FR 2021-00602

The document is an interim final rule issued by the U.S. Small Business Administration (SBA), allowing certain small businesses in the 8(a) Business Development (BD) program to extend their participation by one year. This rule is a response to the challenges posed by the COVID-19 pandemic and is aimed at supporting small businesses affected by the downturn. The extension is backed by legislative provisions in the Consolidated Appropriations Act, 2021, and the National Defense Authorization Act for Fiscal Year 2021. It applies to businesses that were part of the 8(a) program on March 13, 2020. Additionally, those that have left the program since that date may be readmitted if they notify the SBA and continue to meet eligibility criteria. The rule took effect immediately, although the public has been granted a 60-day window to provide comments.

Significant Issues and Concerns

The document assumes a degree of familiarity with regulatory processes and refers to specific sections of the Code of Federal Regulations, which might be difficult for laypersons to comprehend. There is also a notable absence of detailed financial analysis regarding the costs associated with an additional year of eligibility, leaving readers in the dark about potential economic implications. The language describing the conditions for readmission to the 8(a) BD program and the certification requirements might seem overly complex and could pose hurdles for businesses attempting to navigate these bureaucratic processes.

Another concern is the lack of quantitative data on the impact that prolonging the program duration by one year might have on federal contract distribution and competition with other small businesses. The rule mentions the necessity of oversight and compliance costs but does not provide explicit details about these expenses. It also presumes that the urgent nature of the situation is self-evident, which might not be universally understood or accepted.

Impact on the Public

Broadly, the document and its provisions are intended to benefit small businesses experiencing hardship during the COVID-19 pandemic by affording them additional time and opportunity to benefit from the 8(a) program's support. However, the complexity of the language and procedures may act as a barrier for some businesses to effectively capitalize on these newly established benefits.

Impact on Specific Stakeholders

For small businesses in the 8(a) BD program, this rule could provide a crucial lifeline, allowing them to remain eligible for certain government contracts that can aid in their recovery from pandemic-related struggles. Similarly, businesses that left the program since March 13, 2020, stand to gain from the chance to return. Conversely, there may be indirect negative effects on other small businesses not in the 8(a) program as the extension could mean there is less available federal contract work for them to compete for.

Overall, while the rule reflects a proactive step by the SBA to alleviate the impact of COVID-19 on small business enterprises within the 8(a) BD program, the complexity and lack of detailed information in the document might limit its positive effects unless stakeholders can successfully navigate its requirements.

The document discusses amendments to the regulations governing the 8(a) Business Development (BD) program, specifically focusing on financial references and allocations.

The U.S. Small Business Administration (SBA) details expenditures and revenues within the 8(a) BD program. In FY 2019, it is mentioned that 8(a) firms were awarded 5.15% of federal contract dollars, which amounted to $30.39 billion. This figure includes $8.62 billion awarded through set-asides, $9.90 billion through sole-source contracts, and $11.87 billion via open competition or with other preferences, such as HUBZone, applied. The average total contract awards per 8(a) firm were between $3.15 million in FY 2018 and $4.45 million in FY 2016. This data illustrates substantial financial involvement and allocation in the 8(a) BD program, emphasizing the importance of these amendments in potentially affecting the economic landscape of small, disadvantaged businesses.

The document notes that extending the 8(a) program by one year could lead to an increase in the pool of participating firms by 400 to 600 annually. Approximately 4,150 firms could benefit from the additional year in the program, which might alter the distribution of federal contract dollars. However, it anticipates that the impact on 8(a) contract dollars awarded will be non-substantive. Further detail on how this expansion might influence financial distribution or competition with other small businesses is notably absent, as identified in the issues section.

SBA's operational costs are also clarified. With nearly 5,200 8(a) firms in the program in FY 2019, SBA reported spending approximately $12,150 per 8(a) Program Participant, culminating in a total program cost of $63.17 million, inclusive of overhead. The document does not estimate the specific marginal costs associated with an added year of eligibility, a gap that could affect financial forecasting and budgetary planning.

Firm C, a hypothetical example, is presented to illustrate the financial targets for non-8(a) revenue during the extended program period. It had total revenue of $10 million during year 5 of the transitional stage, with $8.5 million being 8(a) revenues. It needs to show at least $3.5 million in non-8(a) revenue and awards to remain eligible for sole-source contracts. This example highlights the financial performance criteria and the SBA's emphasis on encouraging diversification beyond 8(a) contracts.

The document implies significant cost considerations and potential reallocation of federal business opportunities. However, it omits detailed analysis of compliance oversight costs or how they might rise with increased program participation. Additionally, while the document provides a 60-day comment period to collect public feedback, it lacks clarity on how these comments might translate into fiscal adjustments or changes to the interim rule.

Overall, the financial aspects of the rule revision spotlight the program's importance in promoting economic equity among small businesses, yet underscore the need for further transparency in assessing complete financial impacts.