SBA Suspends 1,000 Firms from 8(a) Program

Buried in a news release published Thursday January 22, the U.S. Small Business Administration revealed that it suspended over 1,000 firms from the 8(a) program because they did not respond to the SBA’s data call.

With only about 4,300 current participants in the program, in one administrative swoop, the SBA took out approximately a quarter of its own program.

8(a) Firms May Appeal Suspensions

Suspended firms are not without options. The decision to suspend may be appealed to the SBA Office of Hearings and Appeals (OHA) and potentially beyond through the U.S. Court of Federal Claims all the way up to the U.S. Supreme Court.

Quick caveat, this post is not legal advice. Determining whether or not to challenge such a cancellation would be a fact-specific analysis that should be undertaken with legal council. We’re, of course, happy to discuss.

8(a) Program in the Crosshairs

This mass cancellation comes at a time when the 8(a) Program finds itself under attack from the Trump Administration because the Administration views the 8(a) Program as an example of diversity equity and inclusion (DEI).

Secretary Pete Hegseth this week announced a line-by-line review of every 8(a) contract. (We’ll have a blog post out on this announcement soon—this suspension news took precedence.)

Challenges to the 8(a) Program are nothing new. Over 25 years ago, a Texas company argued in Rothe Dev. Corp. v. U.S. Dept. of Defense that the 8(a) section of the Small Business Act (creating the program and providing its namesake) was an unconstitutional violation of the Fifth Amendment’s Due Process clause.

What’s new is the intensity and the success of the challenges. In 2023, a federal judge in the Eastern District of Tennessee ruled that the program’s use of a presumption of disadvantage in the case of individuals with certain racial or ethnic backgrounds was unconstitutional. This meant that no matter how long a company had been in the nine-year-long program, it had to go back and justify its inclusion by providing a narrative of social disadvantage.

Further, the Administration’s appointment of Kelly Loeffler, an outspoken critic of DEI policies, to the position of SBA Administrator meant that what had historically been the SBA’s most successful contracting program was now disfavored by the head of the agency. The call is now coming from inside the house.

The release revealing the suspensions touted new guidance to SBA officials reminding them that, in alignment with Loeffler’s policies, “race-based discrimination within the 8(a) Business Development Program is unconstitutional and unlawful.”

Deciding to Appeal

Suspended firms may well have good arguments to make if they were suspended solely for not responding to the recent data call. As we have previously pointed out, there were a number of reasons why a firm might object to responding.

One last note, the notice that went to suspended contractors stated that the portal for data call submissions would remain open until February 19. This has the potential to create confusion in two manners. First, it seems to suggest that if the firm responds to the data call by February 19, the suspension will be lifted. That is not explicitly said and should not be assumed. Second, it also seems to indicate that an appeal would be due by February 19. That is also not the case. The actual appeal date would be counted from when the company received the suspension notice.

If you’d like to discuss this latest move, please contact us at 913-354-2632.