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[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR124]

[Page 361-422]
=20
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
=20
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
=20
PART 124_8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED =
BUSINESS STATUS=20
DETERMINATIONS

                   Subpart A_8(a) Business Development

                   Provisions of General Applicability

Sec.
124.1 What is the purpose of the 8(a) Business =
Development program?
124.2 What length of time may a business participate in =
the 8(a) BD=20
          program?
124.3 What definitions are important in the 8(a) BD =
program?

    Eligibility Requirements for Participation in the 8(a) Business=20
                           Development Program

124.101 What are the basic requirements a concern must =
meet for the 8(a)=20
          BD program?
124.102 What size business is eligible to participate =
in the 8(a) BD=20
          program?
124.103 Who is socially disadvantaged?
124.104 Who is economically disadvantaged?
124.105 What does it mean to be unconditionally owned =
by one or more=20
          disadvantaged individuals?
124.106 When do disadvantaged individuals control an =
applicant or=20
          Participant?
124.107 What is potential for success?
124.108 What other eligibility requirements apply for =
individuals or=20
          businesses?
124.109 Do Indian tribes and Alaska Native Corporations =
have any special=20
          rules for applying to the 8(a) BD program?
124.110 Do Native Hawaiian Organizations have any =
special rules for=20
          applying to the 8(a) BD program?
124.111 Do Community Development Corporations (CDCs) =
have any special=20
          rules for applying to the 8(a) BD program?
124.112 What criteria must a business meet to remain =
eligible to=20
          participate in the 8(a) BD program?

                     Applying to the 8(a) BD Program

124.201 May any business submit an application?
124.202 Where must an application be filed?
124.203 What must a concern submit to apply to the 8(a) =
BD program?
124.204 How does SBA process applications for 8(a) BD =
program admission?
124.205 Can an applicant ask SBA to reconsider SBA's =
initial decision to=20
          decline its application?
124.206 What appeal rights are available to an =
applicant that has been=20
          denied admission?
124.207 Can an applicant reapply for admission to the =
8(a) BD program?

                       Exiting the 8(a) BD Program

124.301 What are the ways a business may leave the 8(a) =
BD program?
124.302 What is early graduation?
124.303 What is termination?
124.304 What are the procedures for early graduation =
and termination?
124.305 What is suspension and how is a Participant =
suspended from the=20
          8(a) BD program?

                          Business Development

124.401 Which SBA field office services a Participant?

[[Page 362]]

124.402 How does a Participant develop a business plan?
124.403 How is a business plan updated and modified?
124.404 What business development assistance is =
available to=20
          Participants during the two stages of participation in the=20
          8(a) BD program?
124.405 How does a Participant obtain Federal =
Government surplus=20
          property?

                         Contractual Assistance

124.501 What general provisions apply to the award of =
8(a) contracts?
124.502 How does an agency offer a procurement to SBA =
for award through=20
          the 8(a) BD program?
124.503 How does SBA accept a procurement for award =
through the 8(a) BD=20
          program?
124.504 What circumstances limit SBA's ability to =
accept a procurement=20
          for award as an 8(a) contract?
124.505 When will SBA appeal the terms or conditions of =
a particular=20
          8(a) contract or a procuring activity decision not to reserve=20
          a requirement for the 8(a) BD program?
124.506 At what dollar threshold must an 8(a) =
procurement be competed=20
          among eligible Participants?
124.507 What procedures apply to competitive 8(a) =
procurements?
124.508 How is an 8(a) contract executed?
124.509 What are non-8(a) business activity targets?
124.510 What percentage of work must a Participant =
perform on an 8(a)=20
          contract?
124.511 How is fair market price determined for an 8(a) =
contract?
124.512 Delegation of contract administration to =
procuring agencies.
124.513 Under what circumstances can a joint venture be =
awarded an 8(a)=20
          contract?
124.514 Exercise of 8(a) options and modifications.
124.515 Can a Participant change its ownership or =
control and continue=20
          to perform an 8(a) contract, and can it transfer performance=20
          to another firm?
124.516 Who decides contract disputes arising between a =
Participant and=20
          a procuring activity after the award of an 8(a) contract?
124.517 Can the eligibility or size of a Participant =
for award of an=20
          8(a) contract be questioned?
124.518 How can an 8(a) contract be terminated before =
performance is=20
          completed?
124.519 Are there any dollar limits on the amount of =
8(a) contracts that=20
          a Participant may receive?
124.520 Mentor/Protege program.

                  Miscellaneous Reporting Requirements

124.601 What reports does SBA require concerning =
parties who assist=20
          Participants in obtaining federal contracts?
124.602 What kind of annual financial statement must a =
Participant=20
          submit to SBA?
124.603 What reports regarding the continued business =
operations of=20
          former Participants does SBA require?

               Management and Technical Assistance Program

124.701 What is the purpose of the 7(j) management and =
technical=20
          assistance program?
124.702 What types of assistance are available through =
the 7(j) program?
124.703 Who is eligible to receive 7(j) assistance?
124.704 What additional management and technical =
assistance is reserved=20
          exclusively for concerns eligible to receive 8(a) contracts?

 Subpart B_Eligibility, Certification, and Protests Relating to Federal=20
                  Small Disadvantaged Business Programs

124.1001 General applicability.
124.1002 What is a Small Disadvantaged Business (SDB)?
124.1003 What is a Private Certifier?
124.1004 How does an organization or business concern =
become a Private=20
          Certifier?
124.1005 Can a fee be charged to a firm to process the =
firm's=20
          application for SDB certification?
124.1006 Is there a list of Private Certifiers?
124.1007 How long may an organization or business =
concern be a Private=20
          Certifier?
124.1008 How does a firm become certified as an SDB?
124.1009 How does a firm appeal a decision of a Private =
Certifier?
124.1010 Can a firm represent itself to be an SDB if it =
has not yet been=20
          certified as an SDB?
124.1011 What is a misrepresentation of SDB status?
124.1012 Can a firm reapply for SDB certification?
124.1013 Is there a list of certified SDBs?
124.1014 How long does an SDB certification last?
124.1015 What is the effect of receiving an SDB =
certification?
124.1016 Can SBA re-evaluate the SDB status of a firm =
after SBA=20
          certifies it to be SDB?
124.1017 Who may protest the disadvantaged status of a =
concern?
124.1018 When will SBA not decide an SDB protest?
124.1019 Who decides disadvantaged status protests?

[[Page 363]]

124.1020 What procedures apply to disadvantaged status =
protests?
124.1021 What format, degree of specificity, and basis =
does SBA require=20
          to consider an SDB protest?
124.1022 What will SBA do when it receives an SDB =
protest?
124.1023 How does SBA make disadvantaged status =
determinations in=20
          considering an SDB protest?
124.1024 Appeals of disadvantaged status =
determinations.

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and Pub. L.=20
99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 101-574, and =

42 U.S.C. 9815.

                   Subpart A_8(a) Business Development

    Source: 63 FR 35739, June 30, 1998, unless otherwise noted.

                   Provisions of General Applicability

Sec. 124.1  What is the purpose of the 8(a) Business =
Development=20
          program?

    Sections 8(a) and 7(j) of the Small Business Act authorize a=20
Minority Small Business and Capital Ownership Development program=20
(designated the 8(a) Business Development or ``8(a) BD'' program for=20
purposes of the regulations in this part). The purpose of the 8(a) BD=20
program is to assist eligible small disadvantaged business concerns=20
compete in the American economy through business development.

Sec. 124.2  What length of time may a business =
participate in the 8(a)=20
          BD program?

    A Participant receives a program term of nine years from the date of =

SBA's approval letter certifying the concern's admission to the program. =

The Participant must maintain its program eligibility during its tenure=20
in the program and must inform SBA of any changes that would adversely=20
affect its program eligibility. A firm that completes its nine year term =

of participation in the 8(a) BD program is deemed to graduate from the=20
program. The nine year program term may be shortened only by=20
termination, early graduation or voluntary graduation as provided for in =

this subpart.

Sec. 124.3  What definitions are important in the 8(a) =
BD program?

    Alaska Native means a citizen of the United States who is a person=20
of one-fourth degree or more Alaskan Indian (including Tsimshian Indians =

not enrolled in the Metlaktla Indian Community), Eskimo, or Aleut blood, =

or a combination of those bloodlines. The term includes, in the absence=20
of proof of a minimum blood quantum, any citizen whom a Native village=20
or Native group regards as an Alaska Native if their father or mother is =

regarded as an Alaska Native.
    Alaska Native Corporation or ANC means any Regional Corporation,=20
Village Corporation, Urban Corporation, or Group Corporation organized=20
under the laws of the State of Alaska in accordance with the Alaska=20
Native Claims Settlement Act, as amended (43 U.S.C. 1601, et seq.)
    Bona fide place of business, for purposes of 8(a) construction=20
procurements, means a location where a Participant regularly maintains=20
an office which employs at least one full-time individual within the=20
appropriate geographical boundary. The term does not include=20
construction trailers or other temporary construction sites.
    Community Development Corporation or CDC means a nonprofit=20
organization responsible to residents of the area it serves which has=20
received financial assistance under 42 U.S.C. 9805, et seq.
    Concern is defined in part 121 of this title.
    Days means calendar days unless otherwise specified.
    Day-to-day operations of a firm means the marketing, production,=20
sales, and administrative functions of the firm.
    Immediate family member means father, mother, husband, wife, son,=20
daughter, brother, sister, grandfather, grandmother, grandson,=20
granddaughter, father-in-law, and mother-in-law.
    Indian tribe means any Indian tribe, band, nation, or other=20
organized group or community of Indians, including any ANC, which is=20
recognized as eligible for the special programs and services provided by =

the United States to Indians because of their status as Indians, or is=20
recognized as such by the State in which the tribe, band, nation,

[[Page 364]]

group, or community resides. See definition of ``tribally-owned=20
concern.''
    Native Hawaiian means any individual whose ancestors were natives,=20
prior to 1778, of the area which now comprises the State of Hawaii.
    Native Hawaiian Organization means any community service=20
organization serving Native Hawaiians in the State of Hawaii which is a=20
not-for-profit organization chartered by the State of Hawaii, is=20
controlled by Native Hawaiians, and whose business activities will=20
principally benefit such Native Hawaiians.
    Negative control is defined in part 121 of this title.
    Non-disadvantaged individual means any individual who does not claim =

disadvantaged status, does not qualify as disadvantaged, or upon whose=20
disadvantaged status an applicant or Participant does not rely in=20
qualifying for 8(a) BD program participation.
    Participant means a small business concern admitted to participate=20
in the 8(a) BD program.
    Primary industry classification means the four digit Standard=20
Industrial Classification (SIC) code designation which best describes=20
the primary business activity of the 8(a) BD applicant or Participant.=20
The SIC code designations are described in the Standard Industrial=20
Classification Manual published by the U.S. Office of Management and=20
Budget.
    Principal place of business means the business location where the=20
individuals who manage the concern's day-to-day operations spend most=20
working hours and where top management's business records are kept. If=20
the offices from which management is directed and where the business=20
records are kept are in different locations, SBA will determine the=20
principal place of business for program purposes.
    Program year means a 12-month period of an 8(a) BD Participant's=20
program participation. The first program year begins on the date that=20
the concern is certified to participate in the 8(a) BD program and ends=20
one year later. Each subsequent program year begins on the Participant's =

anniversary of program certification and runs for one 12-month period.
    Same or similar line of business means business activities within=20
the same two-digit ``Major Group'' of the SIC Manual as the primary=20
industry classification of the applicant or Participant. The phrase=20
``same business area'' is synonymous with this definition.
    Self-marketing of a requirement occurs when a Participant identifies =

a requirement that has not been committed to the 8(a) BD program and,=20
through its marketing efforts, causes the procuring activity to offer=20
that specific requirement to the 8(a) BD program on the Participant's=20
behalf. A firm which identifies and markets a requirement which is=20
subsequently offered to the 8(a) BD program as an open requirement or on =

behalf of another Participant has not ``self-marketed'' the requirement=20
within the meaning of this part.
    Tribally-owned concern means any concern at least 51 percent owned=20
by an Indian tribe as defined in this section.
    Unconditional ownership means ownership that is not subject to=20
conditions precedent, conditions subsequent, executory agreements,=20
voting trusts, restrictions on or assignments of voting rights, or other =

arrangements causing or potentially causing ownership benefits to go to=20
another (other than after death or incapacity). The pledge or=20
encumbrance of stock or other ownership interest as collateral,=20
including seller-financed transactions, does not affect the=20
unconditional nature of ownership if the terms follow normal commercial=20
practices and the owner retains control absent violations of the terms.

    Eligibility Requirements for Participation in the 8(a) Business=20
                           Development Program

Sec. 124.101  What are the basic requirements a concern =
must meet for=20
          the 8(a) BD program?

    Generally, a concern meets the basic requirements for admission to=20
the 8(a) BD program if it is a small business which is unconditionally=20
owned and controlled by one or more socially and economically=20
disadvantaged individuals who are of good character and citizens of the=20
United States, and which demonstrates potential for success.

[[Page 365]]

Sec. 124.102  What size business is eligible to =
participate in the 8(a)=20
          BD program?

    (a) An applicant concern must qualify as a small business concern as =

defined in part 121 of this title. The applicable size standard is the=20
one for its primary industry classification. The rules for calculating=20
the size of a tribally-owned concern, a concern owned by an Alaska=20
Native Corporation, a concern owned by a Native Hawaiian Organization,=20
or a concern owned by a Community Development Corporation are=20
additionally affected by Sec. Sec. 124.109, =
124.110, and 124.111,=20
respectively.
    (b) If 8(a) BD program officials determine that a concern may not=20
qualify as small, they may deny an application for 8(a) BD program=20
admission or may request a formal size determination under part 121 of=20
this title.
    (c) A concern whose application is denied due to size by 8(a) BD=20
program officials may request a formal size determination under part 121 =

of this title. A favorable determination will enable the firm to=20
immediately submit a new 8(a) BD application without waiting one year.

Sec. 124.103  Who is socially disadvantaged?

    (a) General. Socially disadvantaged individuals are those who have=20
been subjected to racial or ethnic prejudice or cultural bias within=20
American society because of their identities as members of groups and=20
without regard to their individual qualities. The social disadvantage=20
must stem from circumstances beyond their control.
    (b) Members of designated groups. (1) There is a rebuttable=20
presumption that the following individuals are socially disadvantaged:=20
Black Americans; Hispanic Americans; Native Americans (American Indians, =

Eskimos, Aleuts, or Native Hawaiians); Asian Pacific Americans (persons=20
with origins from Burma, Thailand, Malaysia, Indonesia, Singapore,=20
Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia=20
(Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of=20
the Pacific Islands (Republic of Palau), Republic of the Marshall=20
Islands, Federated States of Micronesia, the Commonwealth of the=20
Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati,=20
Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins=20
from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives=20
Islands or Nepal); and members of other groups designated from time to=20
time by SBA according to procedures set forth at paragraph (d) of this=20
section. Being born in a country does not, by itself, suffice to make=20
the birth country an individual's country of origin for purposes of=20
being included within a designated group.
    (2) An individual must demonstrate that he or she has held himself=20
or herself out, and is currently identified by others, as a member of a=20
designated group if SBA requires it.
    (3) The presumption of social disadvantage may be overcome with=20
credible evidence to the contrary. Individuals possessing or knowing of=20
such evidence should submit the information in writing to the Associate=20
Administrator for 8(a) BD (AA/8(a)BD) for consideration.
    (c) Individuals not members of designated groups. (1) An individual=20
who is not a member of one of the groups presumed to be socially=20
disadvantaged in paragraph (b)(1) of this section must establish=20
individual social disadvantage by a preponderance of the evidence.
    (2) Evidence of individual social disadvantage must include the=20
following elements:
    (i) At least one objective distinguishing feature that has=20
contributed to social disadvantage, such as race, ethnic origin, gender, =

physical handicap, long-term residence in an environment isolated from=20
the mainstream of American society, or other similar causes not common=20
to individuals who are not socially disadvantaged;
    (ii) Personal experiences of substantial and chronic social=20
disadvantage in American society, not in other countries; and
    (iii) Negative impact on entry into or advancement in the business=20
world because of the disadvantage. SBA will consider any relevant=20
evidence in assessing this element. In every case, however, SBA will=20
consider education, employment and business history, where applicable,=20
to see if the totality

[[Page 366]]

of circumstances shows disadvantage in entering into or advancing in the =

business world.
    (A) Education. SBA considers such factors as denial of equal access=20
to institutions of higher education, exclusion from social and=20
professional association with students or teachers, denial of=20
educational honors rightfully earned, and social patterns or pressures=20
which discouraged the individual from pursuing a professional or=20
business education.
    (B) Employment. SBA considers such factors as unequal treatment in=20
hiring, promotions and other aspects of professional advancement, pay=20
and fringe benefits, and other terms and conditions of employment;=20
retaliatory or discriminatory behavior by an employer; and social=20
patterns or pressures which have channelled the individual into=20
nonprofessional or non-business fields.
    (C) Business history. SBA considers such factors as unequal access=20
to credit or capital, acquisition of credit or capital under=20
commercially unfavorable circumstances, unequal treatment in=20
opportunities for government contracts or other work, unequal treatment=20
by potential customers and business associates, and exclusion from=20
business or professional organizations.
    (d) Socially disadvantaged group inclusion--(1) General.=20
Representatives of an identifiable group whose members believe that the=20
group has suffered chronic racial or ethnic prejudice or cultural bias=20
may petition SBA to be included as a presumptively socially=20
disadvantaged group under paragraph (b)(1) of this section. Upon=20
presentation of substantial evidence that members of the group have been =

subjected to racial or ethnic prejudice or cultural bias because of=20
their identity as group members and without regard to their individual=20
qualities, SBA will publish a notice in the Federal Register that it has =

received and is considering such a request, and that it will consider=20
public comments.
    (2) Standards to be applied. In determining whether a group has made =

an adequate showing that it has suffered chronic racial or ethnic=20
prejudice or cultural bias for the purposes of this section, SBA must=20
determine that:
    (i) The group has suffered prejudice, bias, or discriminatory=20
practices;
    (ii) Those conditions have resulted in economic deprivation for the=20
group of the type which Congress has found exists for the groups named=20
in the Small Business Act; and
    (iii) Those conditions have produced impediments in the business=20
world for members of the group over which they have no control and which =

are not common to small business owners generally.
    (3) Procedure. The notice published under paragraph (d)(1) of this=20
section will authorize a specified period for the receipt of public=20
comments supporting or opposing the petition for socially disadvantaged=20
group status. If appropriate, SBA may hold hearings. SBA may also=20
conduct its own research relative to the group's petition.
    (4) Decision. In making a final decision that a group should be=20
considered presumptively disadvantaged, SBA must find that a=20
preponderance of the evidence demonstrates that the group has met the=20
standards set forth in paragraph (d)(2) of this section based on SBA's=20
consideration of the group petition, the comments from the public, and=20
any independent research it performs. SBA will advise the petitioners of =

its final decision in writing, and publish its conclusion as a notice in =

the Federal Register. If appropriate, SBA will amend paragraph (b)(1) of =

this section to include a new group.

Sec. 124.104  Who is economically disadvantaged?

    (a) General. Economically disadvantaged individuals are socially=20
disadvantaged individuals whose ability to compete in the free=20
enterprise system has been impaired due to diminished capital and credit =

opportunities as compared to others in the same or similar line of=20
business who are not socially disadvantaged.
    (b) Submission of narrative and financial information. (1) Each=20
individual claiming economic disadvantage must describe it in a=20
narrative statement, and must submit personal financial information.
    (2) When married, an individual claiming economic disadvantage also

[[Page 367]]

must submit separate financial information for his or her spouse, unless =

the individual and the spouse are legally separated.
    (c) Factors to be considered. In considering diminished capital and=20
credit opportunities, SBA will examine factors relating to the personal=20
financial condition of any individual claiming disadvantaged status,=20
including personal income for the past two years (including bonuses and=20
the value of company stock given in lieu of cash), personal net worth,=20
and the fair market value of all assets, whether encumbered or not. SBA=20
will also consider the financial condition of the applicant compared to=20
the financial profiles of small businesses in the same primary industry=20
classification, or, if not available, in similar lines of business,=20
which are not owned and controlled by socially and economically=20
disadvantaged individuals in evaluating the individual's access to=20
credit and capital. The financial profiles that SBA compares include=20
total assets, net sales, pre tax profit, sales/working capital ratio,=20
and net worth.
    (1) Transfers within two years. (i) Except as set forth in paragraph =

(c)(1)(ii) of this section, SBA will attribute to an individual claiming =

disadvantaged status any assets which that individual has transferred to =

an immediate family member, or to a trust a beneficiary of which is an=20
immediate family member, for less than fair market value, within two=20
years prior to a concern's application for participation in the 8(a) BD=20
program or within two years of a Participant's annual program review,=20
unless the individual claiming disadvantaged status can demonstrate that =

the transfer is to or on behalf of an immediate family member for that=20
individual's education, medical expenses, or some other form of=20
essential support.
    (ii) SBA will not attribute to an individual claiming disadvantaged=20
status any assets transferred by that individual to an immediate family=20
member that are consistent with the customary recognition of special=20
occasions, such as birthdays, graduations, anniversaries, and=20
retirements.
    (iii) In determining an individual's access to capital and credit,=20
SBA may consider any assets that the individual transferred within such=20
two-year period described by paragraph (c)(1)(i) of this section that=20
SBA does not consider in evaluating the individual's assets and net=20
worth (e.g., transfers to charities).
    (2) Net worth. For initial 8(a) BD eligibility, the net worth of an=20
individual claiming disadvantage must be less than $250,000. For=20
continued 8(a) BD eligibility after admission to the program, net worth=20
must be less than $750,000. In determining such net worth, SBA will=20
exclude the ownership interest in the applicant or Participant and the=20
equity in the primary personal residence (except any portion of such=20
equity which is attributable to excessive withdrawals from the applicant =

or Participant). Exclusions for net worth purposes are not exclusions=20
for asset valuation or access to capital and credit purposes.
    (i) A contingent liability does not reduce an individual's net=20
worth.
    (ii) The personal net worth of an individual claiming to be an=20
Alaska Native will include assets and income from sources other than an=20
Alaska Native Corporation and exclude any of the following which the=20
individual receives from any Alaska Native Corporation: cash (including=20
cash dividends on stock received from an ANC) to the extent that it does =

not, in the aggregate, exceed $2,000 per individual per annum; stock=20
(including stock issued or distributed by an ANC as a dividend or=20
distribution on stock); a partnership interest; land or an interest in=20
land (including land or an interest in land received from an ANC as a=20
dividend or distribution on stock); and an interest in a settlement=20
trust.

Sec. 124.105  What does it mean to be unconditionally =
owned by one or=20
          more disadvantaged individuals?

    An applicant or Participant must be at least 51 percent=20
unconditionally and directly owned by one or more socially and=20
economically disadvantaged individuals who are citizens of the United=20
States, except for concerns owned by Indian tribes, Alaska Native=20
Corporations, Native Hawaiian Organizations, or Community Development=20
Corporations (CDCs). See Sec. 124.3 for definition of =
unconditional=20
ownership; and Sec. Sec. 124.109,

[[Page 368]]

124.110, and 124.111, respectively, =
for special ownership requirements=20
for concerns owned by Indian tribes, ANCs, Native Hawaiian=20
Organizations, and CDCs.
    (a) Ownership must be direct. Ownership by one or more disadvantaged =

individuals must be direct ownership. An applicant or Participant owned=20
principally by another business entity or by a trust (including employee =

stock ownership trusts) that is in turn owned and controlled by one or=20
more disadvantaged individuals does not meet this requirement. However,=20
ownership by a trust, such as a living trust, may be treated as the=20
functional equivalent of ownership by a disadvantaged individual where=20
the trust is revocable, and the disadvantaged individual is the grantor, =

a trustee, and the sole current beneficiary of the trust.
    (b) Ownership of a partnership. In the case of a concern which is a=20
partnership, at least 51 percent of every class of partnership interest=20
must be unconditionally owned by one or more individuals determined by=20
SBA to be socially and economically disadvantaged. The ownership must be =

reflected in the concern's partnership agreement.
    (c) Ownership of a limited liability company. In the case of a=20
concern which is a limited liability company, at least 51 percent of=20
each class of member interest must be unconditionally owned by one or=20
more individuals determined by SBA to be socially and economically=20
disadvantaged.
    (d) Ownership of a corporation. In the case of a concern which is a=20
corporation, at least 51 percent of each class of voting stock=20
outstanding and 51 percent of the aggregate of all stock outstanding=20
must be unconditionally owned by one or more individuals determined by=20
SBA to be socially and economically disadvantaged.
    (e) Stock options' effect on ownership. In determining unconditional =

ownership, SBA will disregard any unexercised stock options or similar=20
agreements held by disadvantaged individuals. However, any unexercised=20
stock options or similar agreements (including rights to convert non-
voting stock or debentures into voting stock) held by non-disadvantaged=20
individuals will be treated as exercised, except for any ownership=20
interests which are held by investment companies licensed under the=20
Small Business Investment Act of 1958.
    (f) Dividends and distributions. One or more disadvantaged=20
individuals must be entitled to receive:
    (1) At least 51 percent of the annual distribution of dividends paid =

on the stock of a corporate applicant concern;
    (2) 100 percent of the value of each share of stock owned by them in =

the event that the stock is sold; and
    (3) At least 51 percent of the retained earnings of the concern and=20
100 percent of the unencumbered value of each share of stock owned in=20
the event of dissolution of the corporation.
    (g) Ownership of another Participant. The individuals determined to=20
be disadvantaged for purposes of one Participant, their immediate family =

members, and the Participant itself, may not hold, in the aggregate,=20
more than a 20 percent equity ownership interest in any other single=20
Participant.
    (h) Ownership restrictions for non-disadvantaged individuals and=20
concerns. (1) A non-disadvantaged individual (in the aggregate with all=20
immediate family members) or a non-Participant concern that is a general =

partner or stockholder with at least a 10 percent ownership interest in=20
one Participant may not own more than a 10 percent interest in another=20
Participant that is in the developmental stage or more than a 20 percent =

interest in another Participant in the transitional stage of the=20
program. This restriction does not apply to financial institutions=20
licensed or chartered by Federal, state or local government, including=20
investment companies which are licensed under the Small Business=20
Investment Act of 1958.
    (2) A non-Participant concern in the same or similar line of=20
business may not own more than a 10 percent interest in a Participant=20
that is in the developmental stage or more than a 20 percent interest in =

a Participant in a transitional stage of the program, except that a=20
former Participant or a principal of a former Participant (except those=20
that have been terminated from 8(a) BD program participation pursuant to =

Sec. Sec. 124.303 and 124.304) may =
have an equity ownership interest of=20
up to 20 percent in a current Participant

[[Page 369]]

in the developmental stage of the program or up to 30 percent in a=20
transitional stage Participant, in the same or similar line of business.
    (i) Change of ownership. A Participant may change its ownership or=20
business structure so long as one or more disadvantaged individuals own=20
and control it after the change and SBA approves the transaction in=20
writing prior to the change. The decision to approve or deny a=20
Participant's request for a change in ownership or business structure=20
will be made and communicated to the firm by the AA/8(a)BD. The decision =

of the AA/8(a)BD is the final decision of the Agency. The AA/8(a)BD will =

issue a decision within 60 days from receipt of a request containing all =

necessary documentation, or as soon thereafter as possible. If 60 days=20
lapse without a decision from SBA, the Participant cannot presume that=20
it can complete the change without written approval from SBA. A decision =

to deny a request for change of ownership or business structure may be=20
grounds for program termination where the change is made nevertheless.
    (1) Any Participant that was awarded one or more 8(a) contracts may=20
substitute one disadvantaged individual for another disadvantaged=20
individual without requiring the termination of those contracts or a=20
request for waiver under Sec. 124.515, as long as it =
receives SBA's=20
approval prior to the change.
    (2) Where the previous owner held less than a 10 percent interest in =

the concern, or the transfer results from the death or incapacity due to =

a serious, long-term illness or injury of a disadvantaged principal,=20
prior approval is not required, but the concern must notify SBA within=20
60 days.
    (3) Continued participation of the Participant with new ownership=20
and the award of any new 8(a) contracts requires SBA's determination=20
that all eligibility requirements are met by the concern and the new=20
owners.
    (4) Where a Participant requests a change of ownership or business=20
structure, and proceeds with the change prior to receiving SBA approval=20
(or where a change of ownership results from the death or incapacity of=20
a disadvantaged individual for which a request prior to the change in=20
ownership could not occur), SBA will suspend the Participant from=20
program benefits pending resolution of the request. If the change is=20
approved, the length of the suspension will be restored to the=20
Participant's program term in the case of death or incapacity, or if the =

firm requested prior approval and waited 60 days for SBA approval.
    (5) A change in ownership does not provide the new owner(s) with a=20
new 8(a) BD program term. For example, if a concern has been in the 8(a) =

BD program for five years when a change in ownership occurs, the new=20
owner will have four years remaining until program graduation.
    (j) Public offering. A Participant's request for SBA's approval for=20
the issuance of a public offering will be treated as a request for a=20
change of ownership. Such request will cause SBA to examine the=20
concern's continued need for access to the business development=20
resources of the 8(a) BD program.
    (k) Community property laws given effect. In determining ownership=20
interests when an owner resides in any of the community property states=20
or territories of the United States (Arizona, California, Idaho,=20
Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington and=20
Wisconsin), SBA considers applicable state community property laws. If=20
only one spouse claims disadvantaged status, that spouse's ownership=20
interest will be considered unconditionally held only to the extent it=20
is vested by the community property laws. A transfer or relinquishment=20
of interest by the non-disadvantaged spouse may be necessary in some=20
cases to establish eligibility.

Sec. 124.106  When do disadvantaged individuals control =
an applicant or=20
          Participant?

    Control is not the same as ownership, although both may reside in=20
the same person. SBA regards control as including both the strategic=20
policy setting exercised by boards of directors and the day-to-day=20
management and administration of business operations. An applicant or=20
Participant's management and daily business operations must be conducted =

by one or more disadvantaged individuals, except for concerns

[[Page 370]]

owned by Indian tribes, ANCs, Native Hawaiian Organizations, or=20
Community Development Corporations (CDCs). (See Sec. Sec. =
124.109,=20
124.110, and 124.111, respectively, =
for the requirements for concerns=20
owned by Indian tribes or ANCs, for concerns owned by Native Hawaiian=20
Organizations, and for CDC-owned concerns.) Disadvantaged individuals=20
managing the concern must have managerial experience of the extent and=20
complexity needed to run the concern. A disadvantaged individual need=20
not have the technical expertise or possess a required license to be=20
found to control an applicant or Participant if he or she can=20
demonstrate that he or she has ultimate managerial and supervisory=20
control over those who possess the required licenses or technical=20
expertise. However, where a critical license is held by a non-
disadvantaged individual having an equity interest in the applicant or=20
Participant firm, the non-disadvantaged individual may be found to=20
control the firm.
    (a)(1) An applicant or Participant must be managed on a full-time=20
basis by one or more disadvantaged individuals who possess requisite=20
management capabilities.
    (2) A disadvantaged full-time manager must hold the highest officer=20
position (usually President or Chief Executive Officer) in the applicant =

or Participant.
    (3) One or more disadvantaged individuals who manage the applicant=20
or Participant must devote full-time to the business during the normal=20
working hours of firms in the same or similar line of business. Work in=20
a wholly-owned subsidiary of the applicant or participant may be=20
considered to meet the requirement of full-time devotion. This applies=20
only to a subsidiary owned by the 8(a) firm, and not to firms in which=20
the disadvantaged individual has an ownership interest.
    (4) Any disadvantaged manager who wishes to engage in outside=20
employment must notify SBA of the nature and anticipated duration of the =

outside employment and obtain the prior written approval of SBA. SBA=20
will deny a request for outside employment which could conflict with the =

management of the firm or could hinder it in achieving the objectives of =

its business development plan.
    (5) Except as provided in paragraph (d)(1) of this section, a=20
disadvantaged owner's unexercised right to cause a change in the control =

or management of the applicant concern does not in itself constitute=20
disadvantaged control and management, regardless of how quickly or=20
easily the right could be exercised.
    (b) In the case of a partnership, one or more disadvantaged=20
individuals must serve as general partners, with control over all=20
partnership decisions. A partnership in which no disadvantaged=20
individual is a general partner will be ineligible for participation.
    (c) In the case of a limited liability company, one or more=20
disadvantaged individuals must serve as management members, with control =

over all decisions of the limited liability company.
    (d) One or more disadvantaged individuals must control the Board of=20
Directors of a corporate applicant or Participant.
    (1) SBA will deem disadvantaged individuals to control the Board of=20
Directors where:
    (i) A single disadvantaged individual owns 100% of all voting stock=20
of an applicant or Participant concern;
    (ii) A single disadvantaged individual owns at least 51% of all=20
voting stock of an applicant or Participant concern, the individual is=20
on the Board of Directors and no super majority voting requirements=20
exist for shareholders to approve corporation actions. Where super=20
majority voting requirements are provided for in the concern's articles=20
of incorporation, its by-laws, or by state law, the disadvantaged=20
individual must own at least the percent of the voting stock needed to=20
overcome any such super majority voting requirements; or
    (iii) More than one disadvantaged shareholder seeks to qualify the=20
concern (i.e., no one individual owns 51%), each such individual is on=20
the Board of Directors, together they own at least 51% of all voting=20
stock of the concern, no super majority voting requirements exist, and=20
the disadvantaged shareholders can demonstrate that they have made=20
enforceable arrangements to permit one of them to vote the stock of all=20
as a block without a shareholder

[[Page 371]]

meeting. Where the concern has super majority voting requirements, the=20
disadvantaged shareholders must own at least that percentage of voting=20
stock needed to overcome any such super majority ownership requirements.
    (2) Where an applicant or Participant does not meet the requirements =

set forth in paragraph (d)(1) of this section, the disadvantaged=20
individual(s) upon whom eligibility is based must control the Board of=20
Directors through actual numbers of voting directors or, where permitted =

by state law, through weighted voting (e.g., in a concern having a two-
person Board of Directors where one individual on the Board is=20
disadvantaged and one is not, the disadvantaged vote must be weighted--
worth more than one vote--in order for the concern to be eligible for=20
8(a) participation). Where a concern seeks to comply with this=20
paragraph:
    (i) Provisions for the establishment of a quorum cannot permit non-
disadvantaged Directors to control the Board of Directors, directly or=20
indirectly;
    (ii) Any Executive Committee of Directors must be controlled by=20
disadvantaged directors unless the Executive Committee can only make=20
recommendations to and cannot independently exercise the authority of=20
the Board of Directors.
    (3) An applicant must inform SBA of any super majority voting=20
requirements provided for in its articles of incorporation, its by-laws, =

by state law, or otherwise. Similarly, after being admitted to the=20
program, a Participant must inform SBA of changes regarding super=20
majority voting requirements.
    (4) Non-voting, advisory, or honorary Directors may be appointed=20
without affecting disadvantaged individuals' control of the Board of=20
Directors.
    (5) Arrangements regarding the structure and voting rights of the=20
Board of Directors must comply with applicable state law.
    (e) Non-disadvantaged individuals may be involved in the management=20
of an applicant or Participant, and may be stockholders, partners,=20
limited liability members, officers, and/or directors of the applicant=20
or Participant. However, no such non-disadvantaged individual or=20
immediate family member may:
    (1) Exercise actual control or have the power to control the=20
applicant or Participant;
    (2) Be a former employer or a principal of a former employer of any=20
disadvantaged owner of the applicant or Participant, unless it is=20
determined by the AA/8(a)BD that the relationship between the former=20
employer or principal and the disadvantaged individual or applicant=20
concern does not give the former employer actual control or the=20
potential to control the applicant or Participant and such relationship=20
is in the best interests of the 8(a) BD firm; or
    (3) Receive compensation from the applicant or Participant in any=20
form as directors, officers or employees, including dividends, that=20
exceeds the compensation to be received by the highest officer (usually=20
CEO or President). The highest ranking officer may elect to take a lower =

salary than a non-disadvantaged individual only upon demonstrating that=20
it helps the applicant or Participant. In the case of a Participant, the =

Participant must also obtain the prior written consent of the AA/8(a)BD=20
or designee before changing the compensation paid to the highest ranking =

officer to be below that paid to a non-disadvantaged individual.
    (f) Non-disadvantaged individuals who transfer majority stock=20
ownership or control of the firm to an immediate family member within=20
two years prior to the application and remain involved in the firm as a=20
stockholder, officer, director, or key employee of the firm are presumed =

to control the firm. The presumption may be rebutted by showing that the =

transferee has independent management experience necessary to control=20
the operation of the firm.
    (g) Non-disadvantaged individuals or entities may be found to=20
control or have the power to control in any of the following=20
circumstances, which are illustrative only and not all inclusive:
    (1) In circumstances where an applicant or Participant seeks to=20
establish disadvantaged control of the Board of Directors through=20
paragraph (d)(2) of this section, non-disadvantaged individuals control=20
the Board of Directors of the applicant or Participant, either

[[Page 372]]

directly through majority voting membership, or indirectly, where the=20
by-laws allow non-disadvantaged individuals effectively to prevent a=20
quorum or block actions proposed by the disadvantaged individuals.
    (2) A non-disadvantaged individual or entity, having an equity=20
interest in the applicant or participant, provides critical financial or =

bonding support or a critical license to the applicant or Participant=20
which directly or indirectly allows the non-disadvantaged individual=20
significantly to influence business decisions of the Participant.
    (3) A non-disadvantaged individual or entity controls the applicant=20
or Participant or an individual disadvantaged owner through loan=20
arrangements. Providing a loan guaranty on commercially reasonable terms =

does not, by itself, give a non-disadvantaged individual or entity the=20
power to control a firm.
    (4) Business relationships exist with non-disadvantaged individuals=20
or entities which cause such dependence that the applicant or=20
Participant cannot exercise independent business judgment without great=20
economic risk.

Sec. 124.107  What is potential for success?

    The applicant concern must possess reasonable prospects for success=20
in competing in the private sector if admitted to the 8(a) BD program.=20
To do so, it must be in business in its primary industry classification=20
for at least two full years immediately prior to the date of its 8(a) BD =

application, unless a waiver for this requirement is granted pursuant to =

paragraph (b) of this section.
    (a) Income tax returns for each of the two previous tax years must=20
show operating revenues in the primary industry in which the applicant=20
is seeking 8(a) BD certification.
    (b)(1) SBA may waive the two years in business requirement if each=20
of the following five conditions are met:
    (i) The individual or individuals upon whom eligibility is based=20
have substantial business management experience;
    (ii) The applicant has demonstrated technical experience to carry=20
out its business plan with a substantial likelihood for success if=20
admitted to the 8(a) BD program;
    (iii) The applicant has adequate capital to sustain its operations=20
and carry out its business plan as a Participant;
    (iv) The applicant has a record of successful performance on=20
contracts from governmental or nongovernmental sources in its primary=20
industry category; and
    (v) The applicant has, or can demonstrate its ability to timely=20
obtain, the personnel, facilities, equipment, and any other requirements =

needed to perform contracts as a Participant.
    (2) The concern seeking a waiver under paragraph (b) must provide=20
information on governmental and nongovernmental contracts in progress=20
and completed (including letters of reference) in order to establish=20
successful contract performance, and must demonstrate how it otherwise=20
meets the five conditions for waiver. SBA considers an applicant's=20
performance on both government and private sector contracts in=20
determining whether the firm has an overall successful performance=20
record. If, however, the applicant has performed only government=20
contracts or only private sector contracts, SBA will review its=20
performance on those contracts alone to determine whether the applicant=20
possesses a record of successful performance.
    (c) In assessing potential for success, SBA considers the concern's=20
access to credit and capital, including, but not limited to, access to=20
long-term financing, access to working capital financing, equipment=20
trade credit, access to raw materials and supplier trade credit, and=20
bonding capability.
    (d) In assessing potential for success, SBA will also consider the=20
technical and managerial experience of the applicant concern's managers, =

the operating history of the concern, the concern's record of=20
performance on previous Federal and private sector contracts in the=20
primary industry in which the concern is seeking 8(a) BD certification,=20
and its financial capacity. The applicant concern as a whole must=20
demonstrate both technical knowledge in its primary industry category=20
and management experience sufficient to run its day-to-day operations.
    (e) The Participant or individuals employed by the Participant must=20
hold all requisite licenses if the concern is

[[Page 373]]

engaged in an industry requiring professional licensing (e.g., public=20
accountancy, law, professional engineering).
    (f) An applicant will not be denied admission into the 8(a) BD=20
program due solely to a determination that potential 8(a) contract=20
opportunities are unavailable to assist in the development of the=20
concern unless:
    (1) The Government has not previously procured and is unlikely to=20
procure the types of products or services offered by the concern; or
    (2) The purchase of such products or services by the Federal=20
Government will not be in quantities sufficient to support the=20
developmental needs of the applicant and other Participants providing=20
the same or similar items or services.

Sec. 124.108  What other eligibility requirements apply =
for individuals=20
          or businesses?

    (a) Good character. The applicant or Participant and all its=20
principals must have good character.
    (1) If, during the processing of an application, adverse information =

is obtained from the applicant or a credible source regarding possible=20
criminal conduct by the applicant or any of its principals, no further=20
action will be taken on the application until SBA's Inspector General=20
has collected relevant information and has advised the AA/8(a)BD of his=20
or her findings. The AA/8(a)BD will consider those findings when=20
evaluating the application.
    (2) Violations of any of SBA's regulations may result in denial of=20
participation in the 8(a) BD program. The AA/8(a)BD will consider the=20
nature and severity of the violation in making an eligibility=20
determination.
    (3) Debarred or suspended concerns or concerns owned by debarred or=20
suspended persons are ineligible for admission to the 8(a) BD program.
    (4) An applicant is ineligible for admission to the 8(a) BD program=20
if the applicant concern or a proprietor, partner, limited liability=20
member, director, officer, or holder of at least 10 percent of its=20
stock, or another person (including key employees) with significant=20
authority over the concern:
    (i) Lacks business integrity as demonstrated by information related=20
to an indictment or guilty plea, conviction, civil judgment, or=20
settlement; or
    (ii) Is currently incarcerated, or on parole or probation pursuant=20
to a pre-trial diversion or following conviction for a felony or any=20
crime involving business integrity.
    (5) If, during the processing of an application, SBA determines that =

an applicant has knowingly submitted false information, regardless of=20
whether correct information would cause SBA to deny the application, and =

regardless of whether correct information was given to SBA in=20
accompanying documents, SBA will deny the application. If, after=20
admission to the program, SBA discovers that false information has been=20
knowingly submitted by a firm, SBA will initiate termination proceedings =

and suspend the firm under Sec. Sec. 124.304 and =
124.305. Whenever SBA=20
determines that the applicant submitted false information, the matter=20
will be referred to SBA's Office of Inspector General for review.
    (b) One-time eligibility. Once a concern or disadvantaged individual =

upon whom eligibility was based has participated in the 8(a) BD program, =

neither the concern nor that individual will be eligible again.
    (1) An individual who claims disadvantage and completes the=20
appropriate SBA forms to qualify an applicant has participated in the=20
8(a) BD program if SBA approves the application.
    (2) Use of eligibility will take effect on the date of the concern's =

approval for admission into the program.
    (3) An individual who uses his or her one-time eligibility to=20
qualify a concern for the 8(a) BD program will be considered a non-
disadvantaged individual for ownership or control purposes of another=20
applicant or Participant. The criteria restricting participation by non-
disadvantaged individuals will apply to such an individual. See=20
Sec. Sec. 124.105 and 124.106.
    (4) When at least 50% of the assets of a concern are the same as=20
those of a former Participant, the concern will not be eligible for=20
entry into the program.

[[Page 374]]

    (5) Participants which change their form of business organization=20
and transfer their assets and liabilities to the new organization may do =

so without affecting the eligibility of the new organization provided=20
the previous business is dissolved and all other eligibility criteria=20
are met. In such a case, the new organization may complete the remaining =

program term of the previous organization. A request for a change in=20
business form will be treated as a change of ownership under Sec.=20
124.105(i).
    (c) Wholesalers. An applicant concern seeking admission to the 8(a)=20
BD program as a wholesaler need not demonstrate that it is capable of=20
meeting the requirements of the nonmanufacturer rule for its primary=20
industry classification.
    (d) Brokers. Brokers are ineligible to participate in the 8(a) BD=20
program. A broker is a concern that adds no material value to an item=20
being supplied to a procuring activity or which does not take ownership=20
or possession of or handle the item being procured with its own=20
equipment or facilities.
    (e) Federal financial obligations. Neither a firm nor any of its=20
principals that fails to pay significant financial obligations owed to=20
the Federal Government, including unresolved tax liens and defaults on=20
Federal loans or other Federally assisted financing, is eligible for=20
admission to or participation in the 8(a) BD program.
    (f) Achievement of benchmarks. Where actual participation by=20
disadvantaged businesses in a particular SIC Major Group exceeds the=20
benchmark limitations established by the Department of Commerce, SBA, in =

its discretion, may decide not to accept an application for 8(a) BD=20
participation from a concern whose primary industry classification falls =

within that Major Group.

[63 FR 35739, 35772, June 30, 1998]

Sec. 124.109  Do Indian tribes and Alaska Native =
Corporations have any=20
          special rules for applying to the 8(a) BD program?

    (a) Special rules for ANCs. Small business concerns owned and=20
controlled by ANCs are eligible for participation in the 8(a) program=20
and must meet the eligibility criteria set forth in Sec. =
124.112 to the=20
extent the criteria are not inconsistent with this section. ANC-owned=20
concerns are subject to the same conditions that apply to tribally-owned =

concerns, as described in paragraphs (b) and (c) of this section, except =

that the following provisions and exceptions apply only to ANC-owned=20
concerns:
    (1) Alaska Natives and descendants of Natives must own a majority of =

both the total equity of the ANC and the total voting powers to elect=20
directors of the ANC through their holdings of settlement common stock.=20
Settlement common stock means stock of an ANC issued pursuant to 43=20
U.S.C. 1606(g)(1), which is subject to the rights and restrictions=20
listed in 43 U.S.C. 1606(h)(1).
    (2) An ANC that meets the requirements set forth in paragraph (a)(1) =

of this section is deemed economically disadvantaged under 43 U.S.C.=20
1626(e), and need not establish economic disadvantage as required by=20
paragraph (b)(2) of this section.
    (3) Even though an ANC can be either for profit or non-profit, a=20
small business concern owned and controlled by an ANC must be for profit =

to be eligible for the 8(a) program. The concern will be deemed owned=20
and controlled by the ANC where both the majority of stock or other=20
ownership interest and total voting power are held by the ANC and=20
holders of its settlement common stock.
    (4) The Alaska Native Claims Settlement Act provides that a concern=20
which is majority owned by an ANC shall be deemed to be both owned and=20
controlled by Alaska Natives and an economically disadvantaged business. =

Therefore, an individual responsible for control and management of an=20
ANC-owned applicant or Participant need not establish personal social=20
and economic disadvantage.
    (5) Paragraphs (b)(3)(i), (ii) and (iv) of this section are not=20
applicable to an ANC, provided its status as an ANC is clearly shown in=20
its articles of incorporation.
    (6) Paragraph (c)(1) of this section is not applicable to an ANC-
owned concern to the extent it requires an express waiver of sovereign=20
immunity or a ``sue and be sued'' clause.

[[Page 375]]

    (b) Tribal eligibility. In order to qualify a concern which it owns=20
and controls for participation in the 8(a) BD program, an Indian tribe=20
must establish its own economic disadvantaged status under paragraph=20
(b)(2) of this section. Thereafter, it need not reestablish such status=20
in order to have other businesses that it owns certified for 8(a) BD=20
program participation, unless specifically required to do so by the AA/
8(a)BD or designee. Each tribally-owned concern seeking to be certified=20
for 8(a) BD participation must comply with the provisions of paragraph=20
(c) of this section.
    (1) Social disadvantage. An Indian tribe as defined in Sec. =
124.3=20
is considered to be socially disadvantaged.
    (2) Economic disadvantage. In order to be eligible to participate in =

the 8(a) BD program, the Indian tribe must demonstrate to SBA that the=20
tribe itself is economically disadvantaged. This must involve the=20
consideration of available data showing the tribe's economic condition,=20
including but not limited to, the following information:
    (i) The number of tribal members.
    (ii) The present tribal unemployment rate.
    (iii) The per capita income of tribal members, excluding judgment=20
awards.
    (iv) The percentage of the local Indian population below the poverty =

level.
    (v) The tribe's access to capital.
    (vi) The tribal assets as disclosed in a current tribal financial=20
statement. The statement must list all assets including those which are=20
encumbered or held in trust, but the status of those encumbered or in=20
trust must be clearly delineated.
    (vii) A list of all wholly or partially owned tribal enterprises or=20
affiliates and the primary industry classification of each. The list=20
must also specify the members of the tribe who manage or control such=20
enterprises by serving as officers or directors.
    (3) Forms and documents required to be submitted. Except as=20
otherwise provided in this section, the Indian tribe generally must=20
submit the forms and documents required of 8(a) BD applicants as well as =

the following material:
    (i) A copy of all governing documents such as the tribe's=20
constitution or business charter.
    (ii) Evidence of its recognition as a tribe eligible for the special =

programs and services provided by the United States or by its state of=20
residence.
    (iii) Copies of its articles of incorporation and bylaws as filed=20
with the organizing or chartering authority, or similar documents needed =

to establish and govern a non-corporate legal entity.
    (iv) Documents or materials needed to show the tribe's economically=20
disadvantaged status as described in paragraph (b)(2) of this section.
    (c) Business eligibility. In order to be eligible to participate in=20
the 8(a) BD program, a concern which is owned by an eligible Indian=20
tribe (or wholly owned business entities of such tribe) must meet the=20
conditions set forth in paragraphs (c)(1) through (c)(7) of this=20
section.
    (1) Legal business entity organized for profit and susceptible to=20
suit. The applicant or participating concern must be a separate and=20
distinct legal entity organized or chartered by the tribe, or Federal or =

state authorities. The concern's articles of incorporation, partnership=20
agreement or limited liability company articles of organization must=20
contain express sovereign immunity waiver language, or a ``sue and be=20
sued'' clause which designates United States Federal Courts to be among=20
the courts of competent jurisdiction for all matters relating to SBA's=20
programs including, but not limited to, 8(a) BD program participation,=20
loans, and contract performance. Also, the concern must be organized for =

profit, and the tribe must possess economic development powers in the=20
tribe's governing documents.
    (2) Size. (i) A tribally-owned applicant concern must qualify as a=20
small business concern as defined for purposes of Federal Government=20
procurement in part 121 of this title. The particular size standard to=20
be applied is based on the primary industry classification of the=20
applicant concern.
    (ii) A tribally-owned Participant must certify to SBA that it is a=20
small business pursuant to the provisions of part 121 of this title for=20
the purpose of

[[Page 376]]

performing each individual contract which it is awarded.
    (iii) In determining the size of a small business concern owned by a =

socially and economically disadvantaged Indian tribe (or a wholly owned=20
business entity of such tribe) for either 8(a) BD program entry or=20
contract award, the firm's size shall be determined independently=20
without regard to its affiliation with the tribe, any entity of the=20
tribal government, or any other business enterprise owned by the tribe,=20
unless the Administrator determines that one or more such tribally-owned =

business concerns have obtained, or are likely to obtain, a substantial=20
unfair competitive advantage within an industry category.
    (3) Ownership. (i) For corporate entities, a tribe must own at least =

51 percent of the voting stock and at least 51 percent of the aggregate=20
of all classes of stock. For non-corporate entities, a tribe must own at =

least a 51 percent interest.
    (ii) A tribe cannot own 51% or more of another firm which, either at =

the time of application or within the previous two years, has been=20
operating in the 8(a) program under the same primary SIC code as the=20
applicant. A tribe may, however, own a Participant or an applicant that=20
conducts or will conduct secondary business in the 8(a) BD program under =

the same SIC code that a current Participant owned by the tribe operates =

in the 8(a) BD program as its primary SIC code.
    (iii) The restrictions of Sec. 124.105(h) do not =
apply to tribes;=20
they do, however, apply to non disadvantaged individuals or other=20
business concerns that are partial owners of a tribally-owned concern.
    (4) Control and management. (i) The management and daily business=20
operations of a tribally-owned concern must be controlled by the tribe,=20
through one or more disadvantaged individual members who possess=20
sufficient management experience of an extent and complexity needed to=20
run the concern, or through management as follows:
    (A) Management may be provided by committees, teams, or Boards of=20
Directors which are controlled by one or more members of an economically =

disadvantaged tribe, or
    (B) Management may be provided by non-tribal members if SBA=20
determines that such management is required to assist the concern's=20
development, that the tribe will retain control of all management=20
decisions common to boards of directors, including strategic planning,=20
budget approval, and the employment and compensation of officers, and=20
that a written management development plan exists which shows how=20
disadvantaged tribal members will develop managerial skills sufficient=20
to manage the concern or similar tribally-owned concerns in the future.
    (ii) Members of the management team, business committee members,=20
officers, and directors are precluded from engaging in any outside=20
employment or other business interests which conflict with the=20
management of the concern or prevent the concern from achieving the=20
objectives set forth in its business development plan. This is not=20
intended to preclude participation in tribal or other activities which=20
do not interfere with such individual's responsibilities in the=20
operation of the applicant concern.
    (5) Individual eligibility limitation. SBA does not deem an=20
individual involved in the management or daily business operations of a=20
tribally-owned concern to have used his or her individual eligibility=20
within the meaning of Sec. 124.108(b).
    (6) Potential for success. (i) A tribally-owned applicant concern=20
must be in business for at least two years, as evidenced by income tax=20
returns for each of the two previous tax years showing operating=20
revenues in the primary industry in which the applicant is seeking 8(a)=20
BD certification, or demonstrate potential for success as set forth in=20
paragraph (c)(6)(ii) of this section.
    (ii) In determining whether a tribally-owned concern has the=20
potential for success, SBA will look at a number of factors including,=20
but not limited to:
    (A) The technical and managerial experience and competency of the=20
individual(s) who will manage and control the daily operation of the=20
concern;
    (B) The financial capacity of the concern; and

[[Page 377]]

    (C) The concern's record of performance on any previous Federal or=20
private sector contracts in the primary industry in which the concern is =

seeking 8(a) certification.
    (7) Other eligibility criteria. (i) As with other 8(a) applicants, a =

tribally-owned applicant concern shall not be denied admission into the=20
8(a) program due solely to a determination that specific contract=20
opportunities are unavailable to assist the development of the concern=20
unless:
    (A) The Government has not previously procured and is unlikely to=20
procure the types of products or services offered by the concern; or
    (B) The purchase of such products or services by the Federal=20
Government will not be in quantities sufficient to support the=20
developmental needs of the applicant and other program participants=20
providing the same or similar items or services.
    (ii) Except for the tribe itself, the concern's officers, directors, =

and all shareholders owning an interest of 20% or more must demonstrate=20
good character. See Sec. 124.108(a).

Sec. 124.110  Do Native Hawaiian Organizations have any =
special rules=20
          for applying to the 8(a) BD program?

    (a) Concerns owned by economically disadvantaged Native Hawaiian=20
Organizations, as defined in Sec. 124.3, are eligible =
for participation=20
in the 8(a) program and other federal programs requiring SBA to=20
determine social and economic disadvantage as a condition of=20
eligibility. Such concerns must meet all eligibility criteria set forth=20
in Sec. Sec. 124.101 through 124.108 =
and Sec. 124.112 to the extent=20
that they are not inconsistent with this section.
    (b) A concern owned by a Native Hawaiian Organization must qualify=20
as a small business concern as defined in part 121 of this title. The=20
size standard corresponding to the primary industry classification of=20
the applicant concern applies for determining size. SBA will determine=20
the concern's size independently, without regard to its affiliation with =

the Native Hawaiian Organization or any other business enterprise owned=20
by the Native Hawaiian Organization, unless the Administrator determines =

that one or more such concerns owned by the Native Hawaiian Organization =

have obtained, or are likely to obtain, a substantial unfair competitive =

advantage within an industry category.
    (c) A Native Hawaiian Organization cannot own 51% or more of another =

firm which, either at the time of application or within the previous two =

years, has been operating in the 8(a) program under the same primary SIC =

code as the applicant. A Native Hawaiian Organization may, however, own=20
a Participant or an applicant that conducts or will conduct secondary=20
business in the 8(a) BD program under the same SIC code that a current=20
Participant owned by the Native Hawaiian Organization operates in the=20
8(a) BD program as its primary SIC code.
    (d) SBA does not deem an individual involved in the management or=20
daily business operations of a Participant owned by a Native Hawaiian=20
Organization to have used his or her individual eligibility within the=20
meaning of Sec. 124.108(b).
    (e)(1) An applicant concern owned by a Native Hawaiian Organization=20
must be in business for at least two years, as evidenced by income tax=20
returns for each of the two previous tax years showing operating=20
revenues in the primary industry in which the applicant is seeking 8(a)=20
BD certification, or demonstrate potential for success as set forth in=20
paragraph (e)(2) of this section.
    (2) In determining whether a concern owned by a Native Hawaiian=20
Organization has the potential for success, SBA will look at a number of =

factors including, but not limited to:
    (i) The technical and managerial experience and competence of the=20
individual(s) who will manage and control the daily operation of the=20
concern.
    (ii) The financial capacity of the concern; and
    (iii) The concern's record of performance on any previous Federal or =

private sector contracts in the primary industry in which the concern is =

seeking 8(a) certification.

[[Page 378]]

Sec. 124.111  Do Community Development Corporations =
(CDCs) have any=20
          special rules for applying to the 8(a) BD program?

    (a) Concerns owned at least 51 percent by CDCs (or a wholly owned=20
business entity of a CDC) are eligible for participation in the 8(a) BD=20
program and other federal programs requiring SBA to determine social and =

economic disadvantage as a condition of eligibility. These concerns must =

meet all eligibility criteria set forth in Sec. 124.101 =
through Sec.=20
124.108 and Sec. 124.112 to the extent =
that they are not inconsistent=20
with this section.
    (b) A concern that is at least 51 percent owned by a CDC (or a=20
wholly owned business entity of a CDC) is considered to be controlled by =

such CDC and eligible for participation in the 8(a) BD program, provided =

it meets all eligibility criteria set forth or referred to in this=20
section and its management and daily business operations are conducted=20
by one or more individuals determined to have managerial experience of=20
an extent and complexity needed to run the concern.
    (c) A concern that is at least 51 percent owned by a CDC (or a=20
wholly owned business entity of a CDC) must qualify as a small business=20
concern as defined in part 121 of this title. The size standard=20
corresponding to the primary industry classification of the applicant=20
concern applies for determining size. SBA will determine the concern's=20
size independently, without regard to its affiliation with the CDC or=20
any other business enterprise owned by the CDC, unless the Administrator =

determines that one or more such concerns owned by the CDC have=20
obtained, or are likely to obtain, a substantial unfair competitive=20
advantage within an industry category.
    (d) A CDC cannot own 51% or more of another firm which, either at=20
the time of application or within the previous two years, has been=20
operating in the 8(a) program under the same primary SIC code as the=20
applicant. A CDC may, however, own a Participant or an applicant that=20
conducts or will conduct secondary business in the 8(a) BD program under =

the same SIC code that a current Participant owned by the CDC operates=20
in the 8(a) BD program as its primary SIC code.
    (e) SBA does not deem an individual involved in the management or=20
daily business operations of a CDC-owned concern to have used his or her =

individual eligibility within the meaning of Sec. =
124.108(b).
    (f)(1) A CDC-owned applicant concern must be in business for at=20
least two years, as evidenced by income tax returns for each of the two=20
previous tax years showing operating revenues in the primary industry in =

which the applicant is seeking 8(a) BD certification, or demonstrate=20
potential for success as set forth in paragraph (e)(2) of this section.
    (2) In determining whether a CDC-owned concern has the potential for =

success, SBA will look at a number of factors including, but not limited =

to:
    (i) The technical and managerial experience and competence of the=20
individual(s) who will manage and control the daily operation of the=20
concern;
    (ii) The financial capacity of the concern; and
    (iii) The concern's record of performance on any previous Federal or =

private sector contracts in the primary industry in which the concern is =

seeking 8(a) certification.
    (g) A CDC-owned applicant and all of its principals must have good=20
character as set forth in Sec. 124.108(a).

Sec. 124.112  What criteria must a business meet to =
remain eligible to=20
          participate in the 8(a) BD program?

    (a) Standards. In order for a concern (except those owned by Indian=20
tribes, ANCs, Native Hawaiian Organizations or CDCs) to remain eligible=20
for 8(a) BD program participation, it must continue to meet all=20
eligibility criteria contained in Sec. 124.101 through =
Sec. 124.108.=20
For concerns owned by Indian tribes, ANCs, Native Hawaiian Organizations =

or CDCs to remain eligible, they must meet the criteria set forth in=20
this Sec. 124.112 to the extent that they are not =
inconsistent with=20
Sec. 124.109, Sec. 124.110 and Sec. =
124.111, respectively. The=20
concern must inform SBA in writing of any changes in circumstances which =

would adversely affect its program eligibility, especially economic=20
disadvantage and ownership and control. Any concern

[[Page 379]]

that fails to meet the eligibility requirements after being admitted to=20
the program will be subject to termination or early graduation under=20
Sec. Sec. 124.302 through 124.304, as =
appropriate.
    (b) Submissions supporting continued eligibility. As part of an=20
annual review, each Participant must annually submit to the servicing=20
district office the following:
    (1) A certification that it meets the 8(a) BD program eligibility=20
requirements as set forth in Sec. 124.101 through Sec. =
124.108 and=20
paragraph (a) of this section;
    (2) A certification that there have been no changed circumstances=20
which could adversely affect the Participant's program eligibility. If=20
the Participant is unable to provide such certification, the Participant =

must inform SBA of any changes and provide relevant supporting=20
documentation.
    (3) Personal financial information for each disadvantaged owner;
    (4) A record from each individual claiming disadvantaged status=20
regarding the transfer of assets for less than fair market value to any=20
immediate family member, or to a trust any beneficiary of which is an=20
immediate family member, within two years of the date of the annual=20
review. The record must provide the name of the recipient(s) and family=20
relationship, and the difference between the fair market value of the=20
asset transferred and the value received by the disadvantaged=20
individual.
    (5) A record of all payments, compensation, and distributions=20
(including loans, advances, salaries and dividends) made by the=20
Participant to each of its owners, officers or directors, or to any=20
person or entity affiliated with such individuals;
    (6) If it is an approved protege, a narrative report detailing the=20
contacts it has had with its mentor and benefits it has received from=20
the mentor/protege relationship. See Sec. 124.520(b)(4) =
for additional=20
annual requirements;
    (7) IRS Form 4506, Request for Copy or Transcript of Tax Form; and
    (8) Such other information as SBA may deem necessary. For other=20
required annual submissions, see Sec. Sec. 124.601 =
through 124.603.
    (c) Eligibility reviews. (1) Upon receipt of specific and credible=20
information alleging that a Participant no longer meets the eligibility=20
requirements for continued program eligibility, SBA will review the=20
concern's eligibility for continued participation in the program.
    (2) Sufficient reasons for SBA to conclude that a socially=20
disadvantaged individual is no longer economically disadvantaged=20
include, but are not limited to, excessive withdrawals of funds or other =

assets withdrawn from the concern by its owners, or substantial personal =

assets, income or net worth of any disadvantaged owner. SBA may also=20
consider access by the Participant firm to a significant new source of=20
capital or loans since the financial condition of the Participant is=20
considered in evaluating the disadvantaged individual's economic status.
    (d) Excessive withdrawals. (1) The term withdrawal includes, but is=20
not limited to, the following: officer's salary; cash dividends;=20
distributions in excess of amounts needed to pay S Corporation taxes;=20
cash and property withdrawals; bonuses; loans; advances; payments to=20
immediate family members; investments on behalf of an owner, officer, or =

key employee; acquisition of a business not merged with the 8(a)=20
Participant; charitable contributions; and speculative ventures.
    (2) If SBA determines that excessive funds or other assets have been =

withdrawn from the Participant, SBA may:
    (i) Initiate termination proceedings under Sec. Sec. =
124.303 and=20
124.304 where the withdrawals detrimentally affect the =
achievement of=20
the Participant's targets, objectives and goals set forth in its=20
business plan, or its overall business development;
    (ii) Initiate early graduation proceedings under Sec. Sec. =
124.302=20
and 124.303 where the withdrawals do not adversely =
affect the=20
Participant's business development; or
    (iii) Require an appropriate reinvestment of funds or other assets,=20
as well as any other actions SBA deems necessary to counteract the=20
detrimental effects of the withdrawals, as a condition of the=20
Participant maintaining program eligibility.

[[Page 380]]

    (3) Withdrawals are excessive if during any fiscal year of the=20
Participant they exceed (i) $150,000 for firms with sales up to=20
$1,000,000; (ii) $200,000 for firms with sales between $1,000,000 and=20
$2,000,000; and (iii) $300,000 for firms with sales over $2,000,000.
    (4) The fact that a concern's net worth has increased despite=20
withdrawals that are deemed excessive will not preclude SBA from=20
determining that such withdrawals were detrimental to the attainment of=20
the concern's business objectives or to its overall business=20
development.

                     Applying to the 8(a) BD Program

Sec. 124.201  May any business submit an application?

    Any concern or any individual on behalf of a business has the right=20
to apply for 8(a) BD program participation whether or not there is an=20
appearance of eligibility.

Sec. 124.202  Where must an application be filed?

    An application for 8(a) BD program admission must be filed in the=20
SBA Division of Program Certification and Eligibility (DPCE) field=20
office serving the territory in which the principal place of business is =

located. The SBA district office will provide an applicant concern with=20
information regarding the 8(a) BD program and with all required=20
application forms.

Sec. 124.203  What must a concern submit to apply to =
the 8(a) BD=20
          program?

    Each 8(a) BD applicant concern must submit those forms and=20
attachments required by SBA when applying for admission to the 8(a) BD=20
program. These forms and attachments will include, but not be limited=20
to, financial statements, Federal personal and business tax returns, and =

personal history statements. An applicant must also submit IRS Form=20
4506, Request for Copy or Transcript of Tax Form, to SBA. The=20
application package may be in the form of an electronic application.

Sec. 124.204  How does SBA process applications for =
8(a) BD program=20
          admission?

    (a) The AA/8(a)BD is authorized to approve or decline applications=20
for admission to the 8(a) BD program. The appropriate DPCE field office=20
will receive, review and evaluate all 8(a) BD applications except those=20
from ANC-owned applicants. SBA's Anchorage District Office will receive=20
all applications from ANC-owned applicants and review them for=20
completeness before sending them to the AA/8(a)BD for further=20
processing. The appropriate field office will advise each program=20
applicant within 15 days after the receipt of an application whether the =

application is complete and suitable for evaluation and, if not, what=20
additional information or clarification is required to complete the=20
application. SBA will process an application for 8(a) BD program=20
participation within 90 days of receipt of a complete application=20
package by the DPCE field office. Incomplete application packages will=20
not be processed.
    (b) SBA, in its sole discretion, may request clarification of=20
information contained in the application at any time in the application=20
process. SBA will take into account any clarifications made by an=20
applicant in response to a request for such by SBA.
    (c) An applicant concern's eligibility will be based on=20
circumstances existing on the date of application, except where=20
clarification is made pursuant to paragraph (b) of this section or as=20
provided in paragraph (d) of this section.
    (d) Changed circumstances for an applicant concern occurring=20
subsequent to its application and which adversely affect eligibility=20
will be considered and may constitute grounds for decline. The applicant =

must inform SBA of any changed circumstances that could adversely affect =

its eligibility for the program (particularly economic disadvantage and=20
ownership and control) during its application review. Failure to inform=20
SBA of any such changed circumstances constitutes good cause for which=20
SBA may terminate the Participant if non-compliance is discovered after=20
admittance.
    (e) The decision of the AA/8(a)BD to approve or deny an application=20
will be in writing. A decision to deny admission will state the specific =

reasons for denial, and will inform the applicant of any appeal rights.

[[Page 381]]

    (f) If the AA/8(a)BD approves the application, the date of the=20
approval letter is the date of program certification for purposes of=20
determining the concern's program term.

Sec. 124.205  Can an applicant ask SBA to reconsider =
SBA's initial=20
          decision to decline its application?

    (a) An applicant may request the AA/8(a)BD to reconsider his or her=20
initial decline decision by filing a request for reconsideration with=20
the SBA field office that originally processed its application. Filing=20
means submission by personal delivery, first-class mail, express mail,=20
fascimile transmission followed by first-class mail, or commercial=20
delivery service. The applicant must submit its request for=20
reconsideration within 45 days of receiving notice that its application=20
was declined. The applicant must provide any additional information and=20
documentation pertinent to overcoming the reason(s) for the initial=20
decline.
    (b) The AA/8(a)BD will issue a written decision within 45 days of=20
the regional DPCE's receipt of the applicant's request. The AA/8(a)BD=20
may either approve the application, deny it on the same grounds as the=20
original decision, or deny it on other grounds. If denied, the AA/8(a)BD =

will explain why the applicant is not eligible for admission to the 8(a) =

BD program and give specific reasons for the decline.
    (c) If the AA/8(a)BD declines the application solely on issues not=20
raised in the initial decline, the applicant can ask for reconsideration =

as if it were an initial decline.

Sec. 124.206  What appeal rights are available to an =
applicant that has=20
          been denied admission?

    (a) An applicant may appeal a denial of program admission to SBA's=20
Office of Hearings and Appeals (OHA), if it is based solely on a=20
negative finding of social disadvantage, economic disadvantage,=20
ownership, control, or any combination of these four criteria. A denial=20
decision that is based at least in part on the failure to meet any other =

eligibility criterion is not appealable and is the final decision of=20
SBA.
    (b) The applicant may appeal an initial decision of the AA/8(a)BD=20
without requesting reconsideration, or may appeal the decision of the=20
AA/8(a)BD on reconsideration.
    (c) The applicant may initiate an appeal by filing a petition in=20
accordance with part 134 of this chapter with OHA within 45 days after=20
the applicant receives the Agency decision.
    (d) If an appeal is filed with OHA, the written decision of the=20
Administrative Law Judge is the final Agency decision. If an appealable=20
decision is not appealed, the decision of the AA/8(a)BD is the final=20
Agency decision.

[63 FR 35739, June 30, 1998, as amended at 67 FR 47246, July 18, 2002]

Sec. 124.207  Can an applicant reapply for admission to =
the 8(a) BD=20
          program?

    A concern which has been declined for 8(a) BD program admission may=20
submit a new application for admission to the program 12 months after=20
the date of the final Agency decision to decline.

                       Exiting the 8(a) BD Program

Sec. 124.301  What are the ways a business may leave =
the 8(a) BD=20
          program?

    A concern participating in the 8(a) BD program may leave the program =

by any of the following means:
    (a) Graduation upon the expiration of the program term established=20
pursuant to Sec. 124.2;
    (b) Voluntary early graduation;
    (c) Early graduation pursuant to the provisions of Sec. Sec.=20
124.302 and 124.304; or
    (d) Termination pursuant to the provisions of Sec. Sec. =
124.303 and=20
124.304.

Sec. 124.302  What is early graduation?

    (a) General. SBA may graduate a firm from the 8(a) BD program prior=20
to the expiration of its Program Term where SBA determines that:
    (1) The concern has successfully completed the 8(a) BD program by=20
substantially achieving the targets, objectives, and goals set forth in=20
its business plan prior to the expiration of its program term, and has=20
demonstrated the ability to compete in the marketplace without=20
assistance under the 8(a) BD program; or
    (2) One or more of the disadvantaged owners upon whom the=20
Participant's

[[Page 382]]

eligibility is based are no longer economically disadvantaged.
    (b) Criteria for determining whether a Participant has met its goals =

and objectives. In determining whether a Participant has substantially=20
achieved the targets, objectives and goals of its business plan and in=20
assessing the overall competitive strength and viability of a=20
Participant, SBA considers the totality of circumstances, including the=20
following factors:
    (1) Degree of sustained profitability;
    (2) Sales trends, including improved ratio of non-8(a) sales to 8(a) =

sales since program entry;
    (3) Business net worth, financial ratios, working capital,=20
capitalization, and access to credit and capital;
    (4) Current ability to obtain bonding;
    (5) A comparison of the Participant's business and financial=20
profiles with profiles of non-8(a) BD businesses having the same primary =

four-digit SIC code as the Participant;
    (6) Strength of management experience, capability, and expertise;=20
and
    (7) Ability to operate successfully without 8(a) contracts.
    (c) Excessive withdrawals. SBA may graduate a Participant prior to=20
the expiration of its program term where excessive funds or other assets =

have been withdrawn from the Participant (see Sec. =
124.112(d)(3)),=20
causing SBA to determine that the Participant has demonstrated the=20
ability to compete in the marketplace without assistance under the 8(a)=20
BD program.
    (d) Benchmark achievement. SBA may graduate a Participant prior to=20
the expiration of its program term where the Participant has=20
substantially achieved the targets, objectives and goals of its business =

plan as adjusted under Sec. 124.403(d) and its primary =
industry=20
classification falls within a SIC Major Group in which the benchmarks=20
described in Sec. 124.403(d) have been achieved.

[63 FR 35739, 35772, June 30, 1998]

Sec. 124.303  What is termination?

    (a) SBA may terminate the participation of a concern in the 8(a) BD=20
program prior to the expiration of the concern's Program Term for good=20
cause. Examples of good cause include, but are not limited to, the=20
following:
    (1) Submission of false information in the concern's 8(a) BD=20
application, regardless of whether correct information would have caused =

the concern to be denied admission to the program, and regardless of=20
whether correct information was given to SBA in accompanying documents=20
or by other means.
    (2) Failure by the concern to maintain its eligibility for program=20
participation.
    (3) Failure by the concern for any reason, including the death of an =

individual upon whom eligibility was based, to maintain ownership, full-
time day-to-day management, and control by disadvantaged individuals.
    (4) Failure by the concern to obtain prior written approval from SBA =

for any changes in ownership or business structure, management or=20
control pursuant to Sec. Sec. 124.105 and =
124.106.
    (5) Failure by the concern to disclose to SBA the extent to which=20
non-disadvantaged persons or firms participate in the management of the=20
Participant business concern.
    (6) Failure by the concern or one or more of the concern's=20
principals to maintain good character.
    (7) A pattern of failure to make required submissions or responses=20
to SBA in a timely manner, including a failure to provide required=20
financial statements, requested tax returns, reports, updated business=20
plans, information requested by SBA's Office of Inspector General, or=20
other requested information or data within 30 days of the date of=20
request.
    (8) Cessation of business operations by the concern.
    (9) Failure by the concern to pursue competitive and commercial=20
business in accordance with its business plan, or failure in other ways=20
to make reasonable efforts to develop and achieve competitive viability.
    (10) A pattern of inadequate performance by the concern of awarded=20
section 8(a) contracts.
    (11) Failure by the concern to pay or repay significant financial=20
obligations owed to the Federal Government.
    (12) Failure by the concern to obtain and keep current any and all=20
required permits, licenses, and charters, including suspension or=20
revocation of any

[[Page 383]]

professional license required to operate the business.
    (13) Excessive withdrawals, including transfers of funds or other=20
business assets, from the concern for the personal benefit of any of its =

owners or any person or entity affiliated with the owners that hinder=20
the development of the concern (see Sec. 124.112(d).
    (14) Unauthorized use of SBA direct or guaranteed loan proceeds or=20
violation of an SBA loan agreement.
    (15) Submission by or on behalf of a Participant of false=20
information to SBA, including false certification of compliance with=20
non-8(a) business activity targets under Sec. 124.507 =
or failure to=20
report changes that adversely affect the program eligibility of an=20
applicant or program participant under Sec. 124.204 and =
Sec. 124.112,=20
where responsible officials of the 8(a) BD Participant knew or should=20
have known the submission to be false.
    (16) Debarment, suspension, voluntary exclusion, or ineligibility of =

the concern or its principals pursuant to part 145 of this title or FAR=20
subpart 9.4 (48 CFR part 9, subpart 9.4).
    (17) Conduct by the concern, or any of its principals, indicating a=20
lack of business integrity. Such conduct may be demonstrated by=20
information related to a criminal indictment or guilty plea, a criminal=20
conviction, or a judgment or settlement in a civil case.
    (18) Willful failure by the Participant business concern to comply=20
with applicable labor standards and obligations.
    (19) Material breach of any terms and conditions of the 8(a) BD=20
Program Participation Agreement.
    (20) Willful violation by a concern, or any of its principals, of=20
any SBA regulation pertaining to material issues.
    (b) The examples of good cause listed in paragraph (a) of this=20
section are intended to be illustrative only. Other grounds for=20
terminating a Participant from the 8(a) BD program for cause may exist=20
and may be used by SBA.

Sec. 124.304  What are the procedures for early =
graduation and=20
          termination?

    (a) General. The same procedures apply to both early graduation and=20
termination of Participants from the 8(a) BD program.
    (b) Letter of Intent to Terminate or Graduate Early. When SBA=20
believes that a Participant should be terminated or graduated prior to=20
the expiration of its program term, SBA will notify the concern in=20
writing. The Letter of Intent to Terminate or Graduate Early will set=20
forth the specific facts and reasons for SBA's findings, and will notify =

the concern that it has 30 days from the date it receives the letter to=20
submit a written response to SBA explaining why the proposed ground(s)=20
should not justify termination or early graduation.
    (c) Recommendation and decision. Following the 30-day response=20
period, the Assistant Administrator for DPCE (AA/DPCE) or designee will=20
consider the proposed early graduation or termination and any=20
information submitted in response by the concern. Upon determining that=20
early graduation or termination is not warranted, the AA/DPCE or=20
designee will notify the Participant in writing. If early graduation or=20
termination appears warranted, the AA/DPCE will make such a=20
recommendation to the AA/8(a)BD, who will then make a decision whether=20
to early graduate or terminate the concern. SBA will act in a timely=20
manner in processing early graduation and termination actions.
    (d) Notice requirements. Upon deciding that early graduation or=20
termination is warranted, the AA/8(a)BD will issue a Notice of Early=20
Graduation or Termination. The Notice will set forth the specific facts=20
and reasons for the decision, and will advise the concern that it may=20
appeal the decision in accordance with the provisions of part 134 of=20
this title.
    (e) Appeal to OHA. Procedures governing appeals of early graduation=20
or termination to SBA's OHA are set forth in part 134. If a Participant=20
does not appeal a Notification of Early Graduation or Termination within =

45 days after the Participant receives the Notification, the decision of =

the AA/8(a)BD is the final agency decision effective on the date the=20
appeal right expired.
    (f) Effect of early graduation or termination. After the effective=20
date of early graduation or termination, a Participant is no longer=20
eligible to receive any

[[Page 384]]

8(a) BD program assistance. However, such concern is obligated to=20
complete previously awarded 8(a) contracts, including any priced options =

which may be exercised.

[63 FR 35739, June 30, 1998, as amended at 67 FR 47246, July 18, 2002]

Sec. 124.305  What is suspension and how is a =
Participant suspended=20
          from the 8(a) BD program?

    (a) At any time after SBA issues a Letter of Intent to Terminate=20
pursuant to Sec. 124.304, the AA/8(a)BD may suspend =
8(a) contract=20
support and all other forms of 8(a) BD program assistance to that=20
concern until the issue of the concern's termination from the program is =

finally decided. The AA/8(a)BD may suspend a Participant when he or she=20
determines that suspension is needed to protect the interests of the=20
Federal Government, such as where information showing a clear lack of=20
program eligibility or conduct indicating a lack of business integrity=20
exists, including where the concern or one of its principals submitted=20
false statements to the Federal Government. SBA will suspend a=20
Participant where SBA determines that the Participant submitted false=20
information in its 8(a) BD application.
    (b) SBA will issue a Notice of Suspension to the Participant's last=20
known address by certified mail, return receipt requested. Suspension is =

effective as of the date of the issuance of the Notice. The Notice will=20
provide the following information:
    (1) The basis for the suspension;
    (2) A statement that the suspension will continue pending the=20
completion of further investigation, a final program termination=20
determination, or some other specified period of time;
    (3) A statement that awards of competitive and non-competitive 8(a)=20
contracts, including those which have been ``self-marketed'' by a=20
Participant, will not be made during the pendency of the suspension=20
unless it is determined by the head of the relevant procuring agency or=20
an authorized representative to be in the best interest of the=20
Government to do so, and SBA adopts that determination;
    (4) A statement that the concern is obligated to complete previously =

awarded section 8(a) contracts;
    (5) A statement that the suspension is effective nationally=20
throughout SBA;
    (6) A statement that a request for a hearing on the suspension will=20
be considered by an Administrative Law Judge at OHA, and granted or=20
denied as a matter of discretion.
    (7) A statement that the firm's participation in the program is=20
suspended effective on the date the Notice is served, and that the=20
program term will resume only if the suspension is lifted or the firm is =

not terminated.
    (c) The Participant may appeal a Notice of Suspension by filing a=20
petition in accordance with part 134 of this chapter with OHA within 45=20
days after the concern receives the Notice of Suspension pursuant to=20
paragraph (b) of this section. It is contemplated that in most cases a=20
hearing on the issue of the suspension will be afforded if the=20
Participant requests one, but authority to grant a hearing is within the =

discretion of the Administrative Law Judge in OHA. A suspension remains=20
in effect pending the result of its appeal.
    (d) SBA has the burden of showing that adequate evidence exists that =

protection of the Federal Government's interest requires suspension=20
before OHA or the AA/8(a)BD makes a final determination regarding the=20
termination action.
    (1) The term ``adequate evidence'' means information contained in=20
the record before the AA/8(a)BD at the time of his or her suspension=20
decision that is sufficient to support the reasonable belief that the=20
Government's interests need to be protected.
    (2) SBA need not demonstrate that an act or omission actually=20
occurred in order for OHA to uphold a suspension. SBA's burden in a=20
suspension proceeding is limited to demonstrating that it had a=20
reasonable belief that a particular act or omission occurred, and that=20
that act or omission requires suspension to protect the interests of the =

Government.
    (3) Unless the Administrative Law Judge consolidates the suspension=20
and termination proceedings, OHA's review is limited to determining=20
whether the

[[Page 385]]

Government's interests need to be protected, and will not consider the=20
merits of the termination action.
    (e) If there is a timely appeal, the decision of the Administrative=20
Law Judge is the final SBA decision. If there is not a timely appeal,=20
the decision of the AA/8(a)BD is the final Agency decision.
    (f) Upon the request of SBA, OHA may consolidate suspension and=20
termination proceedings when the issues presented are identical.
    (g) Any program suspension which occurs under this section is=20
effective until such time as SBA lifts the suspension or the=20
Participant's participation in the program is fully terminated. If the=20
concern is ultimately not terminated from the 8(a) BD program, the=20
suspension will be lifted and the length of the suspension will be added =

to the concern's program term.
    (h) SBA may suspend a Participant from program benefits where a=20
change of ownership or business structure has been requested if=20
ownership or control of the participant changed prior to SBA's approval=20
pending resolution of the request to change its ownership or control. If =

the change of ownership is approved, the length of the suspension will=20
be added to the firm's program term where the change in ownership=20
results from the death or incapacity of a disadvantaged individual or=20
where the firm requested prior approval and waited 60 days for SBA=20
approval before making the change. The suspension will be commenced by=20
the issuance of a notice similar to that required for termination-
related suspensions under paragraph (b) of this section, except that a=20
change of ownership suspension is not appealable.
    (i) SBA does not recognize the concept of de facto suspension.=20
Adding time to the end of a Participant's program term equal to the=20
length of a suspension will occur only where a concern's program=20
participation has been formally suspended in accordance with the=20
procedures set forth in this section.
    (j) A suspension from 8(a) BD participation under this section has=20
no effect on a concern's eligibility for non-8(a) Federal Government=20
contracts. However, a debarment or suspension under the Federal=20
Acquisition Regulation (48 CFR, chapter 1) will disqualify a concern=20
from receiving all Federal Government contracts, including 8(a)=20
contracts.

[63 FR 35739, June 30, 1998, as amended at 67 FR 47246, July 18, 2002]

                          Business Development

Sec. 124.401  Which SBA field office services a =
Participant?

    The SBA district office which serves the geographical territory=20
where a Participant's principal place of business is located normally=20
will service the concern during its participation in the 8(a) BD=20
program.

Sec. 124.402  How does a Participant develop a business =
plan?

    (a) General. In order to assist the SBA servicing office in=20
determining the business development needs of its portfolio=20
Participants, each Participant must develop a comprehensive business=20
plan setting forth its business targets, objectives, and goals.
    (b) Submission of initial business plan. Each Participant must=20
submit a business plan to its SBA servicing office as soon as possible=20
after program admission. The Participant will not be eligible for 8(a)=20
BD program benefits, including 8(a) contracts, until SBA approves its=20
business plan.
    (c) Contents of business plan. The business plan must contain at=20
least the following:
    (1) A detailed description of any products currently being produced=20
and any services currently being performed by the concern, as well as=20
any future plans to enter into one or more new markets;
    (2) The applicant's designation of its primary industry=20
classification, as defined in Sec. 124.3;
    (3) An analysis of market potential, competitive environment, and=20
the concern's prospects for profitable operations during and after its=20
participation in the 8(a) BD program;
    (4) An analysis of the concern's strengths and weaknesses, with=20
particular attention on ways to correct any financial, managerial,=20
technical, or work force conditions which could impede the concern from=20
receiving and performing non-8(a) contracts;

[[Page 386]]

    (5) Specific targets, objectives, and goals for the business=20
development of the concern during the next two years;
    (6) Estimates of both 8(a) and non-8(a) contract awards that will be =

needed to meet its targets, objectives and goals; and
    (7) Such other information as SBA may require.

Sec. 124.403  How is a business plan updated and =
modified?

    (a) Annual review. Each Participant must annually review its=20
business plan with its assigned Business Opportunity Specialist (BOS),=20
and modify the plan as appropriate. The Participant must submit a=20
modified plan and updated information to its BOS within thirty (30) days =

after the close of each program year. It also must submit a capability=20
statement describing its current contract performance capabilities as=20
part of its updated business plan.
    (b) Contract forecast. As part of the annual review of its business=20
plan, each Participant must annually forecast in writing its needs for=20
contract awards for the next program year. The forecast must include:
    (1) The aggregate dollar value of 8(a) contracts to be sought,=20
broken down by sole source and competitive opportunities where possible;
    (2) The aggregate dollar value of non-8(a) contracts to be sought;
    (3) The types of contract opportunities to be sought, identified by=20
product or service; and
    (4) Such other information as SBA may request to aid in providing=20
effective business development assistance to the Participant.
    (c) Transition management strategy. Beginning in the first year of=20
the transitional stage of program participation, each Participant must=20
annually submit a transition management strategy to be incorporated into =

its business plan. The transition management strategy must describe:
    (1) How the Participant intends to meet the applicable non-8(a)=20
business activity target imposed by Sec. 124.507 during =
the=20
transitional stage of participation; and
    (2) The specific steps the Participant intends to take to continue=20
its business growth and promote profitable business operations after the =

expiration of its program term.
    (d) Benchmark achievement. Where actual participation by=20
disadvantaged businesses in a particular SIC Major Group exceeds the=20
benchmark limitations established by the Department of Commerce for that =

Major Group, SBA may adjust the targets, objectives and goals contained=20
in the business plans of Participants whose primary industry=20
classification falls within that Major Group. Any adjustment will take=20
into account projected decreases in 8(a) and SDB contracting=20
opportunities.

[63 FR 35739, 35772, June 30, 1998]

Sec. 124.404  What business development assistance is =
available to=20
          Participants during the two stages of participation in the=20
          8(a) BD program?

    (a) General. Participation in the 8(a) BD program is divided into=20
two stages, a developmental stage and a transitional stage. The=20
developmental stage will last four years, and the transitional stage=20
will last five years, unless the concern has exited the program by one=20
of the means set forth in Sec. 124.301 prior to the =
expiration of its=20
program term.
    (b) Developmental stage of program participation. A Participant, if=20
otherwise eligible, may receive the following assistance during the=20
developmental stage of program participation:
    (1) Sole source and competitive 8(a) contract support;
    (2) Financial assistance pursuant to Sec. 120.375 of this title;
    (3) The transfer of technology or surplus property owned by the=20
United States pursuant to Sec. 124.405; and
    (4) Training to aid in developing business principles and strategies =

to enhance their ability to compete successfully for both 8(a) and non-
8(a) contracts.
    (c) Transitional stage of program participation. A Participant, if=20
otherwise eligible, may receive the following assistance during the=20
transitional stage of program participation:
    (1) The same assistance as that provided to Participants in the=20
developmental stage;

[[Page 387]]

    (2) Assistance from procuring agencies (in cooperation with SBA) in=20
forming joint ventures, leader-follower arrangements, and teaming=20
agreements between the concern and other Participants or other business=20
concerns with respect to contracting opportunities outside the 8(a) BD=20
program for research, development, or full scale engineering or=20
production of major systems (these arrangements must comply with all=20
relevant statutes and regulations, including applicable size standard=20
requirements); and
    (3) Training and technical assistance in transitional business=20
planning.

Sec. 124.405  How does a Participant obtain Federal =
Government surplus=20
          property?

    (a) General. (1) Pursuant to 15 U.S.C. 636(j)(13)(F), eligible=20
Participants may receive surplus Federal Government property from State=20
Agencies for Surplus Property (SASPs). The procedures set forth in 41=20
CFR Part 101-44 and this section will be used to transfer surplus=20
property to eligible Participants.
    (2) The property which may be transferred to SASPs for further=20
transfer to eligible Participants includes all personal property which=20
has been determined to be ``donable'' as defined in 41 CFR 101-44.001-3.
    (b) Eligibility to receive Federal surplus property. To be eligible=20
to receive Federal surplus property, on the date of transfer a concern=20
must:
    (1) Be in the 8(a) BD program;
    (2) Be in compliance with all program requirements, including any=20
reporting requirements;
    (3) Not be debarred, suspended, or declared ineligible under part 9, =

subpart 9.4 of the Federal Acquisition Regulations, Title 48 of the Code =

of Federal Regulations;
    (4) Not be under a pending 8(a) BD program suspension, termination=20
or early graduation proceeding; and
    (5) Be engaged or expect to be engaged in business activities making =

the item useful to it.
    (c) Use of acquired surplus property. (1) Eligible Participants may=20
acquire surplus Federal property from any SASP located in any state,=20
provided the concern represents and agrees in writing:
    (i) As to what the intended use of the surplus property is to be and =

that this use is consistent with the objectives of the concern's 8(a)=20
business plan;
    (ii) That it will use the property to be acquired in the normal=20
conduct of its business activities or be liable for the fair rental=20
value from the date of its receipt;
    (iii) That it will not sell or transfer the property to be acquired=20
to any party other than the Federal Government during its term of=20
participation in the 8(a) program and for one year after it leaves the=20
program;
    (iv) That, at its own expense, it will return the property to a SASP =

or transfer it to another Participant if directed to do so by SBA=20
because it has not used the property as intended within one year of=20
receipt;
    (v) That, should it breach its agreement not to sell or transfer the =

property, it will be liable to the Government for the established fair=20
market value or the sale price, whichever is greater, of the property=20
sold or transferred; and
    (vi) That it will give SBA access to inspect the property and all=20
records pertaining to it.
    (2) A firm receiving surplus property pursuant to this section=20
assumes all liability associated with or stemming from the use of the=20
property.
    (3) If the property is not placed in use for the purposes for which=20
it was intended within one year of its receipt, SBA may direct the=20
concern to deliver the property to another Participant or to the SASP=20
from which it was acquired.
    (4) Failure to comply with any of the commitments made under=20
paragraph (c)(1) of this section constitutes a basis for termination=20
from the 8(a) program.
    (d) Procedures for acquiring Federal Government surplus property.=20
(1) Participants may participate in the surplus property distribution=20
program administered by the SASPs to the same extent, but with no=20
special priority over, other authorized transferees. See 41 CFR subpart=20
101-44.2.
    (2) Each Participant seeking to acquire Federal Government surplus=20
property from a SASP must:

[[Page 388]]

    (i) Certify in writing to the SASP that it is eligible to receive=20
the property pursuant to paragraph (b) of this section;
    (ii) Make the written representations and agreement required by=20
paragraph (c)(1) of this section; and
    (iii) Identify to the SASP its servicing SBA field office.
    (3) Upon receipt of the required certification, representations,=20
agreement, and information set forth in paragraph (d)(2) of this=20
section, the SASP must contact the appropriate SBA field office and=20
obtain SBA's verification that the concern seeking to acquire the=20
surplus property is eligible, and that the identified use of the=20
property is consistent with the concern's business activities. SASPs may =

not release property to a Participant without this verification.
    (4) The SASP and the Participant must agree on and record the fair=20
market value of the surplus property at the time of the transfer to the=20
Participant. The SASP must provide to SBA a written record, including=20
the agreed upon fair market value, of each transaction to a Participant=20
when any property has been transferred.
    (e) Costs. Participants acquiring surplus property from a SASP must=20
pay a service fee to the SASP which is equal to the SASP's direct costs=20
of locating, inspecting, and transporting the surplus property. If a=20
Participant elects to incur the responsibility and the expense for=20
transporting the acquired property, the concern may do so and no=20
transportation costs will be charged by the SASP. In addition, the SASP=20
may charge a reasonable fee to cover its costs of administering the=20
program. In no instance will any SASP charge a Participant more for any=20
service than their established fees charged to other transferees.
    (f) Title. The title to surplus property acquired from a SASP will=20
pass to the Participant when the Participant executes the applicable=20
SASP distribution documents and takes possession of the property.
    (g) Compliance. (1) SBA will periodically review whether=20
Participants that have received surplus property have used and=20
maintained the property as agreed. This review may include site visits=20
to visually inspect the property to ensure that it is being used in a=20
manner consistent with the terms of its transfer.
    (2) Participants must provide SBA with access to all relevant=20
records upon request.
    (3) Where SBA receives credible information that transferred surplus =

property may have been disposed of or otherwise used in a manner that is =

not consistent with the terms of the transfer, SBA may investigate such=20
claim to determine its validity.
    (4) SBA may take any action to correct any noncompliance involving=20
the use of transferred property still in possession of the Participant=20
or to enforce any terms, conditions, reservations, or restrictions=20
imposed on the property by the distribution document. Actions to enforce =

compliance, or which may be taken as a result of noncompliance, include=20
the following:
    (i) Requiring that the property be placed in proper use within a=20
specified time;
    (ii) Requiring that the property be transferred to another=20
Participant having a need and use for the property, returned to the SASP =

serving the area where the property is located for distribution to=20
another eligible transferee or to another SASP, or transferred through=20
GSA to another Federal agency;
    (iii) Recovery of the fair rental value of the property from the=20
date of its receipt by the Participant; and
    (iv) Initiation of proceedings to terminate the Participant from the =

8(a) BD program.
    (5) Where SBA finds that a recipient has sold or otherwise disposed=20
of the acquired surplus property in violation of the agreement covering=20
sale and disposal, the Participant is liable for the agreed upon fair=20
market value of the property at the time of the transfer, or the sale=20
price, whichever is greater. However, a Participant need not repay any=20
amount where it can demonstrate to SBA's satisfaction that the property=20
is no longer useful for the purpose for which it was transferred and=20
receives SBA's prior written consent to transfer the property. For=20
example, if a piece of equipment breaks down beyond repair, it may be=20
disposed of without being

[[Page 389]]

subject to the repayment provision, so long as the concern receives=20
SBA's prior consent.
    (6) Any funds received by SBA in enforcement of this section will be =

remitted promptly to the Treasury of the United States as miscellaneous=20
receipts.

                         Contractual Assistance

Sec. 124.501  What general provisions apply to the =
award of 8(a)=20
          contracts?

    (a) Pursuant to section 8(a) of the Small Business Act, SBA is=20
authorized to enter into all types of contracts with other Federal=20
agencies, including contracts to furnish equipment, supplies, services,=20
leased real property, or materials to them or to perform construction=20
work for them, and to contract the performance of these contracts to=20
qualified Participants. Where practicable, simplified acquisition=20
procedures should be used for 8(a) contracts at or below the simplified=20
acquisition threshold. Where appropriate, SBA will delegate the contract =

execution function to procuring activities. In order to receive and=20
retain a delegation of SBA's contract execution and review functions, a=20
procuring activity must report all 8(a) contract awards, modifications,=20
and options to SBA.
    (b) 8(a) contracts may either be sole source awards or awards won=20
through competition with other Participants.
    (c) Admission into the 8(a) BD program does not guarantee that a=20
Participant will receive 8(a) contracts.
    (d) A requirement for possible award may be identified by SBA, a=20
particular Participant or the procuring activity itself. SBA will submit =

the capability statements provided to SBA annually under Sec. =
124.403=20
to appropriate procuring activities for the purpose of matching=20
requirements with Participants.
    (e) Participants should market their capabilities to appropriate=20
procuring activities to increase their prospects of receiving sole=20
source 8(a) contracts.
    (f) An 8(a) participant that identifies a requirement that appears=20
suitable for award through the 8(a) BD program may request SBA to=20
contact the procuring activity to request that the requirement be=20
offered to the 8(a) BD program.
    (g) A concern must be a current Participant in the 8(a) BD program=20
at the time of award, except as provided in Sec. =
124.507(d).
    (h) A Participant must certify that it is a small business under the =

size standard corresponding to the SIC code assigned to each 8(a)=20
contract. 8(a) BD program personnel will verify size prior to award of=20
an 8(a) contract. If the Participant is not verified as small, it may=20
request a formal size determination from the appropriate General=20
Contracting Area Office under part 121 of this title.
    (i) Any person or entity that misrepresents its status as a ``small=20
business concern owned and controlled by socially and economically=20
disadvantaged individuals'' in order to obtain any 8(a) contracting=20
opportunity will be subject to possible criminal, civil and=20
administrative penalties, including those imposed by section 16(d) of=20
the Small Business Act, 15 U.S.C. 645(d).

Sec. 124.502  How does an agency offer a procurement to =
SBA for award=20
          through the 8(a) BD program?

    (a) A procuring activity contracting officer indicates his or her=20
formal intent to award a procurement requirement as an 8(a) contract by=20
submitting a written offering letter to SBA. The procuring activity may=20
transmit the offering letter to SBA by electronic mail, if available, or =

by facsimile transmission, as well as by mail or commercial delivery=20
service.
    (b) Contracting officers must submit offering letters to the=20
following locations:
    (1) For competitive 8(a) requirements and those sole source=20
requirements for which no specific Participant is nominated (i.e., open=20
requirements) other than construction requirements, to the SBA district=20
office serving the geographical area in which the procuring activity is=20
located;
    (2) For competitive and open construction requirements, to the SBA=20
district office serving the geographical area in which the work is to be =

performed or, in the case of such contracts to be performed overseas, to =

the Office of 8(a) BD located in SBA Headquarters;

[[Page 390]]

    (3) For sole source requirements offered on behalf of a specific=20
Participant, to the SBA district office servicing that concern.
    (c)