered to exist if the contract is currently being performed by a small business (not in the 8(a) program) and accounts for 25% or more of that concern's annual receipts.

   If below the threshold for competition, the acceptance letter will also identify the contractor selected to perform the procurement. In most cases, SBA will authorize the procuring agency to conduct negotiations directly with that contractor.

   For competitive procurements, the acceptance letter will advise whether the competition is limited geographically or further limited to participants in the developmental stage or the transitional stage of program participation.

E. SINGLE SOURCE 8(a) CONTRACTS

The SBA AND HHS has a Partnership Agreement (PA) to streamline the 8(a) acquisition process. The SBA has delegated their authority to execute the final contractual document 8(a) acquisitions. Detailed procedures are outlined below.

F. COMPETITIVE 8(a) CONTRACTS

The MOU between the Department of the HHS and the SBA, signed in May of 1998, also applies to competitive 8(a) acquisitions. Please log onto the OSDBU homepage for details (http://www.hhs.gov/osdbu/read/ ).

1. Offering Letter

   An offering letter must be sent to the appropriate SBA office as outlined in Section D above. The SBA has five working days to respond to the offering letter with an acceptance letter. If the SBA does not respond within five working days, the contract specialist must contact the SBA office immediately. An acceptance letter must be received from SBA prior to proceeding with the 8(a) acquisition.

2. Establishing Competitive 8(a) Source Lists

   For competitive 8(a) procurements, the acquisition is synopsized in the Commerce Business Daily. The 8(a) contractors who request a copy of the solicitation, plus any other qualified contractors known to the bureau SBPM or contracting officer, will constitute the list of concerns to receive the solicitation.

3. Competitive 8(a) Solicitations

   Competitive 8(a) acquisitions may be conducted using either sealed bids or competitive proposals. The same criteria for selecting the method of solicitation (sealed bid vs. competitive proposals) apply as for other competitive contracts. The solicitation package for a competitive 8(a) solicitation should not differ from that required for any other competitive procurement. The solicitation shall include a complete statement of work, detailed evaluation factors for award, and the clause at DTAR 1052.219-72, Section 8(a) Direct Awards (May 1998). The solicitation shall also include the clause at FAR 52.219-18, Notification of Competition Limited to Eligible 8(a) Concerns, with it Alternate III (Deviation).

   The date of the 8(a) offeror's written self-certification as a small business, submitted with its initial offer including price, will be the date used by SBA to determine the concern's eligibility to receive the particular contract. Therefore, it is particularly important to obtain a complete set of representations and certifications from each 8(a) offeror.

4. Evaluation of Competitive 8(a) Offers

   Offers from 8(a) concerns are evaluated in accordance with the evaluation factors listed in the solicitation. Evaluations shall proceed as they would for any competitive solicitation, whether sealed bid or competitive proposals.

   The General Accounting Office has recently ruled that it has jurisdiction to hear and decide protests of solicitation content and evaluation procedures used for competitive 8(a) procurements. Therefore, the contracting officer must use the same care to safeguard information and evaluate 8(a) offers as is required for other competitive procurements.

5. Negotiating the Competitive 8(a) Contract

   Agency contracting officers are responsible for conducting all negotiations necessary for determining an apparent successful offeror on solicitations requiring competitive proposals. The SBA contracting officer is not usually involved in these negotiations.

6. Eligibility Determinations for Competitive Procurements

   For competitive 8(a) acquisitions over $100,000, the contracting officer shall submit the name, address, and telephone number of the apparent successful offeror (or low bidder) to the appropriate SBA BOS at the field office(s) servicing the identified 8(a) firm(s). The SBA shall determine the eligibility of the firm(s) and advise the contracting officer within two working days of the receipt of the request. If the firm is determined to be ineligible, the contracting officer shall submit information on the next apparent successful offeror (or low bidder) to the cognizant SBA field office.

7. Preparing the Competitive 8(a) Contract Documents

   The competitive 8(a) contract documents are prepared in the same way as Single Source 8(a) contract documents (See Paragraph F.2 above).

An individual 8(a) set-aside may be withdrawn or modified before award if the contracting officer determines that award would not be in the public interest (because of unreasonable price, for example.) A copy of the contracting officer's written determination to withdraw or modify a set-aside must be forwarded through the bureau SBPM and the PCR to the OSDBU or designee for approval prior to proceeding with the procurement. After the OSBDU or designee's approval, the contracting officer must notify the SBA of its intention to withdraw the requirement from the 8(a) program. SBA has the right to appeal the withdrawal, particularly if it is based on price or price-related issues.

If the OSDBU or designee disagrees with the contracting officer, the matter may be referred to the D,OSDBU and the head of the contracting activity (the bureau head). The decision of the D, OSDBU is final. If no award can be made, the set-aside is automatically dissolved.

H. POST-AWARD ACTIONS

1. Coordination with the SBA and the HHS OSBDU

   Careful evaluation of the contractor's capabilities prior to award ensures that 8(a) contracts are performed successfully. However, any significant performance problems under an 8(a) contract shall be reported immediately by the contracting officer to the bureau SBPM and the OSBDU. The SBA contracting officer should also be notified, as it may be possible for the SBA to provide assistance which will enable the 8(a) contractor to satisfactorily complete the contract. The contracting officer must not initiate termination proceedings, either for default or for the convenience of the Government, without first informing the bureau SBPM, OSDBU and the SBA contracting officer.

2. Approval of Lower Tier Subcontracting

   The Small Business Specialist and SBA Procurement Center Representative (PCR) must concur before performance under an 8(a) contract is subcontracted to another concern. This requirement is in addition to the overall limitations on subcontracting required for set-aside contracts (see FAR 52.219-14). The SBS and SBA PCR may not concur if a proposed subcontracting arrangement has the following issues:

   • The proposed subcontractor is suspended, debarred, or determined ineligible by any Federal agency;

   • SBA determines that the subcontractor would control performance of the procurement;

   • SBA determines that the proposed subcontract is not an arms length agreement; or

   • SBA determines that the proposed subcontract is an attempt to circumvent the size regulations.

   The SBA PCR must be informed of all subcontracting arrangements and reserves the right to disapprove such agreements.

3. Contract Modifications

   Contract modifications are negotiated between the contracting agency and the 8(a) firm. In general, unilateral modifications, such as a change in the Contracting Officer's Technical Representative, may be issued without the signature of the 8(a) firm. A copy of the modification should be sent to SBA within five days.

   A modification within the scope of the initial contract may be issued whether the contractor has exited the 8(a) program or whether the concern is no longer small under the size standard for the contract.

   A modification outside the scope of the initial 8(a) contract is considered a new contract action. If the 8(a) contractor has exited the program or is no longer small for that size standard, the modification cannot be issued. If the 8(a) contractor is still a program participant and still a small business, the modification may be issued as long as the estimated price falls below the applicable threshold for competition and SBA has issued an acceptance letter in response to the contracting agency�s offering letter for all work falling outside of the scope of the current contract. If the estimated price exceeds the threshold for competition, the requirement must be competed among eligible 8(a) concerns.

4. Delivery Orders

   It is the responsibility of the HHS contracting officer to monitor delivery orders against indefinite quantity-indefinite delivery contracts to ensure that the 8(a) firm is not subcontracting work beyond the established limitations. A copy of each delivery order should be forwarded to the appropriate SBA office within five days of execution.

5. Exercising Options

   Priced options under 8(a) contracts are exercised in the same manner as any contract option, except that a copy of the modification should be forwarded to the SBA office which administers the contract.

   Priced options may be exercised even if the 8(a) contractor has exited the 8(a) program or is no longer a small business under the size standard which applies to the contract. As with any other contract, un-priced options are not allowed.

6. Performance of Contracts By Original 8(a) Concern

   Any 8(a) contract (including options) awarded on or after June 1, 1989 must be performed by the 8(a) concern that initially received the contract. If the owner(s) upon whom eligibility was based relinquish ownership, the contract or option shall be terminated for the convenience of the Government. The SBA Administrator, on a non-delegable basis, may waive this requirement if certain conditions exist (such as the death or incapacity of the owner).

   If the contracting officer determines that termination of the contract would severely impair attainment of the agency's program objectives or mission, and the SBA Administrator does not grant a waiver to the contractor, the contracting officer may request a waiver by immediately notifying SBA in writing. The request for waiver must be coordinated with the OSBDU, and must be filed within 15 working days after the notice.

   If SBA does not approve a waiver, the contracting officer must terminate the contract for convenience upon receipt of SBA's written request.

7. Contract Close-out

   A copy of the acceptance document and a copy of the final payment document shall be provided to SBA.

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