On June 11, 2026, SBA issued a proposed rule entitled “Reforms to Remove SBA’s 8(a) Program’s Rebuttable Presumption of Social Disadvantage for Individually Owned Firms Only; Reforms Do Not Impact Entity-Owned Firms.” This client alert covers key aspects of the proposed rule and how it may impact a contractor’s pending or future 8(a) application. Notably, this proposed rule does not impact current individually-owned participants in the U.S. Small Business Administration’s (SBA) 8(a) business development program (8(a) program) or entity-owned firms.
This proposed rule is issued nearly three years after the decision in Ultima Servs. Corp. v. U.S. Dep’t of Agric., 683 F. Supp. 3d 745 (E.D. Tenn. 2023), which enjoined SBA from applying the rebuttable presumption of social disadvantage in administering the 8(a) program. Since Ultima, SBA has not applied a rebuttable presumption of social disadvantage but has required all participants and applicants to demonstrate the social disadvantage that the qualifying owner(s) of the firms have endured due to an objective distinguishing feature (i.e., race, ethnic origin, gender, physical handicap) that has negatively impacted the individual’s entry into or advancement in the business world. However, as the proposed rule explains, this practice “persisted until 2025 when certain related practices and policies were terminated.”
Since 2025, 8(a) applications have been more or less at a standstill. In January 2026, SBA released guidance hinting that a proposed rule would be coming. And while the proposed rule is now here, we may still be a ways away from SBA approving any 8(a) applications, especially for individually-owned firms.
What SBA is Proposing
SBA is proposing to replace the current test for social disadvantage with the requirement that a (i) U.S. citizen (any citizen) show; (ii) during his or her lifetime; (iii) a governmental or private entity in the United States (such as a federal, state or local government, university or corporation); (iv) through an action, policy, rule, regulation of any of its agencies, subsidiaries or authorized agents; (v) discriminated or was biased against a racial, ethnic, or cultural group of which the U.S. citizen is a member of or favored a racial, ethnic, or cultural group of which the U.S. citizen is not a member of; and (vi) the U.S. citizen must establish that such discrimination or bias resulted in loss of access to capital or diminished economic advancement. It will not be sufficient to show that you were discriminated against or biased against, or not part of a group that was favored, but you will also need to detail the negative financial impact that this had. And you must self-certify that you were a member of a particular group at the time of the action.
In addition, SBA is proposing to require, over and beyond a self-certification of the requirements described above, that the individual provide “evidence” of the government’s, university’s, or corporation’s action, policy, rule, or regulation that disfavored the U.S. citizen’s group. As examples, you could provide unlawful DEI programs or policies, unlawful affirmative action programs or policies, race-based quotas, set-asides, or hiring targets, or anything that favored some groups over others on the basis of race.
Any U.S. citizen who can demonstrate the above, in addition to the other requirements of the 8(a) program (namely, economic disadvantage, good character, and potential for success), will be 8(a) eligible.
Entity-Owned Firms and Current 8(a) Participants
The proposed rule does not apply to companies that are owned and controlled by entity-owned firms, such as tribes, Alaska Native Corporations, Native Hawaiian Organizations, or Community Development Corporations.
In addition, the proposed rule explains that it “does not affect participants currently admitted to the 8(a) BD Program,” and that “SBA does not currently intend to apply the new test to current Participants at their next annual review,” but SBA is requesting comments on this.
What To Do Next
This is a proposed rule, and comments are due on July 13, 2026. If you have a pending 8(a) application, it is more than likely that if and when this rule is finalized, SBA will require you to establish social disadvantage in accordance with the updated requirements.
Meghan Leemon and her colleagues in the firm’s Government Contracts Group stand ready to assist companies and individuals wishing to submit comments on the proposed rule and to guide companies through their 8(a) applications.
