What Happened?

Small business owners hoping to win federal contracts through the 8(a) program now need proof that discrimination held them back, and anyone already in line is on a deadline. A Small Business Administration rule that took effect Thursday, Sept. 10, ended the presumption that members of certain racial and ethnic groups, including Black, Hispanic and Native Americans, are socially disadvantaged. ​

The 8(a) program helps disadvantaged owners win federal work, sometimes without open bidding. The SBA hasn’t used the presumption since July 2023, when a federal judge in Tennessee ruled in Ultima Services Corp. v. U.S. Department of Agriculture that it violated equal protection. A Legis1 analysis of a Congressional Research Service review traced how that court-ordered pause became a permanent rule, proposed June 11 and finalized Aug. 11.

Why Does It Matter To Me?

Under the new test, an applicant must point to evidence that a government or private policy discriminated against a group they belong to, then certify that it materially harmed them. Examples include race-based quotas, unlawful diversity, equity and inclusion programs, and barriers to federal contracts that other groups didn’t face. The SBA says any American can use the test, including white owners, who previously had to prove disadvantage individually.

Here’s who is affected:

  • Applicants: Individually owned firms pending on Sept. 10, and all new applicants, must meet the new test.
  • Current participants: Firms already admitted don’t have to prove it again.
  • Tribal and community-owned firms: Businesses owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations and Community Development Corporations are exempt.

Both Sides, Now

The SBA argues a race-based presumption kept “all Americans regardless of race” from equal access to the program. The Justice Department told Congress in November 2025 that it considered the presumption unconstitutional and would stop defending it. The SBA’s Office of Advocacy backed a “fact-based, race-neutral standard” in July, while urging the agency not to stall eligible firms.

Sen. Ed Markey (D-MA), the top Democrat on the Senate Small Business Committee, and Sen. Mazie Hirono (D-HI) objected in a July 17 letter to SBA Administrator Kelly Loeffler. “Discrimination is not dead,” they wrote, adding that the record “remains devoid of evidence of discrimination against White individuals on the basis of race.” A plurality of the 114 public comments opposed the rule, though the SBA said many fell outside its scope.

What Happens Next?

The SBA began returning pending applications Sept. 10 and gave owners 45 calendar days to revise and resubmit, according to the contracting blog SmallGovCon. For owners notified that day, the window closes Sunday, Oct. 25, and late applications are closed automatically.

Rep. Gil Cisneros (D-CA) and Rep. Nydia Velázquez (D-NY) introduced the 8(a) Small Business Integrity and Stability Act on Aug. 10. It would give current participants an extra year and keep them under the old rules, but wouldn’t restore the presumption for new applicants. The bill sits in the House Small Business Committee and would need that panel’s approval, votes in both chambers and the president’s signature to become law. Congress returns Monday, Nov. 9.

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