The 8(a) program is on pause
There are many goals of government procurement and many of them are at odds with each other. For example, society values competition in government procurement. But competition can slow things down. Similarly, society values efficiency with taxpayer dollars. But the most efficient thing may not be especially transparent. These goals are in conflict, and tradeoffs are just part of life in government procurement.
There’s also a large bucket of "social goals" that show up in government procurement policy. Social goals include things like: "we want agencies to buy things made in the United States" or "we want agencies to buy things that are environmentally sustainable." Social goals can also take the shape of things like "we want to ban TikTok but we don't want to do that directly, so we'll ban contractors from using TikTok."
Advancing social policy through government contracting tends to draw the ire of academics and practitioners. For one, sometimes they are ineffective at actually achieving their goals. For two, they can be politically volatile. And for three, they can make contracting officers' lives a little harder! Is it worth it, for example, to buy something made in the USA if it's 3 times more expensive? That requires documentation and remembering all of the boxes to check. Social goals can add burden to the procurement process.
One of the biggest social policy goals, which we’ve talked about before and that enjoys bipartisan support, is using government contracts to promote small business development. The basic idea is that elected officials in the United States government love talking about small businesses, and one of the ways they can talk about small businesses is by advancing policies that make it so that small businesses win more federal contracts.
Like other social policies, small business programs can make contracting officers’ lives more difficult. Small business set asides means extra market research. There are also XOSB goal requirements, which means that contracting officers have to keep an extra spreadsheet sitting on their desktops, tracking progress toward those goals.[1]
And yet, from a practitioner’s perspective, there is a small-business program that procurement professionals actually like! The SBA 8(a) program, which is aimed at helping small businesses that are owned by individuals who are socially and economically disadvantaged, is different from many small-business programs because the 8(a) program can make contracting officers’ lives a little easier, not harder.
The 8(a) program’s popularity is largely attributable to the use of the "directed award." One of the super powers of the SBA 8(a) program is that you can shortcut ordinary procurement methods and sole-source a contract to an 8(a) for millions of dollars![2]
And it works! Apparently, the data bears out that "participation in the 8(a) program coincide[s] with a higher likelihood of winning a federal contract and produced a higher odds ratio for successfully winning a government contract." According to the latest data I’ve seen, more than 25% of dollars going to small disadvantaged businesses happens through the directed-award authority. Which, I guess, sure explains the higher odds ratio.
The point is that the 8(a) program exists in a sort of procurement social-policy sweet spot: it actually improves small businesses’ chances of winning contracts; it allows politicians to talk about greater racial and gender equity in government contracting; and it makes contracting officers’ lives easier!
The 8(a) program is not universally beloved, though. Recently, the 8(a) program was put on pause because a court in Tennessee found that the SBA’s use of a “rebuttable presumption” of social disadvantage to implement the 8(a) program was unconstitutional.
If I were a law firm, I’d give you an analysis of how the court reached its conclusion and conclude with something along the lines of “we will continue to monitor the situation and provide updates as appropriate.” Fortunately, I’m not a law firm and we can get to the point: the 8(a) program is in a limbo and no one knows what will happen next!
My hunch (not policy advice!) is that the SBA will revise the rebuttable-presumption requirements to require applicants to provide personalized evidence that the owners of a small business are “socially disadvantaged.” Perhaps the SBA will retain a presumption but establish more targeted goals? Who knows?
Still, I keep pondering about what would happen if the 8(a) program were to disappear or be materially changed. How would agencies handle the loss of directed awards? The program is liked by procurement professionals because it makes their lives easier. Taking it away means that contracting officers will have more work to do. No one wants that.
My bet (again, not policy advice!) is that we’d see a lot of agencies scrambling to revise their procurement forecasts, more awards going to large businesses, and a bunch of procurement advocates looking for ways to fill the gaps. Perhaps we’d see new authorities for other XOSBs. Perhaps not.
One thing I can guarantee, though, is that over time, new and different social goals and policies will emerge, making the procurement landscape a little more complicated and the procurement rules thicket a little bit thicker.
Another thing I can guarantee is that, regardless of what happens with the 8(a) program, law firms will continue to monitor the situation and provide updates as appropriate.
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[1] Sure, there are official dashboards to track progress toward these goals. But experience teaches that no one really uses those dashboards and instead the actual work happens in Excel spreadsheets sitting on desktops.
[2] Millions of dollars is intentionally vague because there is a special category of 8(a) called an Alaska Native Corporation (or ANC). An ANC 8(a) has significantly higher dollar thresholds for directed awards. But either way, we’re talking millions of dollars.