Recent developments in government contracting include the Small Business Administration’s new framework for establishing social disadvantage under the Section 8(a) Business Development Program, a Government Accountability Office decision requiring the US Army to permit small business teaming under its Marketplace for the Acquisition of Professional Services procurement, Department of War efforts to simplify contractor accounting requirements, and the Financial Crimes Enforcement Network’s final rollback of Corporate Transparency Act reporting requirements.
These significant changes will affect small business participation and reinforce efforts to streamline contractor compliance obligations.
SBA Replaces Section 8(a)’s Social Disadvantage Test
On August 11, the Small Business Administration (SBA) finalized an overhaul of how individually owned firms establish social disadvantage for admission to the 8(a) Business Development Program (8(a) Program). Historically, the program provided evaluation preferences in government contracting to small businesses that demonstrated social disadvantage, typically through a rebuttable presumption based on membership in certain racial or ethnic groups.
Effective September 10, the rule eliminates that presumption and establishes a new individualized framework under which a business may qualify by demonstrating that its owner or owners were materially harmed by discrimination or bias against a racial, ethnic, or cultural group of which they are members.
SBA specifically identifies unlawful diversity, equity, and inclusion programs, unlawful affirmative action programs, race-based quotas or hiring targets, and other government, corporate, or university programs or policies favoring one group over another as examples of evidence that may support eligibility. Current 8(a) Program participants and entity-owned firms are not affected by the definitional change.
The new framework may open the 8(a) Program to applicants who were not previously presumed socially disadvantaged. In particular, the rule identifies exclusion from groups previously entitled to the rebuttable presumption as potential evidence of group-based discrimination.
The change raises questions about which businesses may qualify for procurements that are reserved for or provide preferences to 8(a) Program participants. As the pool of potentially eligible businesses changes, other contractors may also seek to challenge 8(a) Program status determinations or the new eligibility framework.
GAO Requires Army to Permit Small Business Teams Under MAPS
Also on August 11, the Government Accountability Office (GAO) partially sustained a protest challenging the Army’s prohibition on small businesses’ ability to form teams to compete under the $50 billion Marketplace for the Acquisition of Professional Services (MAPS) procurement.
The solicitation, which contemplates multiple indefinite delivery/indefinite quantity contract awards, prohibited offerors from proposing subcontractors or forming teaming arrangements. GAO concluded that the Small Business Act did not give the Army discretion to prohibit such arrangements and recognized that the ability to form teams can allow small businesses to better meet the requirements of a procurement of this scale.
GAO recommended that the Army amend the solicitation to permit small business teams and reopen the procurement for new or revised proposals.
Small businesses that may have declined to participate because of the teaming prohibition should consider whether the amended procurement presents a new opportunity to compete with potential partners. Businesses that have already submitted proposals should likewise assess whether revisions could strengthen their competitive position, including in light of potential competition from newly formed small business teams or joint ventures.
DoW Seeks Input on Streamlining Contractor Accounting Requirements
The Department of War (DoW) recently requested contractor input on potential “common sense contract accounting changes” intended to reduce compliance costs and attract more commercial companies to the defense industrial base.
The department is considering ways to align government data, audit, and business-system requirements more closely with Generally Accepted Accounting Principles (GAAP) and the Sarbanes-Oxley Act Section 404(b) framework. The effort is consistent with broader procurement reforms intended to encourage commercial company participation by implementing government requirements that correlate with existing accounting and compliance practices in the commercial marketplace.
The initiative also follows recent increases to the thresholds for application of the Cost Accounting Standards (CAS) and efforts to conform several CAS requirements to GAAP.
If broadly implemented, these reforms could lower barriers to entering the defense market and reduce compliance burdens for existing contractors. Changes could also have significant implications for contractor business system reviews, CAS compliance, audit requirements, and the compliance infrastructure that companies maintain for federal work.
FinCEN Finalizes Corporate Transparency Act Reporting Rollback
The Financial Crimes Enforcement Network (FinCEN) has finalized its rollback of corporate transparency act (CTA) reporting requirements for US companies and US persons. US entities will no longer be required to submit beneficial ownership information under the CTA, and FinCEN has indicated that it will delete previously submitted information that it reasonably believes relates to US persons, including information concerning beneficial owners, company applicants, and FinCEN identifiers.
Certain foreign entities that continue to qualify as reporting companies may remain subject to reporting requirements concerning foreign beneficial owners.
While the final rule removes a compliance obligation for many US businesses, the change does not eliminate separate ownership disclosure requirements that are applicable to government contractors. Contractors should therefore continue assessing federal procurement and program-specific requirements concerning ownership, control, and related disclosures independently of the CTA framework.
Looking Ahead
These latest developments reflect parallel efforts to reshape access to federal contracting opportunities and reduce compliance requirements that may discourage participation in the government marketplace. Small businesses should closely assess changes to 8(a) Program eligibility and teaming opportunities, while defense contractors and commercial companies considering federal work should monitor potential accounting reforms.
Contractors should also distinguish broader regulatory relief, such as the CTA rollback, from procurement-specific disclosure obligations that remain in effect.