Summary of Proposed 8(a) Rules This summary of proposed changes in 8(a) rules was prepared by Richard J. Hernandez, CPCM, and Henry W. Washington of e-mbe.net and is used with their permission. To comment on the proposed rule, go to www.regulations.gov and use the identifier RIN: 3245-AF53. Comments are due Jan. 28. Current rule: JOINT VENTURES: Limit a specific joint venture to submitting no more than three offers over a two-year period. Proposed rule: •A specific joint venture entity generally may not be awarded more than three contracts over a two-year period, starting from the date of the award of the first contract, without the partners to the joint venture being deemed affiliated for all purposes. •The same joint venturers could form additional joint ventures and be awarded three additional contracts for each. •While a joint venture may or may not be a separate legal entity (e.g., an LLC), it must exist through a written document. Even an “informal” joint venture must have a written agreement between the partners. Likely impact: •Provides 8(a) firms more opportunity to grow their business by gaining additional capacity. •Too many joint ventures between the same parties could lead to a finding of general affiliation. •8(a) firms may over-commit to projects and lose focus. •May need to update SBA Form Current rule: SBA language on definition of populated vs. unpopulated joint ventures is not specified. Proposed rule: •If a joint venture is a separate legal entity, then it must have its own employees. •If a joint venture merely exists through a written agreement between two or more individual business entities, then it need not have its own separate employees and employees of each of the individual business entities may perform work for the joint venture. Likely impact: •Depends on the specific of each joint venture agreement. •May need to update SBA Form 1010C, the 8(a) Business Plan Current rule: Must obtain SBA approval of joint venture agreements for 8(a) contracts prior to contract award NOTE: SBA approval is not required for joint venture agreements for non-8(a) contracts. Proposed rule: Parties to a previously-approved joint venture to obtain SBA approval for a second and third 8(a) contact by merely providing SBA an addendum to the original agreement NOTE: SBA approval is not required for joint venture agreements for non-8(a) contracts. Likely impact: •Provides the 8(a) additional flexibility to quickly respond to contract opportunities by creating a new joint venture •May need to update SBA Form 1010C, the 8(a) Business Plan Current rule: 8(a) firm to receive at least 51% of the net profits of an 8(a) joint venture. Proposed rule: 8(a) firm receive “profits from the joint venture commensurate with the work performed by the 8(a) Participant(s).” Likely impact: •Reduced profits for 8(a) firm. •Provides more incentives for mentor to work with 8(a) firms. •May need to update SBA Form 1010C, the 8(a) Business Plan Current rule: The protégé in a mentor-protégé joint venture must perform a “significant portion” of the work done by the joint venture. Proposed rule: The 8(a) member of a joint venture for an 8(a) contract must perform at least 40% of the work done by the joint venture. Likely impact: 8(a) firms can pursue larger contracts and leverage the capacity of joint venture partners. Current rule: MENTOR-PROTEGE: An 8(a) protégé may have only one mentor. In limited circumstances, a mentor may have multiple protégés, subject to SBA approval. Proposed rule: An 8(a) protégé may have a second mentor, subject to SBA approval. A mentor has an absolute limit of three protégés. Likely impact: •Provides the 8(a) with additional growth opportunities. •Reduces the pool of potential mentors. •May need to update SBA Form 1010C, the 8(a) Business Plan Current rule: Mentor-protégé joint venture can qualify as a small business only for federal prime contracts. Proposed rule: Mentor-protégé joint ventures could qualify as small business for federal subcontracts as well as prime contracts. Likely impact: •More opportunities to get federal contracts at a Tier 2 level •May need to update SBA Form 1010C, the 8(a) Business Plan Current rule: ECONOMIC DISADVANTAGE CFR § 124.104 Considers community property when determining an applicant’s net worth Proposed rule: SBA would not take community property laws into account when determining economic disadvantage. (i.e., property that is legally in the name of one spouse would be considered wholly that spouse’s property, whether or not the couple lived in a community property state) Likely impact: Allows more potential 8(a) applicants to qualify for program entry. Current rule: IRA and other retirement accounts are considered part of personal net worth when making 8(a) program eligibility decisions Proposed rule: Exempts funds in Individual Retirement Accounts (IRAs) and other official retirement accounts from the calculation of net worth provided that the funds cannot currently be withdrawn from the account prior to retirement age without a significant penalty. Likely impact: Allows more potential 8(a) applicants to qualify for program entry. Current rule: SET-ASIDE CONTRACT REPORTING: Agencies may count an order towards their 8(a) prime contracting goals only if the contract under which the order was placed was awarded either sole source or based on competition limited exclusively to 8(a) concerns. Proposed rule: Procuring agencies could receive 8(a) credit for orders placed with 8(a) concerns under multiple award IDIQ contracts even if the underlying contracts were not set-aside exclusively for 8(a) contractors, as long as the competition for the order is restricted to 8(a) concerns and the selected contractor is an 8(a) participant as of the date specified for receipt of task or delivery order proposals. Likely impact: •Provides large businesses with increased incentives to use 8(a) subcontractors on IDIQ contracts. •Provides 8(a) firms with the ability to work with large business mentor in (usually) long-term IDIQ contract arrangements. •Helps provide for a long-term income stream for the 8(a) firm. •May need to update SBA Form 1010C, the 8(a) Business Plan