Digging in to SBA’s New 8(a) Social Disadvantage Rule

Now that the Small Business Administration has finalized its 8(a) rule change and created a new paradigm regarding social disadvantage, let’s dig in and analyze the remade program.

For those who don’t know, in order to gain access into the 8(a) program, a company must be owned and controlled by an individual who is both economically and socially disadvantaged. Historically, showing social disadvantage had been easiest by being a member of certain congressionally-recognized disadvantaged groups like Native Americans, African Americans, or Hispanic Americans; though others weren’t barred from participating in the program, they had to do a bit more to establish their social disadvantage.

The new rule turns that around.

The new social disadvantage test is tailor-made for white-owned businesses

Effective September 10, 2026, the new social disadvantage test will require an individual to show that a group, of which they are a part, suffered discrimination or bias, and that he or she suffered material harm from that discrimination or bias.

There’s two steps to this. First, the applicant must show that a government (federal, state, or local), university, or corporation, took an action or had a policy, rule, regulation, or practice that favored one group over another. Second, the applicant must certify that they are a member of the non-favored group.

Because affirmative action programs that took race into account in hiring decisions, school admissions, etc., can satisfy this test, and such programs were widespread until recently, this change opens the program door widely for businesses owned by white men and women—individuals who under the old social disadvantage system had difficulty being admitted to the program.

And because such programs tended to benefit groups like Native Americans, African Americans, or Hispanic Americans—make no mistake—starting it September, it will be easier to get into the 8(a) program as a white person than as a minority.

SBA: Social disadvantage change is necessary post Ultima

SBA views this new rule as necessary to bring the 8(a) program into line with the Constitution following the 2023 Ultima ruling out of the Eastern District of Tennessee. There, a judge found that the rebuttable presumption of social disadvantage impermissibly benefitted certain racial and ethnic groups over others; that ruling, however, did not touch on whether the social disadvantage test itself was constitutional or not.

During the proposed rule’s 30-day comment period, 114 comments were received by SBA. The majority were against the change, but they ranged widely from support to opposition, requests for clarifications, and more. SBA changed little in response to these comments.

What did change? Two things worth noting. The final rule added that where evidence of a program such as affirmative action is not available to the applicant, they can provide “other adequate evidence.” SBA also stripped the race and ethnicity questions from the information collection.

Not retoractive

SBA insists that this new test will not apply retroactively to firms already admitted. Or at least that is not SBA’s intent. SBA said social disadvantage is a one-time determination, and that current participants keep their status. But pending applicants get no such grace: a firm that applied under the old regulations will be judged under the new test as of September 10, 2026.

Given the suspension of more than 1,000 firms earlier this year, the Secretary of Defense’s promise to take a “sledgehammer” to the program, and the Administration’s general antipathy toward anything it views as DEI, a current participant would be forgiven for reading “one-time determination” as something SBA is willing to revisit.

Open to all?

Also of issue is the new test’s evidentiary burden. Some commenters questioned whether the new rule would only allow individuals not included in DEI policies to qualify for the 8(a) program.

SBA said that was not the intent. SBA said for example that women who suffered material harm prior to the enactment of the Equal Credit Opportunity Act of 1974 and discrimination against people with disabilities prior to the Americans with Disabilities Act of 1990.

That means if you are an elderly woman or a middle-aged person with disabilities, you might meet the test.

Interestingly, SBA said that a “Congressional finding” is sufficient evidence to demonstrate discrimination. Perhaps the SBA has forgotten that the basis of the now unconstitutional presumption of social disadvantage was that those groups were found by Congress to be socially disadvantaged.

If this is the case, practically every American that can meet the economic disadvantage threshold can now gain access to the 8(a) program.

Now that the rule is final, it’s also open to being challenged. Some have suggested that this new test fails to meet the statutory definition of social disadvantage. We’ll continue to keep an eye on it.

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