SBA Updates Regulations On 8(a) Sole Source Justifications, SDVOSB Surviving Spouse Ownership, and Dollar Thresholds for Subcontracting Requirements and Sole Source Manufacturing Contracts

Earlier this week, on November 8, 2021, the U.S. Small Business Administration (SBA) issued a direct final rule that updated its regulations addressing 8(a) sole source contracts, SDVOSB ownership by surviving spouses, and certain contracting dollar thresholds, in order to conform those regulations to recent statutory changes.

The final rule adopted changes made under the National Defense Authorization Act of 2020 (NDAA 2020) to how certain surviving spouses are treated for purposes of the ownership requirements for service-disabled veteran-owned small businesses.  In particular, NDAA 2020 permits a surviving spouse of a veteran with a service-connected disability rated as 100 percent disabling, or the surviving spouse of a veteran who dies as a result of a service-connected disability, to remain an eligible owner for ten (10) years after the death of a veteran.  In the case of a death by a veteran with a service-connected disability rated less than 100 percent disabling who does not die as a result of the disability, a surviving spouse remains an eligible owner for three (3) years after the death of the veteran. The final rule updates 13 CFR 125.12 to reflect the NDAA 2020 changes.

The final rule also changes the SBA’s regulations covering justification and approval thresholds for sole source 8(a) procurements in order to reflect recent statutory increases in those thresholds.  Specifically, NDAA 2020 increased the threshold for which a justification and approval is needed for DoD 8(a) procurements to $100 million.  So the SBA’s regulations under § 124.502(c)(17) and § 124.506(b)(5) now reflect this threshold for DoD contracts.  As for non-DoD 8(a) procurements, the final rule increases the justification and approval threshold in the SBA’s regulations from $22 million to $25 million.  This increase reflects changes mandated under the National Defense Authorization Act of 2010 (NDAA 2010) that were already implemented in the Federal Acquisition Regulation (FAR), but that were not reflected in the SBA’s regulations.

Lastly, the final rule incorporates statutory changes to two other thresholds found in the SBA’s regulations - the contracting dollar sole source threshold for 8(a), HUBZone, SDVOSB and WOSB manufacturing contracts, and a threshold under the SBA’s small business subcontracting program.  The National Defense Authorization Act of 2021 (NDAA 2021) raised the 8(a), HUBZone and WOSB sole source threshold for manufacturing contracts to $7 million.  This increased threshold was subsequently incorporated in the FAR’s 8(a), HUBZone, SDVOSB and WOSB regulations but, until the SBA’s latest final rule, was not incorporated into the SBA’s regulations.  In addition, as amended by the final rule, the contracting dollar threshold over which prime contractors must implement the small business subcontracting requirements under 13 CFR 125.3(c), including the submission of an acceptable subcontracting plan, has increased from $700,000 to $750,000 for procurements other than public facility construction contracts, which retain the current $1,500,000 threshold. 

Unless significant adverse comment is received by December 8, the SBA's final direct rule will become effective February 7, 2022.  To read the final direct rule go here. 

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