As you may be aware, there are certain ownership restrictions on an 8(a) firm. One of the restrictions currently provides that a non-participant concern in the same or similar line of business (which is determined by looking at the first four digits of a company’s NAICS code) may not own more than a 10% interest of a participant in the developmental stage (years 1 – 4 of the program) or a 20% interest if the participant is in the transitional stage (years 5 – 9 of the program). These figures are increased to 20% and 30%, respectively, if the non-participant concern or principal of such was a former participant in the 8(a) Program.
Under SBA’s Mentor-Protégé program, a mentor is permitted to acquire up to a 40% equity interest in the protégé in order for the protégé to raise capital. As currently written, the 8(a) ownership regulation, 13 C.F.R. § 124.105, does not recognize the exception that a mentor may own up to 40%. As protégés and mentors are typically in the same or similar line of business, the exception for a mentor to own up to 40% will likely be a welcome change for both 8(a) protégés and their mentors…
In addition to the proposed changes to the ownership and control regulations, the rule proposes several changes and/or clarifications relating to 8(a) contracts. Notable proposed changes include:
- Making it clear for 8(a) sole source contracts, including orders issued under an 8(a) multiple award contract (MAC), that the contract holder must be both small as of the date of the offer for the contract/order and a current 8(a) participant as of the contract/order award date to be eligible for the sole source award. Thus, for sole source orders under an 8(a) MAC, size does not relate back to the date of the offer for the MAC.
- Clarifying that for any 8(a) sole source award, including an order under an MAC, the 8(a) participant must not be on a sole source restriction (i.e., restricted for failing to meet the non-8(a) business activity target). This also applies to the 8(a) partner where the award is to an 8(a) joint venture… Read the full article here.
