No doubt, the Federal Small Business Development Programs have been challenged by litigation, policy changes, and regulatory reform for the last two years. The fallout from the Ultima case, which ordered the U.S. Small Business Administration (SBA) to not use a presumption of social disadvantage status based on races as a qualifying factor, disrupted an almost 50-year beneficial SBA program for socially and economically disadvantaged small businesses.
Sweeping regulatory changes to the Federal Procurement Program and new policies have changed doing business with the federal government. But the government is still doing business with government contractors, and the SBA still has Small Business Development Programs helping small businesses owned by veterans, socially disadvantage people, Tribes, Native Hawaiian Organizations, Alaska Native corporations, and businesses located in Historically Under unitized Business Zones (HUBZone).
But challenges and hurdles remain.
SBA Inspector General Report on the SBA Mentor Protégé Program
The SBA Inspector General released a report on the SBA Mentor Protégé Program comparing four major recommendations previously made. The IG found that SBA Program did not maintain protégé business plans during the initial evaluation process. Albeit it did maintain and tracked annual evaluation. It did not conduct the analysis to ensure the mentor-protégé agreement aligns with the Mentor Protégé Program and goals outline in the protégé’s business plan.
The SBA will issue a Policy Notice to revise the Program’s standard operating procedures, SOP 80 05, version 8, consistent with statute. Additionally, the SBA will update Program work instructions to clarify the required file documents and issue an internal Program memorandum to further communicate the effective date of implementation. This will be implemented by December 31, 2026.
SBA Inspector General Release a Report on Subcontracting Limitation
The SBA IG issued a Report entitled “Consolidated OIG Findings on Subcontract Limitation Concerns for Set-Aside Awards.” The report found serious problems that have been high on the target list of the SBA and Congress. The SBA IG found that across the government there were recurring decencies in the Federal procurement agencies and the contracting community interpretation of the rules, and monitoring and enforcing compliance. The IG recommended that there must be stronger monitoring controls to ensure compliance. The IG also found that the contract that contracting officials were not evaluating past performance and the ability for contractors to perform the required work while complying with the subcontracting requirements.
Anticipated regulation updates are anticipated in early 2027. A related concern is the SBA regulatory Reform of Entity Owned participation in the SBA 8(a) Program is still on the shelf at the Office of Management and Budget.
SBA Agreement with Dept. of War to “Supercharge” Investment in the Defense Industrial Base
Perhaps on the good news front, the SBA and the Department of War (DOW) this in October entered into an agreement to create the Smaller War Plants Commission and expand access to private sector capital and government support the expansion of small business capacity to support the DOW needs with a variety of activities. The agreement provides underlying authority under which the SBA and the DOW to access capital that is intended for small business in the defense industrial base using the SBA Economic Defense Unit (EDU) to partner with defense critical manufacturers and suppliers to grow domestic capacity. The agreements created the Smaller War Plants Commission to implement the objectives of the agreement.
The reality is that the federal government is still the largest consumer of goods and services. The federal government still has a stated goal of at least 5% of federal discretionary spending should be made with small business. But regulations and policies have made doing business with the government challenging. Compliance remains a priority.
Giving additional attention to the program, contract requirements and agreement details is essential. Finding or developing the right people and professional assistance can make being successful in the future Federal Procurement System safer, more manageable, and hopefully profitable for small businesses.