Federal spending on 8(a) contracts typically surges during the fourth quarter, but new court-imposed requirements to qualify those small businesses will likely procurements and scare off agency buyers.
The federal court decision declaring parts of the 8(a) program unconstitutional couldn’t have come at a worse time as government buyers work their way through the last quarter of their fiscal year.
The fourth quarter is the busiest buying season of the year as agencies spend their remaining budget dollars. They also are working to meet small business contracting goals for the year and the 8(a) program is a major part of that
While the court case hasn’t thrown out 8(a) contracts, there are more requirements to meet for the companies and agencies.
If companies used rebuttable presumption processes to be certified as 8(a), they now have to submit narratives that describe how they have faced discrimination. The Small Business Administration has to process those narratives and approve them.
Meanwhile, agencies are trying to spend their money. SBA says they can process the narratives in a few days, but I can’t help but wonder how many agencies are looking elsewhere to spend their small business dollars as the fiscal year ends.
It is worth noting that 8(a) companies can continue to win contracts and task orders, they just can’t win them through the 8(a) program itself until SBA has approved their narrative.
Even under a best-case scenario, we are likely to see a significant dip in 8(a) spending during this quarter. Just look at the numbers.
According to our analysis of GovTribe data, there were 3,154 transactions involving 8(a) contracts during the government's fiscal 2022 fourth quarter. Those transactions obligated $3.9 billion in spending.
Those figures become even more significant for 8(a) spending when you look at the fiscal 2022 third quarter that ran April 1 through June 30.
There were 1,291 transactions involving 8(a) contracts, which obligated $1.7 billion in spending.
That’s a huge increase from one quarter to the next that we aren’t going to see this year.
I’m confident that SBA will work through this. SBA will get the processes in place to move through, approve the narratives and sign off on 8(a) contracts. They also will restart the application process so new 8(a) firms come on board.
In short, dollars will flow again through 8(a) contracts.
But I just don’t think it will happen this quarter.