US SBA Issues Interim Rule Offers Relief to Certain 8(a) BD Companies
Many small businesses in the US have suffered severe economic hardships due to the global pandemic, but there is now some relief available to a subset of small businesses.
The US Small Business Administration (SBA) issued an interim rule effective January 13, 2021, amending the regulations governing the 8(a) Business Development (BD) program to implement the provisions in the Consolidated Appropriations Act, 2021 (Appropriations Act)1 and the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021).2 Section 330 of the Appropriations Act requires the SBA to ensure any small business concern participating in the 8(a) BD program on or before September 9, 2020, has the option to extend such participation for one year from the end of its program term. This option to extend is available even if the concern previously elected to suspend its program participation in connection with the President’s March 2020 COVID-19 emergency disaster declaration.3 Section 869 of the NDAA 20214 includes language providing for the same authorization of business concerns participating in the 8(a) BD program to extend their participation in the program.
In regards to timing, if a business concern was participating in the 8(a) BD program as of March 13, 2020 and through January 13, 2021, the business concern should notify the SBA in writing of its intention to extend the program term by one year. Although the interim rule indicates the extension applies without such notice, a representative of the SBA confirmed to us that because of the large volume of participants in the 8(a) BD program, and in order to facilitate internal recordkeeping, the eligible business concerns should email their intent to exercise the extension to email@example.com. However, a qualifying business concern is not required to extend its program and may decline the extension. If it chooses to decline, the business concern must notify the SBA in writing of its decision.
In regard to timing, if a business concern was participating in the 8(a) BD program as of March 13, 2020, and through January 13, 2021, the SBA will extend its program term by one year unless the business concern declines the extension. However, if a business concern that was participating in the 8(a) BD program as of March 13, 2020, has since graduated or left the program (for reasons other than early graduation or termination) before January 13, 2021, and wishes to be readmitted under the amendment, it must notify the SBA of its intent to be readmitted for a period of one year from the date it completed its program term.The SBA must receive this notification by March 15, 2021.
It is important to note that the interim rule does not apply to business concerns that graduated from or otherwise left the 8(a) BD program before March 13, 2020, or to business concerns admitted to the 8(a) BD program after September 9, 2020.
Additionally, the interim rule does not provide extension to business concerns that were participants in the 8(a) BD program at any time between March 13, 2020, and September 9, 2020, but were terminated, early graduated or voluntarily withdrew from the program rather than be terminated or early graduated. This exclusion is based on the fact that the SBA has already determined such business concerns are ineligible to participate in the program.
As for the impact on participants and their relevant stages in the 8(a) BD program, the interim rule confirms that the SBA will apply any extension to the participant’s transitional stage of participation. In other words, if a participant has already entered the transitional stage or has completed its program term, the SBA will not place it back in the development stage during its extension period. Additionally, the interim rule states that participants will not have to repeat a stage or, for those in the transitional stage, be subject to a business activity target higher than what corresponds to their relevant stage.
1 Public Law 116-260, Div. N, title III, sec. 330 (December 27, 2020).
2 Public Law 116-283, title VIII, sec. 869 (January 1, 2021).
3 Presidential Disaster Declaration on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak (March 13, 2020).
4 Public Law 116-283, title VIII, sec. 869 (January 1, 2021).