8(a) Firm: Meaning, Purpose, Qualifications (2024)

What is an 8(a) Firm?

An 8(a) firm is a small business that is owned and operated by socially and economically disadvantaged citizens and that has been accepted into the 8(a) Business Development Program. This program is administered by the Small Business Administration (SBA), the United States agency charged withsupporting the growth and development of small businesses. The 8(a) program is designed to help disadvantaged entrepreneurs get government contracts and access the economic mainstream in America.

Key Takeaways

  • 8(a) firms are small businesses that are owned and controlled by socially and economically disadvantaged individuals.
  • The (8)a Business Development Program is run and administered by the SBA, or Small Business Administration, with the goal of giving a leg up to specially selected small businesses.
  • The 8(a) program helps aspiring entrepreneurs obtain government contracts and also includes mentoring, procurement assistance, training, financial assistance, management assistance, and technical assistance, among other benefits.
  • Applicants go through a rigorous application process for 8(a) status. 8 (a) status lasts up to nine years from when it is granted.

How 8(a) Firm Status Works

The 8(a) status is specially granted by the SBA to any small business that qualifies, making it eligible for financial assistance, training, mentoring, and other forms of assistance. In order to qualify for this special status,businesses must be owned and operated by individuals who are considered socially and economically disadvantaged. These individuals may have been subject to racial or ethnic prejudice or cultural bias.

The 8(a) status is outlined specifically in Section 8(a) of the Small BusinessAct, and is designed to help small, disadvantaged businesses compete in the general market. The federal government has a stated goal of awarding at least 5% of federal contracting dollars every year to these businesses.

The Purpose of the 8(a) Business Development Program

One of the main reasons behind the creation of the 8(a) status was to increase businessinvolvement by a broader portion of society. The SBA identifies several groups that are eligible for 8(a) status, including Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. Someone who is not a member of one of these groupsmay still get into the program if they can show significant evidence of having been socially disadvantaged—for instance, due to race, ethnic origin, gender, and physical handicap, among other causes.

Through the 8(a) Business Development Program, owners can compete for special contracts, such as sole-source government contracts for which there are no competitive bids, that help level the playing field for their small businesses. These small businesses can use the program to form joint ventures with already-established businesses to formmentor-protégérelationships, as well as formanagement and technical assistance. Businesses must meet certain requirements to be eligible to be a protégé.

Qualifications for 8(a) Firm Status

In order to qualify to become an 8(a) firm under SBA guidelines, a business must meet the following criteria (effective July 15, 2020):

  • It must be a small business.
  • It must not have participated in the program before.
  • At least 51% of the business must be owned and operated by U.S. citizens who are considered economically and socially disadvantaged.
  • The owner's personal net worth must be no higher than $750,000
  • The owner's average adjusted gross income (AGI) must be $350,000 or less.
  • The owner must have no more than $6 million in assets.
  • The owner must be of good character.
  • It must show the potential for success and be able to perform successfully on contracts.

Title 13 Part 124 of the Code of Federal Regulations (CFR) spells out who qualifies for the 8(a) program as well as what counts as being economically and socially disadvantaged.

Small businesses with 8(a) status can receive sole-source contracts, up to a ceiling of $4 million for goods and services and $6.5 million for manufacturing.

The first step: getting certified

Owners interested in taking part in the program are encouraged to do an on-line training and self-evaluation course through the 8(a) Business Development Suitability Tool. The course helps entrepreneurs determine whether or not their company meets the qualifications for the 8(a) program and if it does not, directs them to an appropriate SBA resource.

Before a firm can participate in the 8(a) program, it must first be certified at certify.SBA.gov. And small businesses that want to use the certification website must have a profile at SAM.gov, which is where companies register to do business with the U.S. government. (Contact your local SBA office if you have questions about applying.) Once you have applied, the administration will send a notification letter explaining whether the business was accepted into the 8(a) program. The certification lasts for nine years—the first four years are considered to be developmental, while the remaining five are deemed to be a transition phase.

Small businesses that gain 8(a) status are subject to annual reviews in order to keep the designation and their good standingin the program.During these reviews, the business owner has to draw up business plans and undergo systematic evaluations. Entrepreneurs who have secured 8(a) firm status say that the application process can be lengthy and rigorous, having prior experience with government contracts can be helpful, and working hard to take advantage of the program's benefits can make the experience very rewarding.

8(a) Firm: Meaning, Purpose, Qualifications (2024)

FAQs

8(a) Firm: Meaning, Purpose, Qualifications? ›

To be eligible for the 8(a) program, your business must: Be a small business with revenues of less than $27 million in its prior fiscal year. Be owned and controlled by socially and economically disadvantaged individuals (SDIs). As an SDI, you must have a net worth that does not exceed $6 million.

Who qualifies for the 8a program? ›

Be a small business. Not have previously participated in the 8(a) program. Be at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged. Have a personal net worth of $850 thousand or less, adjusted gross income of $400 thousand or less, and assets totaling $6.5 million or less.

What is the 8a competitive threshold? ›

You determine that the qualified small business is responsible. The resulting contract can be awarded at a fair market price. The government estimate doesn't exceed $7 million for manufacturing requirements or $4.5 million for all other requirements (There's an exception to this rule for entity-owned businesses)

What does 8a stand for? ›

SBA (8a) is an ownership/diversity certification sponsored by the Small Business Association (SBA) of the United States government. The 8(a) program is a nine-year business development program that provides business training, counseling, marketing and technical assistance to small businesses that have been certified.

What are the income limits for 8a? ›

A personal net worth of $850,000 or less (excluding their ownership interest in the applicant business, personal residence and official retirement accounts) An adjusted gross income averaged over three years of $400,000 or less.

Is 8A certification worth it? ›

Benefits of an 8(a) Certification

An 8(a) certification is a great way to get started with government contracting. If you're a small business, it's especially beneficial because it allows you to compete for contracts that have been set aside for small businesses.

Is the 8A program still suspended? ›

Current 8(a) participants who did not submit a social disadvantage narrative to re-establish eligibility were suspended from the 8(a) Program on November 15, 2023. To overcome this suspension, firms must submit an individual social disadvantage narrative through the Certify.sba.gov system to re-establish eligibility.

What does it mean to graduate from 8a program? ›

Sooner or later, 8(a) businesses "graduate" from the program because they no longer meet the qualification criteria. And even if they continue to meet the qualification criteria, they are only permitted to be in the program for nine years.

Is 8a the same as small disadvantaged business? ›

The 8(a) Business Development Program is a business assistance program for small disadvantaged businesses. The 8(a) Program offers a broad scope of assistance to firms that are owned and controlled at least 51% by socially and economically disadvantaged individuals.

Is 8a the same as small business? ›

The SBA 8(a) Business Development program helps socially and economically disadvantaged small-business owners secure coveted government contracts. Through the nine-year program, members can also access training and technical, financial and management assistance to help their business grow and compete for contracts.

What is once an 8a always an 8a? ›

Under the so-called “once 8(a), always 8(a)” rule set forth in the FAR and SBA regulations, when a procurement has been accepted by the SBA for inclusion in the 8(a) Program, any follow-on contract generally must remain in the 8(a) Program, unless the SBA agrees to release it for non-8(a) competition.

What is considered a small business? ›

It defines small business by firm revenue (ranging from $1 million to over $40 million) and by employment (from 100 to over 1,500 employees). For example, according to the SBA definition, a roofing contractor is defined as a small business if it has annual revenues of $16.5 million or less.

What is an 8a set aside? ›

If your company qualifies as a small business, the Small Business Administration has created several designations for specific types of small businesses. These are known as “set-asides,” and 8a contracts are a type of set aside for businesses known as small disadvantaged businesses (SDBs).

Who is considered socially and economically disadvantaged? ›

Under federal law, socially and economically disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identification as members of groups without regard to their individual qualities.

What is the federal 8a program? ›

The 8(a) Business Development Program is a business assistance program for small disadvantaged businesses. The 8(a) Program offers a broad scope of assistance to firms that are owned and controlled at least 51% by socially and economically disadvantaged individuals.

How long does 8a certification last? ›

8a certification Program is a nine years program designated for small and disadvantaged business firms who are well experienced with the racial, ethnic and cultural bias. This program has been targeted to award 5 per cent of the federal contracts each year to the small and disadvantaged businesses.

What are 8a contracts? ›

The SBA 8(a) Business Development program helps socially and economically disadvantaged small-business owners secure coveted government contracts. Through the nine-year program, members can also access training and technical, financial and management assistance to help their business grow and compete for contracts.

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