1. The Small Business Administration’s New Size and 8(a) Regulations Kym Nucci

2. 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.

3. 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.

4. 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.

5. 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.

6. Changes to Part 124 Section 8(a) Regulations

7.  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.

8. 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.

9. 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.

10. 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.

11. 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.