SBA Increases Scrutiny of the 8a Business Development Program

The current administration is intensifying oversight of participants in the Small Business Administration’s (SBA) 8(a) Business Development Program, with particular implications for government contractors. Agencies are seeing a stronger emphasis on detecting fraud, validating 8(a) eligibility, and confirming a firm’s continued status as an economically disadvantaged individual-owned business. This increased scrutiny now extends beyond the initial 8(a) application to include annual recertifications and SBA data calls and is more frequently influencing responsibility determinations and ongoing contract compliance for 8(a) awardees.

Key regulatory thresholds that are receiving increased attention include:

Adjusted Gross Income (AGI): Pursuant to 13 C.F.R. § 124.104(c)(3), the SBA will presume that an individual is not economically disadvantaged if their average AGI over the prior three years exceeds $400,000.This presumption may be rebutted if the income was unusual and unlikely to recur, if losses directly related to the earnings were incurred, or if the income level is otherwise not indicative of a lack of economic disadvantage.
Net Worth Limitation: Under 13 C.F.R. § 124.104(c)(2), for continued 8(a) eligibility, the disadvantaged individual’s net worth must be less than $850,000. Importantly, the SBA excludes:
- Ownership interest in the 8(a) participant firm, and
- Equity in the primary personal residence (except for equity attributable to excessive withdrawals from the participant).

These exclusions apply only for net worth purposes and do not apply to assessments of access to capital or credit.

Total Asset Threshold: Pursuant to 13 C.F.R. § 124.104(c)(4), an individual will generally not be considered economically disadvantaged if the fair market value of all assets exceeds $6.5 million, including the primary residence and the value of the applicant or participant firm. The primary exception is funds invested in a qualified IRA account, as specified in the regulations.

Recent SBA Enforcement Trends

Recent SBA actions strongly suggest that the agency is utilizing automated and AI-driven tools to review annual recertifications and data call submissions. In practice, this appears to have replaced much of the prior, more interactive, human review process.

As a result, there are cases where SBA determinations move directly to a letter of intent to terminate, rather than beginning with questions or requests for clarification. In one recent matter, a company received a notice asserting that the disadvantaged owner exceeded the net worth threshold, along with a form to voluntarily withdraw from the program or be terminated. Upon review, the SBA’s conclusion was clearly incorrect; the assets cited were joint marital assets, which under SBA rules must be allocated appropriately (generally split equally) when evaluating an individual’s economic position. The company has a strong basis for appeal.

Historically, issues of this nature would often be resolved through discussion and explanation with an SBA representative. With the transition to automated review, that intermediate step is frequently absent, increasing the likelihood of premature or inaccurate adverse determinations.

How Citrin Cooperman Can Help

It is anticipated that similar situations may continue to arise. Our team is prepared to assist with:

Proactive eligibility and recertification reviews
Net worth, asset, and AGI analyses aligned with SBA methodology
Responses to SBA data calls and eligibility inquiries
Appeals and formal responses to Notices of Intent to Terminate

If you receive any communication from the SBA regarding your 8(a) eligibility, pause before responding. These matters are often technical and fact specific, and an initial notice does not mean the issue cannot be corrected or successfully challenged. It is recommended to discuss this matter with your accountants and legal counsel before acting.

For more information on how Citrin Cooperman's Government Contracting Industry Practice can help review your current eligibility position or discuss recent SBA correspondence, please reach out to Sirena Johnson or Andrew Duston.