Today, just shy of 30 days after comments on the proposed rule closed, SBA issued a final rule entitled “Reforms to 13 CFR 124.103 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 final rule and how it will impact your pending or future 8(a) application. Notably, this final 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. The final rule will take effect on September 10, 2026.
SBA received 114 comments to the proposed rule, with a “plurality of comments express[ing] opposition to the proposed rule.” Despite this, SBA determined that most of these comments were irrelevant or in conflict with 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.
As a result, much of what SBA proposed was carried over to the final rule.
What SBA Proposed
SBA proposed 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 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 proposed 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 based on race.
Any U.S. citizen that 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.
Final Rule
In response to the comments received, SBA clarified that it was “never SBA’s intent to exclude any evidence-based bases of individual racial prejudice or cultural bias from those that could establish a claim of social disadvantage.” And this “certainly could include discrimination or bias based on sex.”
In addition, SBA received several comments regarding the “evidence” requirement. While SBA believes that “in most cases, evidence will be publicly available and easily accessible through the internet,” it did add an alternative test to establish social disadvantage where evidence is not readily available.
Accordingly, U.S. Citizens that have a pending 8(a) application or are seeking to apply to the 8(a) program will now be required to demonstrate social disadvantage by:
Option 1: providing evidence that a governmental or private entity in the United States (such as a federal, state or local government, university or corporation), through an action, policy, rule, regulation or other practice, favored other groups, thereby excluding the Citizen’s group, disadvantaged the Citizen’s group, or took adverse action against the Citizen’s group. The Citizen must also establish that such discrimination, bias or favoritism conferred material harm to him or her.
Option 2: self-certify that he or she was a member of a particular group at the time of the governmental or private entity’s action during the effective period of the relevant action, policy, rule, regulation, or other practice and suffered material harm because of it.
In each case, the individual will need to demonstrate the “loss of access to or diminished opportunities related to economic advancement.”
Going Forward
With the implementation of the final rule, this may be an indication that SBA may start issuing decisions on 8(a) applications again, although time will tell. Depending on how long your application has been pending, this would be a good time to start gathering updated information and documents, such as financial statements, tax returns, and contract details. All individuals with pending 8(a) applications should expect their application to be returned to them, asking for, at a minimum, new information to establish social disadvantage.
If you have a pending 8(a) application or are considering applying, our team can guide you through this process and understand the new requirements. If you have any questions, please reach out to Meghan Leemon or another member of PilieroMazza’s Government Contracts group.
