Proposed Rule Would Turn 8(a) Program on its Head

Thursday, the Small Business Administration proposed the most significant rewrite of 8(a) Business Development program’s social disadvantage eligibility in the program’s history. If enacted, the new rule would make it much easier—extremely easy, in fact—for businesses owned by white Americans to gain entry to the program.

While this comes as no surprise—the 8(a) program has been in the administration’s crosshairs all year and comes mere months after Secretary of Defense Pete Hegseth promised to take a “sledgehammer” to the “oldest DEI program in the federal government” —the breadth and audacity of the proposed changes are shocking.

The New 8(a) Program Two-Prong Social Disadvantage Test

The proposed rule would create new standards for determining when individuals have been socially disadvantaged for the purpose of 8(a) program eligibility. It would replace the current method for demonstrating social disadvantage with a new one. The new test would have two elements: group-level discrimination and individual material harm.

To demonstrate this first prong, an individual must show that “during their lifetime, a governmental or private entity . . . discriminated or was biased against a clearly definable racial, ethnic, or cultural group of which the citizen is a member, or favored in any way a racial, ethnic, or cultural group of which the citizen is not a member.” Critically, the “or favored in any way” clause means that someone seeking 8(a) program eligibility need not show that their group was targeted, only that another group was advantaged. Such programs—according to the proposed rule—include “unlawful diversity, equity, and inclusion programs or policies; unlawful affirmative action programs or policies; race-based quotas, set-asides, or hiring targets; or, any policies or programs that favored some groups over others on the basis of race.”

This specifically includes the prior version of the 8(a) program eligibility rule itself.

Yes, you read that right.

The new rule would make the old rule and its now unconstitutional rebuttable presumption of disadvantage for members of certain racial, ethnic, and religious groups a per se act of discrimination against those the old rule excluded.

Thus, the first prong would be easily satisfied by any person who can show that the government, institution (like a university), or business had a program of any type that favored a person of a different race or background.

Under the second prong of individual material harm, the applicant would self-certify that he or she was a member of a particular group at the time of the discrimination or bias and that they suffered material harm, defined as “loss of access to or diminished opportunities related to economic advancement.” Proof of such material harm could include government, university, and corporate polices and website materials, official statements, reports and audits, court decisions, and administrative rulings.

This would create a near-automatic pathway for anyone who can point to a race-conscious policy that disfavored their group or favored a group they are not in membership.

There’s more. Because the new rule is policy-centric, not experiential, it could make it more difficult for an individual who has personally experienced discrimination that was not part of a “policy, rule, regulation, or other practice” to gain entry to the 8(a) program.

Upending the Program

In essence, this proposed rule could flip the program on its head making it easy for businesses that have historically not been able to gain access to the program to be admitted and harder for companies similar to the historical participants to gain admittance.

What does this mean for current 8(a) program participants? For now, nothing—SBA “does not currently intend” to apply the new test to current participants at their next annual review. Yet, this statement of intent is not a commitment and given the SBA’s January data call and subsequent suspension of over 1,000 firms, it would certainly be reasonable for current participants to be concerned.

Last but not least, the proposed rule would apply only to the eligibility of small businesses owned and controlled by individuals. It would not affect the eligibility of “entity-owned” small businesses—those owned by Native American tribes, Alaska Native Corporations, and Native Hawaiian Organizations—although they would undoubtedly be impacted by such a fundamental change to the program.

Opportunity to Comment

The proposed rule must go through a 30-day comment period ending on July 11, 2026. Contractors and applicants with a stake in the 8(a) program should consider submitting comments at http://www.regulations.gov, Docket No. SBA-2026-0133. SBA must consider all timely comments before issuing a final rule.

Schoonover & Moriarty Law Clerk William “Preston” Knight co-authored this blog post.