GovCon Intelligence

The Next Stage of the FAR Overhaul (with David Mullis)

Sam Le — Tue, 30 Jun 2026 10:30:16 GMT

David Mullis has been analyzing the FAR Overhaul from a small-business perspective for well over a year now. So when the FAR Council published its first batches of proposed rules last week, the former SBA Advocacy assistant chief counsel and current regulatory consultant at Gov Contract Pros was my first choice to break down how those rules affect small businesses. There are some surprises in there, David says. The proposed rules aren’t the same as what we saw published last year—instead, there are substantive policy changes. And there are some hidden changes for small businesses that you’ll miss if you read the 1,000 pages too quickly.

Right now, David is pushing to get small businesses more time to comment on the rules. But, if the FAR Council keeps to its current schedule, comments will be due on July 23. David and I talked about the strategies that small businesses should use to make sure their comments are considered, and how they might play a long game to push back on the changes, even if they are finalized.

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Links

David Mullis on LinkedIn

Gov Contract Pros

FAR Overhaul Proposed Rules:

Executive Order on Restoring Common Sense to Federal Procurement

“You Said, We Did: How Public Feedback on Model Deviations Informed the Proposed Rules”

Open FAR Cases tracker

Regulatory Flexibility Act

SBA SBIR Policy Directive

FAR proposed Rule on Controlled Unclassified Information, January 2025

FAR Proposed Rule on Strengthening America’s Cybersecurity Workforce (NICE Framework), January 2025

Guide to the Regulatory Flexibility Act

Regulations.gov docket for comments

Chapters

00:00 - Introduction to the FAR Overhaul

01:28 - What is the Revolutionary FAR Overhaul?

02:30 - The Significance of Proposed Rules

04:05 - The Rulemaking Timeline

06:01 - The Scope of the 12 FAR Rules

07:50 - Substantive Changes vs. Model Deviations

09:41 - The Impact of Public Comments and the Sunset Provision

13:30 - The Regulatory Flexibility Act and 10-Year Reviews

15:06 - Changes to Market Research (Part 10 to Part 7)

17:14 - The Push for COTS and Full and Open Competition

19:15 - Balancing COTS with Cybersecurity and Compliance Risks

20:22 - Oral Acquisition Plans

21:09 - The Impact on Small Business Programs

24:43 - Good News for SBIR/STTR Programs

27:13 - The New CUI and Cybersecurity Requirements

32:41 - The 30-Day Comment Period Debate

36:36 - Breaking Down the 12 Rulemaking Batches

37:48 - The Regulatory Flexibility Act (RFA) Explained

39:43 - The Missing Data in the Regulatory Flexibility Analysis

41:55 - The IRFA, FRFA, and Judicial Challenges

45:08 - The Role of the SBA Office of Advocacy

46:57 - Strategic Tips for Submitting FAR Overhaul Comments

51:38 - Conclusion and Contact Info

Transcript

Introduction to the FAR Overhaul

Sam: Welcome to GovCon Intelligence. If you’ve been paying attention to the world of federal procurement policy, you’ve no doubt heard of the FAR Overhaul. Today, my guest is David Mullis. He’s the regulatory consultant for Gov Contract Pros. He was previously the Assistant Chief Counsel at the SBA Office of Advocacy where, among many other things, he worked on the FAR Overhaul in reviewing it for regulatory compliance and small business issues. Just this week, we’re recording on Thursday, the FAR Council published its proposed rules for many parts of the FAR Overhaul in four different batches and they gave everybody 30 days to respond. 30 days, that includes July 4th, by the way, or the July 3rd holiday. So if you have any comments, you have to get them through quickly. David and I are going to be going through these first four batches of the FAR Overhaul. It’s a laptops out episode of GovCon Intelligence. And David, thanks very much for joining me today.

David: Thanks so much for having me, Sam. I’m excited to go through the weeds on all of this.

Sam: That’s what we do here, and I know we’ve been looking at parts of the FAR Overhaul for, gosh, about a year now, when they started the process of the class deviations.

What is the Revolutionary FAR Overhaul?

Sam: Just generally, for people who might be busy running their businesses, what is the Revolutionary FAR Overhaul? What is the overarching purpose of this process?

David: Sure, so this is all stemming from an Executive Order that was signed in April of 2025 and was the President directing the FAR Council to streamline and create more efficient contracts. A lot of this was stemming from just the fact that the FAR is 2,000 pages. It’s a very long document. They’ve been trying to, in their own way, whittle this down into something that they see as more manageable or more streamlined or efficient. And so that’s why we’ve gone through this model deviation phase. Now we are at this phase of actual proposed rules that we actually get to kind of turn through and look at what’s going to be actually implemented with these agencies. But it’s just been a long, long line of trying to make this more hopefully streamlined is the intention here.

The Significance of Proposed Rules

Sam: So for people who aren’t thinking rulemaking 24/7, what’s the significance of a proposed rule, which is what we saw on Monday pre-publication, Tuesday officially, what’s the significance of a proposed rule as compared to posting things online as they were doing last summer?

David: Sure. So the model deviations, which was basically them just posting kind of their wish list of what the FAR should look like, was really non-binding. So they aren’t technically the law. They aren’t technically regulations. They permitted agencies to adopt those model deviations. But at the end of the day, you can even look at which agency has adopted which of the model deviations right now, and it is not uniform. There’s no agency that’s accepting all of these and currently implementing all aspects of the model deviations. And so this actual proposed rulemaking phase means it is seeking public input, which is why we want everyone to be commenting on what they’re seeing in the FAR Overhaul. They have to take in that input and then they can actually put out a final rule that would actually bind all the agencies, all the contracting officers to the terms that are put forward here.

Sam: So now we’ll have consistency among all the agencies that use the FAR, once you get to the final rule.

David: Right, exactly. Yeah, which is still months away. It takes a minute or two to get through the whole process here. But once it is a final rule, it would then be the across agency binding regulations for everyone.

The Rulemaking Timeline

Sam: Well, tell me about that. How long is this process? I remember being at SBA and there were rules that would take a year. And sometimes it would take many years even to get into the FAR. It seems like the FAR is trying to move quickly here, given those 30 days. How fast do you think they’re trying to move?

David: I mean, obviously they’re trying to move fast. They’ve chosen to use the shortest timeframe possible to seek public comment. But really a rule from its inception as an idea, even at the fastest track, is at least 18 months.

Sam: Wow, 18 months.

David: Because it has to go through drafting, it has to go through interagency comments, it has to go through the White House’s regulatory office review, it has to then go into the Federal Register as a proposed rule that has to have a minimum of 30 days. Then they receive the comments. They have to sort through and meaningfully respond to any significant comments. And then once they’ve kind of crossed all those T’s, dotted all those I’s, then they can actually put forward the final rule. And usually the final rule has a 60-day window until it’s actually effective. So that’s you know where even at this point it’s going to take a couple months to see a final rule on just these four proposals and we’re expecting...

The Scope of the 12 FAR Rules

Sam: At least eight more. Oh, it’s 12 all together. 12 batches all together. They’ve already batched all these parts up into different segments. Just going back to the 18 months, that 18 months includes some time that’s already passed to get the proposed rule out, right? Because they’ve already gone through the interagency review process, OIRA, OFPP review on the proposed rules. Those took longer than they were talking about. At some point they were talking about these will be out in April and now it’s June. So not a huge amount of time, but it did cause some delay, that long process.

David: Yeah, and really important to know, kind of weaving in that there’s going to be a total of 12 rules to redo the entirety of the FAR, it’s that these are the only four that have actually passed through OIRA at this point. OIRA has the right to hold a rule for up to 90 days before releasing it to go into the Federal Register as a proposed rule. So we haven’t even seen three-quarters of these rules even start that multi-month process at this point.

Sam: Yeah, and if you go to the FAR tracking chart, the PDF, the rule that I’m interested in, Part 19, it says it’s still parked at OFPP. So for everybody in the audience, this does not include Part 19, which is Small Business. It doesn’t include that debate over the Rule of Two and the 8(a) program. That’s yet to be seen.

David: That is a fight for another day. A couple months from now. Honestly, maybe next calendar year at this point. That might be when it comes out. It’s just got a long path to go right now.

Sam: Right. I wonder how they’re going to work sequentially on these. So there are 12 altogether. I think that they’ll be concurrently working on these as they have already been essentially working on all of these because it’s so intertwined.

David: I don’t think that they would wait for these four to be finalized because that’s going to take months. I think that their initial plan was to have these more out almost at the same time or as one is closing out to put out the next one into the public register.

Substantive Changes vs. Model Deviations

Sam: Well, a lot for us to read as people interested in the regulatory world. When this came out in pre-publication on Monday, I added up all the pages and it was over a thousand pages. So as you’re reading through these 1,000 pages, do you see differences between what is being proposed now versus what was in the class deviation?

David: So it’s certainly, there’s the biggest difference between what the model deviations were showing and what these rules have now is that the model deviations were just removing non-statutory requirements from the FAR. These proposed rules contain substantive rulemakings. These contain substantive policies. This has things like changes to implementing a former CUI proposed rule, a former cybersecurity proposed rule. It’s changing meaningful deadlines on certain termination processes. It’s introducing not just the reduction of the FAR, but it’s actually now including new provisions to the FAR that the model deviations just couldn’t do through that process.

Sam: So don’t think that just because you read the FAR deviations over last summer, that you’ve read these because there are substantive changes.

David: Right. It was not one and done. Even those model deviations have been subject to many updates and have had multiple rounds of version 2 of Part 19 and such. And so I think that we don’t know how these final proposed rules are going to look and we don’t know how the final rules are gonna look which make substantively change from what we’re seeing right now because they can always say there was something that was a logical outgrowth from the comments received and they can make substantive changes in that final rule.

The Impact of Public Comments and the Sunset Provision

Sam: So the comments do matter. I know that from being at SBA, you know that from being at Office of Advocacy, and it seems like the comments mattered even pre-proposed rule here because earlier this week GSA or the FAR Council published on their website a summary of some of the 1,000 comments that they received on the RFI on the model deviations. The biggest point to come out of that is they address small business comments on the so-called sunset provision. This was the idea that any non-statutory FAR provisions and clauses would sunset after 10 years [actually, 4 years]. 2035 or 2036 [actually, 2030 or 2031] those would sunset meaning they would become inoperative. Small businesses commented that that creates unnecessary uncertainty because they don’t know what’s going to be in their contracts, they don’t know how to act in accordance with the Rule of Two or other small business provisions. What did the FAR do there and why did they decide to respond to those comments?

David: So I guess a little bit twofold there is like one of course the day that they actually publish these rules we finally get to see what had been submitted during the model deviation phase and that’s the first time we’ve actually even heard how many comments were being filed in that phase, because before that was just a black box. People would file comments, but there was no public record or no public showing. Even now, we don’t know what did the comments say, who was filing comments, what was responsive and what was unresponsive, what have they chosen to not show us in that comment collection process. But the sunset provision particularly was originally in there and was part of the executive order as well to ensure that that’s clearly stated that rules that are non-statutory would be removed within that four-year period. Now it’s kind of backed off of that and now it’s more of a general we want to generally have this set up that in the future the FAR Council will propose rules on regulatory sunset provisions. And so it then becomes a little bit of a task for another day for the FAR Council to go through and create some sort of regulatory sunset.

Sam: Yeah, I’m looking at it here. 1.109, the FAR Council will seek public input, through rulemaking on sections, provisions, and clauses. So they’re not going to do another, you know, RFI, informal comment, not even comments, feedback, I think they called it. It would actually be through rulemaking. And actually, it doesn’t even say, I don’t see a certain number of years here in 1.109.

David: Right. The original executive order that instigated the FAR overhaul, the 14275 that it notes there, it actually does specifically say four years, but that has been removed as in part response to the comments or the feedback that they received during Model Deviation.

Sam: Okay, so it takes some of the pressure off 2030 or so.

David: Possibly, we don’t know. We don’t know what the final, because that could end up being the next proposed rule by the FAR Council is saying is implementing a four year sunset.

Sam: Well, at least they’ve committed themselves to using rulemaking. It specifically refers to the Federal Register in bold that they’ll be using for this next sunset period. But also in terms of years, it might not be four years.

The Regulatory Flexibility Act and 10-Year Reviews

Sam: It could be that there is, we were talking about before, there’s a Section 610 of the Regulatory Flexibility Act that requires agencies to review regulations every 10 years. So it’s conceivable that they could just say, well, we’re going to do it every 10 years because that’s what the RFA says.

David: Right. The RFA, which I was partly in charge of upholding, does have that Section 610 that requires every 10 years. It’s not a sunset. It’s instead asking agencies within 10 years of passage of a rule to just review it. Did they correctly estimate the impacts that that rule would have on small entities? If you’re going to tie it to something that already exists, that seems like a very easy mechanism, but I will note that most agencies don’t engage with Section 610 in any meaningful way as is, and so that might even be a foreign concept to the FAR Council to introduce a 10-year look back in the same way that 610 does.

Sam: Except for the FCC.

David: They put out a nice little document of every rule that’s 10 years old now. But it is really seldom that agencies already do not comply with that provision of the law.

Sam: Great. Well, we have that in common as well that we also work on communications policy. My former associate classmate Brendan Carr is the chairman of the FCC now and maybe he’s responsible for that as well as many other things.

Changes to Market Research (Part 10 to Part 7)

Sam: Let’s get into some of the meat of these four proposed rules that came out. Big surprise to me when it came out, the very first thing I looked at was to see what happened to Part 10 which is on market research and the reason for that is small businesses want to be involved in the results of market research. They want agencies to be required to look at the SBA website, do internet searches for small businesses, and determine whether or not there’s sufficient small business competition to do a set aside. Some of that was removed in the RFI Part 10 during the model deviation phase and then all of it was removed in Part 10. So tell us a bit about what happened in Part 10.

David: It was moved. It was all moved into Part 7 now. So acquisition planning and market research are now consolidated into one part. So now 10 is essentially an empty part of the FAR. There’s a couple other areas where now certain parts of the FAR have been moved over into another part and then that part’s now reserved and essentially empty. And so the market research has been kind of consolidated into acquisition planning, which logically makes sense. That does operatively, that is how it was working. But as you’re noting, the proposed rule really does remove small business considerations. Even to activate the Rule of Two, you have to show that there’s two small businesses that could reasonably do this work. How is the contracting officer going to know that moving forward if they don’t meaningfully engage with the Small Business Administration, they don’t meaningfully engage with the industry or do their research into who’s in these, are there small businesses in these sections and proposals that they’re trying to seek out?

Sam: Right. There used to be things in there about PCRs, checking with SBA, and that’s been taken out. To be fair, there’s some mention of small business generally in Part 7. These are not new, but it’s working with the OSDBU, getting a consolidation or bundling.

The Push for COTS and Full and Open Competition

David: There is some PCR, some working with the Procurement Center Representative still, but generally the role that small businesses would have in contracts is going to be diminished because of how the FAR is really gearing towards open and full competition. It uses that multiple times throughout the proposed rule and the proposed language to the FAR and that also commercial off-the-shelf or COTS purchasing should be the primary goal of any contracting officer. So there’s an intentional move away from more specialized or individualized contracts that the government would be engaging in and really seeking as full and open, which often means that maybe the small businesses will not be able to compete with the big businesses in terms of pricing or services provided.

Sam: So you’re saying the biggest changes in Part 7 or maybe in the FAR in general are have fewer contracts, don’t create new contracts. Do commercial as much as possible.

David: Yeah, those are really some of the biggest pushes here, particularly the commercial off-the-shelf purchasing is ostensibly what is being held up as the streamlining efficiency gain through this whole process, is that now the contracting officer should just go to Staples and buy their office supplies rather than procuring a particular small business to supply those. And so it is just really this is geared towards they’re just like any other buyer. They want them to just order off Amazon. They want these things to not be so special, which has validity, but also brings in things like cybersecurity risks and other concerns for those contracting officers.

Balancing COTS with Cybersecurity and Compliance Risks

Sam: Yeah, that’s a strange dichotomy on one side with you have to go commercial or try to go commercial as much as possible. On the other side, you also have to pay attention to these NIST requirements and CUI and Chinese manufacturing restrictions. How do you balance those two?

David: It’s a great question. I think that’s going to be one of the... When I think that when this rule and the rest of the Revolutionary FAR Overhaul really hits on contracting officers, that’s going to be one of the tough points for them to navigate is that they have personal liability on their contracts that they form and that they could be violating some of those provisions unknowingly. And that’s partly why there might have been a reason to have kind of what was before seen as a checkbox approach to your acquisition planning. That you go through these different steps, they may seem redundant, they may seem tedious, but they at least provided that contracting officer the certainty that they were abiding by all of the underlying regulations and laws.

Oral Acquisition Plans

Sam: And before, they were written. And now you can have oral acquisition plans. David, I want to acquire this commercial product. Is that my oral acquisition plan?

David: That sounds great, yeah, go ahead. You get the agency head approval and you’re good to go.

Sam: So is that a big change, being able to go to oral acquisition plans?

David: I think that is part of the streamlining effect. It does note that the oral acquisition planning does need a written component justifying why it was oral acquisition planning.

David: Interesting. So there’s still going to be some level of a paper trail, but that is one of those, again... Seemingly confusing or possibly muddy parts of how do they expect contracting officers to be implementing this rule.

The Impact on Small Business Programs

Sam: Any other thoughts on Part 10, Part 7 as far as small businesses are concerned? It seems like my first reaction is this is as bad as what we saw in the model deviations. It hasn’t really gotten worse, but it hasn’t gotten better.

David: Yeah, I don’t think it’s gotten, there’s no substantial win that seemingly small businesses got through the submit your feedback deviation process so far. I’ll note that it’s really going to be moving agency responsibilities away from ensuring smalls are in the field and really towards this open and full competition. That’s the term of art that’s used throughout the entirety of the RFO is that they want open and full competition, and to me that reads somewhat as we don’t want to have to consider small businesses or do set-asides. Once Part 19 comes out, we already see within the model deviations that part of that is already suggesting that small business programs like the HUBZone, WOSB, EDWOSB, those won’t have sole sourcing anymore. It’s just going to be about keeping it within the small business world. So there’s seemingly a lot of things that are going to be lost for small businesses within those programs and within generally contracting.

Sam: Yeah, we’ve already seen memos from at least the Army directing their agencies not to use 8(a) sole source and wonder how far that’s going to go here. At the very least, speaking of small business authorities, sole source and whatnot, they at least took out the general reference to the Small Business Act and actually put in the names of the programs. I think that was my comment, actually. I put in that comment.

There was something previously, I think it said, you can use the authorities in Part 14A of the Small Business Act, which nobody knows what that 14A means, but that refers to all of the programs, small business set-aside, 8(a), HUBZone, SDVOSB, and WOSB. And maybe you save a few words by doing that, but you create a lot of confusion. They have now turned to at least put the actual words of the programs into Part 6 now. Part 6, which is the one that covers exceptions to full and open competition.

David: Yeah, and so that’s, you know, they took the loss on adding more words into the FAR, but I think that that’s all the better for its clarity.

Sam: Overall, the model deviations cut the FAR by 20%, I believe. It was 1,600 pages when you add it all up. Any predictions on this? It seems like you’re adding more in with the CUI and some of these other policies.

David: It’s going to keep building up and I think that this is gonna hit there’s gonna be aspects that they realize as it starts being implemented that they need to fill back in. And I think we’re quickly gonna get back to a long FAR again, but also changing it from 2,000 pages to 1,600 pages doesn’t... I think to most people, you don’t want to open either of those books. Like neither of those are short enough for me, and so I don’t know necessarily if that’s the substantive change that everyone’s been clamoring for that this is trying to promise.

Good News for SBIR/STTR Programs

Sam: There is some good news for small businesses involved in the SBIR and STTR programs in Part 6. Those reflect the Phase III sole source authority. That was not previously in the FAR. It’s been in the statute for quite some time. Agencies are certainly using Phase III sole source. But now you see it in the proposed rule. It’s also in the model deviation. So good news there for SBIR. And there’s a hidden recognition of changes to the SBIR data rights.

David: Yeah, very hidden. You caught that really well.

Sam: I don’t know if I was just searching for 20 years or small business, but there’s a provision in the FAR that tells contracting officers how long they must keep documentation for. And in the old FAR, there’s nothing about keeping documentation for SBIR contracts, but in this new proposed rule, there is a requirement that contracting officers keep SBIR contracts for 20 years. Why is it 20 years? Well, it doesn’t actually say, because this is just about documentation, but 20 years is the timeframe that SBA put into its policy directive for the SBIR program back in 2023 [actually, 2020]. So it’s been there for several years now. That’s a big expansion from the previous data rights. Previously, it was four years. So if you were going to keep with the old four years, which is what the current FAR has, you probably wouldn’t require contracting officers to keep the documents around for 20 years. It seems like the reason for keeping SBIR contract documents around for 20 years is the FAR, when it comes out, with the SBIR section, which is partly in... Mostly in Part 27 on data rights, somewhat I think in Part 19, it’ll probably have that 20-year data rights protection period. So that gives the government only government purpose rights for that 20-year period. So that’s a big win for SBIR companies.

David: Yeah, that will definitely be good to have people who are in the SBIR program to be saying, this is good for us, we appreciate this, and to really explain that when that does come into the comment period for this rule.

Sam: Yeah, so we’ll watch for that when Part 27 comes out with the data rights section. And that’ll provide consistency between the SBA rule and the FAR rules.

The New CUI and Cybersecurity Requirements

Sam: All right, CUI. We’ve been talking about CUI, CMMC, NIST, Revision 2, Revision 3. You have been immersed in this for several years now. Tell us what happened with the CUI proposal.

David: Yeah, so in 2025, there was a proposal, January 2025. Well over a year and a half ago there was a proposal for amending CUI data and the reporting of if you have an incident and originally it was proposing a 24-hour reporting. So if you find out that you have an incident you must report it within 24 hours of finding out. And a lot of small businesses that I had been talking to noted that that’s really tough because they’re probably on the field. They’re out. They can’t respond in such a quick timeline. This rule, there’s actually two areas where it kind of brings up old rules, both from January of 2025. But this CUI reporting one extends that to 72 hours. So again, you know, that’s three times the amount. It is kind of interesting that this is one of those substantive aspects of that... It’s now introducing new requirements and it’s kind of pushing through what was before an unpopular proposed rule and it’s pushing it through now as a proposal within this to kind of get it in there without maybe our attention on it.

Sam: We caught that. What would people want to focus on in the CUI or some of the other cyber-related aspects as they’re looking at potentially commenting?

David: Yeah, the other big aspect that’s changed is the introduction of NICE framework, which is a NIST Cybersecurity Framework. And that’s also a January 2025 proposed rule. It only got like eight comments total, but it did receive pushback on that. And now it’s trying to put through this NICE framework to essentially standardize and implement cybersecurity practices amongst the agencies, but also all contractors.

Sam: That’s cybersecurity workforce. Strengthening... it was a proposed rule from January 2025, Strengthening America’s Cybersecurity Workforce, the NICE framework.

David: And so these cybersecurity new requirements, I’m not going to pretend that I know how that’s going to affect every business because it’s going to just be a matter of familiarization. Part of this is each agency could have their own definitions, their own procedures, their own concepts of how to deal with cybersecurity risks. This takes away that ability and standardizes it throughout the government. And so it is going to be learning a new language and it’s going to be learning this framework. If you’ve been working under this NICE framework already, great, you’re already kind of ahead of the game, but if you’re not in one of those agencies that was applying NICE before, you’re going to have to learn this. There’s resources on the website, on this website for implementing NICE, but this is going to be a learn new definitions, those could change, particularly if you’re doing IT services or anything that is really touching cyber capacity, how are you managing this? And that’s not even mentioning CMMC which is also going on at the same time but only affects those within the Department of Defense.

Sam: So just so we don’t get ahead of it, there is not CMMC in this proposed rule. They are not proposing government-wide adoption of CMMC.

David: No, this is not the government-wide adoption. This is certainly a step towards that at least. It is a step towards creating a standardized, uniform cybersecurity framework for the entirety of government contracting. And I wouldn’t be surprised if at some point we see a CMMC government-wide, but we’re not even past the implementation point for CMMC right now. So I think that the government is waiting to see how that is kind of taken in, and then we might see that later on.

Sam: And the CUI proposed requirement here is NIST Revision 3. As opposed to NIST Revision 2. Does that make a difference?

David: I mean, it’s more updated and modern, which we always appreciate. One thing that’s... Having the more updated version of those CUI rules, great. But again, it is just part of that familiarization. It’s going to take you time to learn what are the differences between what have you been doing, what is this now requiring, what does that mean in practical sense for changing your business plan and your procedures to do these kind of reportings.

Sam: So this does seem like a lot to process, particularly if you’re subject to those requirements. And I imagine when the FAR put out these proposed rules in January of 2025, I’m going back and look, but I imagine they had more than a 30-day comment period.

The 30-Day Comment Period Debate

Sam: So tell me, what do you think? Do you think 30 days is an appropriate time to comment on these, at least in pre-publication on Monday, 1,000-plus pages?

David: Sure. You know, they’re going to take the stance that these are technically four separate rules. So each of those rules is only 200-ish pages. That’s nothing. And so if you chunk it out, sure, maybe. But it’s really hard to not see these as intertwined here. These are all really tied together. All four of these plus the eight that we haven’t seen in the Federal Register yet. It’s all about changing the FAR at a baseline. 30 days, that’s the technical requirement, that’s the APA. The Administrative Procedures Act says if you’re going to go through informal rulemaking process and seek public comment on those proposed rules, you need to permit 30 days to allow people to review and submit. That’s really not what most agencies go with though. As you may be very well aware, it’s usually 60 days. 60 days is really the norm for most agencies when proposing a rule. That’s purely a matter of practice though. That is really an unspoken norm within putting out public comments, particularly on more lengthy pieces. You do usually... an agency is going to permit time for the industry to understand it, to familiarize themselves with it, to compare it to what has been and what is being proposed here, and then to also seek meaningful data of surveys. How much is this... how long is this going to take you to familiarize yourself with? So often that is what an agency will do. If an agency does want to get something through fast, you usually put it through at 30 days because you just want to get it through. You want to meet the minimum time frames.

I’ll note that Gov Contract Pros just yesterday filed a comment letter in all of these dockets asking for an extension of 60 or 90 days to this comment period because it is such an intense review. As we’re already talking, we’ve talked about it’s the FAR as it is now is 2,000 pages. The model deviations are 1,600 pages. Now we also have a FAR companion guide that they updated for the model deviations. There’s other guidance. There’s guide management. Now they’ve just published that comments received and how they’ve dealt with them. Thousands and thousands of pages that they’re asking everyone to go through in a very short timeframe. Plus, these are including new statutory new provisions that were not proposed in the model deviation phase that have substantive effects on businesses. And so it would make sense to allow a longer timeframe on these comment letter solicitations because it is an intensive task they’re asking everyone to undertake. And most people, the people they want to hear from the most are the contractors. They want to hear from the businesses. But they have businesses to run. They have bottom lines. This is the end of the fiscal year. They’re very busy right now. And so this is going to be a large task if they actually do want the public to provide meaningful input to this rulemaking.

Sam: I’ll just emphasize to the FAR Council, if you want people to celebrate America’s 250th anniversary, the big birthday, don’t have them at home reading a thousand pages of proposed rules. It’s going to ruin somebody’s beach vacation.

Breaking Down the 12 Rulemaking Batches

Sam: They’re putting these out in batches. Do you have any insight on how they’ve selected these batches? How they’ve decided to put certain parts together and why there are 12 of them?

David: I mean, you can take that there’s 12 of them, four of them are out right now. The FAR Council is made up of three agencies, ostensibly NASA, DOD, and GSA. Ostensibly, that’s looking at each of them taking on about a third of it and kind of taking that on as an administrative task for their staffers. But then also, these are kind of looped together in the general... 7 and 10 are now together, so 7 and 10 are within the same rule. There is some logic to how these are being laid out as much as you can put logic in sorting through 52 different parts and trying to divvy them up into just 12 rulemakings.

Sam: Oh, that’s fascinating. It’s a big math problem. How do you divide 52 by 3 for three agencies and then try to get these out so that you’re not putting out the whole FAR at once? There were some rumors that they were going to put out all 52 parts at once. I’m glad that didn’t happen.

The Regulatory Flexibility Act (RFA) Explained

Sam: So when you were at the SBA Office of Advocacy, your big emphasis was on the Regulatory Flexibility Act, which, as you mentioned before, looks at the impact of regulations on small businesses. And when you hear about, oh, some law or some regulation cuts such millions of dollars from regulations, that’s where it comes from, right? The Regulatory Flexibility Act. So tell us a bit about generally how the Regulatory Flexibility Act works and how does it work specifically during this process for the FAR Overhaul?

David: Yeah, no, that’s a great question. It’s one of those parts of every regulation that even some of the most seasoned administrative law nerds don’t necessarily get into. And so the Regulatory Flexibility Act is really a way to ensure that the agencies are considering the impact a rule will have on small businesses, small nonprofits, and small government jurisdictions of under 50,000 people, i.e., local counties. The RFA asks for a... what I always told people was that the RFA should be essentially a 10-page or less section that you can hold, you can read through, and should be able to accurately explain the proposal. What is being proposed? What is being changed? Why are they doing this? How much will it cost you? And what do you need to do to comply with this new proposal? And then also it asks, what did the agency consider as a reasonable alternative that could lessen the impacts on small entities, but the agency chose not to pursue for another policy reason? Which can often be like, it’s just hard to implement a differentiation between the small and the big on a particular rule...

The Missing Data in the Regulatory Flexibility Analysis

David: And so the Regulatory Flexibility Analysis is really about trying to give some data and some actual numbers behind what is going on here and trying to inform small businesses what they need to know. As far as it relates to these rules and what we’re seeing right now, the regulatory flexibility analysis is there. It is stating that it will have an impact on small entities. It does not provide any estimates, though. And that’s where I think that within the public comment process, it is something that is really vital to be raising up now.

The entirety of this FAR Overhaul, it is asking you to read through the FAR again and again and again and again, as we’ve done over the past year. That’s a familiarization cost. That is a cost. Costs are not just the amount of money you had to dole out; it is about how much time is it taking your senior leaders to work through something. How much time do you have to then spend going over your existing procedures and implementing these changes? And so that’s something that is ostensibly left out of the Reg Flex analysis here, is that it doesn’t tell us how long they think it might take contracting officers to be trained on the FAR. It doesn’t tell us how long they think a small business will have to spend to familiarize themselves with this. And it doesn’t even begin to estimate the impacts of these changes on small entities—how much time and energy will go into implementing the NICE framework, into implementing these different aspects of how the market research changes will actually impact small businesses. It doesn’t attempt to put any numbers behind that right now. And so that’s where the public really needs to be writing comment letters saying, “This is my estimation,” because if you’re putting forward estimations and they’ve put forward nothing, your estimation becomes the official estimates.

The IRFA, FRFA, and Judicial Challenges

Sam: So tell me about how this works. They come up with something called the Initial Regulatory Flexibility Analysis, IRFA, and then small businesses, small entities comment on what the impact of this will look like, and perhaps they quantify that. Then the FAR Council then issues the FRFA [Final Regulatory Flexibility Analysis], right? So tell us about the FRFA and how that comes out.

David: So the FRFA is ostensibly the same document, the same analysis in many ways. So it’s still asking, what is the proposed rule? How will this impact small entities? What are reasonable alternatives that the agency chose not to pursue because of other policy concerns? But then the FRFA also asks, what were the comments received on the adequacy of the IRFA? And so they need to go through their comment record and specifically go through, specifically if the Office of Advocacy Chief Counsel files any concerns, those must be responded to by the issuing agency. And so often that would mean that the agency goes line by line through my comment letter or other of my former colleagues’ comment letters. But then it’s also about what has been sought in the public record that specifically calls it out. So if you are a small business commenting, I really recommend adding in an IRFA, FRFA call out, saying, “Here’s where I think the Regulatory Flexibility Analysis is lacking right now. Here’s what I think it would actually impact me. Here’s if you take my estimate of that and scale it out to all the contractors within the federal base, this is how much money you’re actually asking small businesses to expend on implementing this FAR.” And importantly, what I want to note is that an inadequate Final Regulatory Flexibility Analysis is judicially challengeable. And so you can sue an agency saying that they inadequately considered the impact their rule will have on small entities. And if a court finds in favor of it being an insufficient FRFA, then all small entities are exempt from that rulemaking.

Sam: Wow, so that could be a long game strategy for small businesses that might be upset about what’s in here, maybe from the CUI perspective or something else. Comment on this Initial Regulatory Flexibility Analysis, get your comment in, see if the FAR Council will actually issue a substantive final, the FRFA. And if they don’t, then that can be judicially challenged.

David: Yep, exactly. And then that would exempt all small entities from that rulemaking, which creates kind of a mess for the FAR Council to try and clean up. So it’s really in the issuing agency’s best interest to actually do a complete IRFA and FRFA and to adequately give weight to any comments they receive, and to make sure that particularly any data they receive is being adequately vetted and understood by that issuing agency.

The Role of the SBA Office of Advocacy

Sam: And you mentioned that the Chief Counsel for Advocacy comments get special weight. What do you expect to see from the Office of Advocacy there? And how is that weight applied during the FRFA process?

David: So the FRFA specifically has a section that says, “What were the concerns raised by the Chief Counsel of Advocacy and how do you move past those?” And so when I commented on CMMC, the Department of Defense was going line by line through my comment letter and saying, “Here’s what was raised as an issue, here’s how we’re pledging to commit engagement with small businesses and such.” So the Chief Counsel’s comment letters do get a kind of special weight. They’re literally the only comment letter that anyone can file that must be responded to no matter what. Whereas most comment letters just need to be meaningfully responded to if they raise significant issues that the counsel can actually deal with in the actual rule. When it comes to actually where Advocacy is working on that right now, I don’t know. I highly recommend that you reach out to the Office of Advocacy and contact their Assistant Chief Counsel there who’s managing government contracting and make sure that you’re voicing your concerns because, as someone who was in that role, we only know what small entities tell us are their concerns. It’s not in the business to make up small business concerns, but if you’re going through the Advocacy door and you’re saying, “Hey, I’m a small business, I’m meeting the Revolutionary FAR Overhaul, I’m concerned about the impacts it’s going to have on us,” you’re going to start that ball rolling to get a comment letter submitted into the Federal Register on that issue.

Strategic Tips for Submitting FAR Overhaul Comments

Sam: You’ve given a number of tips already for small businesses as they might be looking to comment. By the way, the deadline, July 23rd, did I get that right? July 23rd, currently, unless your comment encourages the FAR Council to extend it. What other tips do you have for businesses as they might be considering comments?

David: Yeah, I mean, one is in the immediacy, Gov Contract Pros has filed the comment letter asking for an extension. Actually, if you look right now, there’s only one other comment filed so far and it’s also asking for an extension. I really recommend that folks in the immediacy file for that extension because that’s going to start creating that chain of, is this being rushed through? Is this being arbitrary and capricious rulemaking? And so that’s the immediate thing. It’s a simple letter, doesn’t have to be complex, just make sure you’re making your case. On the broader scope of when you’re filing a comment letter for these four parts, it’s really going to be how you want to take it, of course. But what I really recommend is your first decision is do you file one comment letter on all four of them, or do you file four individual comment letters that speak to whatever part you’re looking at?

Sam: Or 12 or 16 because there are multiple agencies that are accepting them.

David: Yes, on the actual regulations.gov docket. Each agency posts this rule. So NASA, OFPP—DOD has actually not posted it—but GSA. So each of these four rules is posted three times by three different agencies. And so there’s a lot of different dockets. And so that’s going to make it kind of difficult for everyone to be tracking what comments were received, what comments, where did that land. But on the comment letter structure, the things I like to talk to folks about is, if you are a small business who is impacted by this, lead with your experience. As I’ve already noted, there is no data about how this is going to cost small entities. So your input on how this is going to impact you, even if it’s rough estimates of time, of money, of consultants you need to hire, of any amount of work that’s going to go through to implement the FAR Overhaul. If you are putting that in the public register, you are the one who gets to control what the narrative is around how much this costs, how many millions or billions of dollars will this cost the economy in red tape to go through to understand.

The other thing is, I’ve mentioned it when talking about the Regulatory Flexibility Analysis, but agencies have to consider reasonable alternatives to proposed rules that could lessen impact on small entities. So if you’re making reasonable proposals, if you’re actually dealing with the text as presented and going through that to present, “Hey, here’s where I think you could just change this wording.” That’s more helpful than a comment letter that is merely saying, “I don’t like this, this is horrible, please don’t ever do this.” That’s, of course, very valuable to have stated opposition or stated support for a rule, but it’s much more valuable to provide something to the government for them to consider, whether that be just reasonable alternatives or data. You know, small businesses, contractors, those who are implementing these contracts, they are the boots on the ground. They are the actual people who deal with the FAR. Everyone here in DC, we get to think about it. So your experience of being in the FAR, of having to deal with these, that is very valuable and much more persuasive than you might think at first.

Sam: Yes, these reasonable alternatives can bring up very good points. I’ll note that sometimes agencies have statutory guardrails that they can’t go past, so they have to stay within a particular lane there. But I remember several times at SBA where we received alternatives that we had not thought about because we are not living these regulations through day to day. We write them and we see the statutes as they come through, but it’s the businesses that have to cope with them.

Conclusion and Contact Info

Sam: David, how do people find more about you and about Gov Contract Pros?

David: You can find me on LinkedIn, David Mullis. You can always email me at david.mullis@govcontractpros.com. Follow us on LinkedIn, GCP, our website (govcontractpros.com). I’m certainly around DC a lot, so it’s not too hard to find me usually.

Sam: Great going around DC with a 2,000-page book of the FAR.

David: Exactly. I’ll be the one with the thousands of pages of FAR on hand.

Sam: Looking forward to seeing your comments on these rules and the next batches that come out. Thanks so much for joining us on the show.

David: Thank you for having me, Sam.

Sam: Thanks, David.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam received his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

Behind the Scenes of the Fight for the Rule of Two (with Lizzie Sullivan)

Sam Le — Tue, 23 Jun 2026 11:06:28 GMT

Lizzie Sullivan has been pushing the Rule of Two through Congress for years now, and this year is the best shot to get that vital rule for small businesses into statutory law, she says. But opposition from an unexpected source has popped up.

Sullivan, the president of Madison Services Group, joined me on GovCon Intelligence to discuss the prospect of Congress passing the Rule of Two—which would boost small business set-asides for years to come. We also talked about why 151 is a bad number of IT value-added resellers, the bill that would end the women-owned small business program, and what to expect out of SBA on size standards.

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Chapters

00:00 - Introduction to GovCon and the Rule of Two

01:28 - The History and Legislative Push for H.R. 2804

03:58 - Understanding the Tolliver Case and Task Orders

05:28 - Bipartisan Support and the NDAA Vehicle

11:15 - Navigating Mandatory Sources and AbilityOne Concerns

14:45 - The Importance of Codifying the Rule of Two

17:35 - GWAC Innovation, Pools, and the Shift in Task Orders

19:26 - The IT Value-Added Reseller (ITVAR) Size Standard Debate

26:05 - The Value of ITVARs vs. Direct Procurement and OneGov

30:46 - The Fight to Raise Sole Source Thresholds

35:50 - The Impact of Compressed Buying Years and Competition

38:54 - Reimagining the OSDBU and the 8(a) Proposed Rule

41:43 - Women-Owned Small Business Entry into the 8(a) Program

44:57 - Legislative Threats to Small Business Set-Aside Programs

47:49 - Deconstructing the EDWOSB Audit and Program Origins

52:47 - Overcoming the Scrutiny and Complexity of the WOSB Program

55:18 - Strategies for Capability Statements and Mission Alignment

58:26 - A Plea for Small Business Unity Against Large Competitors

59:41 - Wrapup

Transcript

Introduction to GovCon and the Rule of Two

Sam: If you care about small business federal contracting, you have to care about the Rule of Two. The Rule of Two, SBA said, is the cornerstone of small business federal contracting. If you remember from the FAR overhaul period last year, it was in doubt about whether the government would continue providing preferences to small businesses under the Rule of Two. Today on GovCon Intelligence, we have the person most responsible for getting the Rule of Two into the FAR overhaul and pushing it through the halls of Congress. Lizzie Sullivan is the president of Madison Services Group. That’s a government relations firm in Washington that has clients across the acquisition ecosystem. Lizzie, thanks so much for joining us on GovCon Intelligence.

Lizzie: Thanks so much for having me, Sam. It’s great to be here. Great to see you again.

Sam: Great to see you as well. So Rule of Two—I spent a lot of time at SBA on the Rule of Two, pushing it through GAO cases and working with the FAR staff potentially to expand it. You have been the person most visible and involved on the Rule of Two now for years. Tell us a bit about what your motivation has been for pushing so hard on the Rule of Two and where is it now from a statutory perspective? Why do you think we need it in statute?

The History and Legislative Push for H.R. 2804

Lizzie: That’s a great question. And I’m just going to start by saying anything I say, we work completely bipartisanly. We work with whoever wants to get what’s best for this community done within reason, right? No crazies. So I would encourage anyone listening to not interpret my words and try and fit them into one box or the other. I’m an equal opportunity lover and hater of all political parties. But I think that this issue is something that has brought everyone together because it really is, like you said, the cornerstone of small business contracting.

So just some history, and thank you for the nice introduction. Back, I believe it was last summer, before there was an executive order and the official kickoff to the FAR overhaul, there were rumblings that the FAR overhaul was happening in the basement of GSA.

Sam: I’ve been in that basement, by the way.

Lizzie: Ah, there you go. And based on kind of who was at the table that we were being told, we thought it was extremely important to get in front of anything that was going to happen by cementing that Congress was watching and that the Rule of Two was important. So it was not just me. It was also Cate Benedetti, who works for the ranking member Nydia Velázquez from New York, who is sadly retiring but has been such an advocate for all of these programs and really knows contracting in and out—as does Cate, right? She’s only one of the most savvy procurement staffers on the Hill. And she said, “Okay, let’s introduce this bill. It’s not perfect. They haven’t even started, but yes, it sends this message.”

So that is how the bill came to be. And lo and behold, after that was dropped, there was an executive order, an official, “Here’s how the FAR overhaul is going to go.” So really that message was received by the decision-makers. The original bill, which is H.R. 2804, has the addition of task and delivery orders to it. The reason it does is because we were mimicking that agreement that you put together with the FAR Council on solving the Tolliver issue. I don’t know if you want to talk a little bit about that case. I think it would be helpful.

Understanding the Tolliver Case and Task Orders

Sam: Sure. The Rule of Two for context is the rule that says if you have two or more small businesses that can perform a requirement, the requirement must be set aside for small businesses. And the Tolliver case, which was the 2020 case from the Court of Federal Claims, asked: Is a requirement only a contract? Which means for a multiple-award IDIQ contract, just the base-level contract? Or could it apply to an order that an agency might issue off the contract?

In that case, Judge Solomson—he’s now Chief Judge of the Court of Federal Claims—ruled that when an agency issues an order off a multiple-award IDIQ contract, it needs to apply the Rule of Two prior to issuing that order. So what that means is an agency cannot go straight to a large business off of a multiple-award IDIQ contract before it looks at a small business competition.

The reason that SBA and other agencies had come to this agreement about the Rule of Two for orders is that we saw that more of federal contracting was going through orders. And we looked at that as a possible workaround on the Rule of Two. There were some statistics in there; we said if we were able to pass the Rule of Two for orders, that would add somewhere around $6 billion to small business contracting.

Bipartisan Support and the NDAA Vehicle

Lizzie: That’s a lot. And it makes sense with the trends, right? But as it’s been pointed out and how Congress has been moving the bill, there had to be some changes made, right? So there is a Senate companion bill and it’s—I have my cheat sheet—S. 2656. That was introduced bipartisanly by the ranking member Ed Markey of the Senate Small Business Committee, the top Democrat Cory Booker as the other Democrat, and then both Alaska Republican Senators Murkowski and Sullivan were original co-sponsors. In our world, the reason that’s important is because while you can add other people onto a bill—for example, the House bill, you can add on other sponsors—it sends a very important message when there are original co-sponsors on this bill.

So that’s kind of how we got started. The Senate came after the House. Flash forward to now, there was a markup in the House Small Business Committee, and this bill passed unanimously. However, worth noting, there was an amendment to the bill, and the amendment took out the task and delivery orders. What it did is it mimicked exactly how the FAR overhaul expanded the Rule of Two in their language, right? So it’s anything above the SAP applies to small business.

They had to do that in order to get the bill moving forward because there was heartburn, I think, about doing something above and beyond what the administration had done. And that rule that, unfortunately, you worked on for a long time got rescinded. So it would have looked like they were superseding what the administration had done.

So what the Democrats decided with the Republicans—and this is how the legislative process works—is how can we negotiate, come to the table, and get to a place where we can move this forward? Because both of them, in this highly political and polarizing environment, still recognize the absolute importance and crucialness of the Rule of Two. And I think that’s a really powerful message, honestly. Again, I know people think Washington is just dysfunctional. Small business contracting legislation is something that we’re able to work on because it brings both sides of the aisle together.

Sam: Congratulations on that really big win for small businesses. Is there any insight you can give us into what the lawmakers were agreeing on when they passed that unanimously? What areas did they feel were important to make such a big statement there?

Lizzie: Yeah, they felt that as the cornerstone of small business contracting, it needed to move forward. And we’re really happy, and we were very happy with the expansion in the FAR overhaul that we worked on. One of the things that’s cropped up—and just to go back to your “I’m Just a Bill” Schoolhouse Rock—it passed the committee. So now there are a couple of options here. It can go to the House floor. Oftentimes those small business bills go through something called suspension votes, where two-thirds are required in the House to agree for it to move forward.

Another vehicle that gets talked about all the time is the National Defense Authorization Act (NDAA).

Sam: Oh, wow.

Lizzie: And that is Congress’s last must-pass bill. So you can imagine every lobbyist in town, including us, tries to get things onto that bill. That was actually something that some people cooked up about 10 years ago and said, “Well, small business applies to the industrial base, so it’s germane, or it would make sense to put it in the bill that authorizes the Department of Defense.”

Sam: Some people like Sullivan.

Lizzie: Sullivan and Murphy. And yes, exactly. And that has then been the way that we’ve been able to move forward legislation. That’s important because if you go back to the original process, then the Senate would need to mark it up and it would need to go to the floor. And the Senate is much harder to move things through because of a lot of the rules around timing, what they’re working on, and the fact that any one senator can put a hold on a bill and say, “No, this isn’t moving forward.”

So right now, we’re working to get it into the House NDAA and also the Senate NDAA so that when both sides pass their bills and are conferencing, it’s very crystal clear that this needs to be in the final—what they call conference report—which is the final bill signed into law.

Sam: So are we talking about the FY 2027 NDAA possibility?

Lizzie: Everything is—yes. Exactly.

Sam: Exactly. Do you see this getting in there and becoming the law for good?

Navigating Mandatory Sources and AbilityOne Concerns

Lizzie: You know, we had 39 organizations that represent tens of thousands of small business contractors. Think about 500 individual companies that signed onto a letter for the original House bill before it was amended, right? And look, we have only so much control. As I mentioned, the House decided to make that amendment to move it forward. We would have loved the expanded bill, but again, we’re happy with this version to move forward. And so I thought that was a very powerful number of companies and boards to put together in like 72 hours as this was about to get marked up.

It’s caught the light that there is some concern from the AbilityOne community around the impact of the Rule of Two with sole-source and mandatory sources. You’re an attorney; I am not. So you could talk about that. I didn’t think that this was a problem, but this has been an effort to stop the bill. And I know that the committees are trying to work with the AbilityOne teams and their lobbying firms to figure out kind of how to move forward here.

Sam: As a historical note, the Rule of Two has been around since 1962.

Lizzie: Wow.

Sam: And it’s always been secondary to the mandatory sources, another one of which is JWOD and the Federal Prison Industries. So just historically, people understand the Rule of Two as coming after an agency would apply mandatory sources. There was a question that came up with the VA-specific Rule of Two—that’s the one that applied in the Kingdomware case—where that was written in statute in a particular way where the courts found that, in fact, that Rule of Two jumped ahead of the mandatory sources.

There are other semi-rules of two or suggestions of two in different programs that specify that they’re subject to AbilityOne and Federal Prison Industries. This VA statute did not have that. So the court said the VA Rule of Two moves ahead of JWOD and Federal Prison Industries. Congress had to go back and change that. So Congress has solved that problem with the VA after these cases came out.

Lizzie: Back in 2020?

Sam: It’s been a while. There were a number of cases, and it became a hot issue. And that was one of those where, again, same as your bill, it was a bipartisan agreement to change the bill so that everybody went back to the historical understanding under the Rule of Two. My view would probably be either let’s go with the historical understanding—which is AbilityOne and Federal Prison Industries still get priority, nobody is trying to dispute that.

Lizzie: Exactly.

Sam: Same as the VA bill, the current SBA statute, as well as in the other SBA programs where they have explicit language, just carve out AbilityOne and Federal Prison Industries to ensure that we just stay the way that we’ve been. What I’m understanding you saying with the bill that you put forth is you’re trying to keep in place the status quo, both before the FAR overhaul and as implemented in the FAR overhaul. Okay, maybe we tried for task orders, but that was a no-go. And I can tell you why I think perhaps it’s not as important now to do task orders as it was when I was at SBA. But if we’re going to do the status quo for contracts under the Rule of Two, then let’s also do the status quo for the interaction between AbilityOne, the Prison Industries, and small business preferences.

Lizzie: 100%. This bill was never intended to do anything to touch mandatory sources. As you said, this bill is intended to put it into statute so that it cannot be changed when there’s a sunset period for all the provisions in the FAR overhaul, right? It can be changed, but if it’s there in statute, it’s set in stone, and that’s really what the goal has been here.

The Importance of Codifying the Rule of Two

Sam: So that’s an important point because you talked a lot about this during the FAR overhaul drafting period in 2025, and it’ll probably come up again as we get to a close and final rule in 2026. But if there is that 10-year sunset period, why is it that the Rule of Two would be up for consideration in 2035 or 2036 if it weren’t for this statute?

Lizzie: You can think about who wouldn’t like this expansion, right? And there are a lot of powerful companies with a lot of lobbying capability able to go and influence and say, “We don’t really like this.” I mean, there were organizations during the proposed rule with the FAR Council—again, before it got rescinded—that stood up and said, “We don’t like this expansion.” So there’s nothing stopping a huge push to get rid of it. That’s why, really, this Congress, this NDAA, is so crucial because the end of this year is the end of a Congress. And so then the bill would have to be reintroduced next year and start the whole process over again.

Sam: And you have momentum now because of the FAR overhaul making that decision and because of this unanimity around the statute.

Lizzie: 100%. So I would encourage anyone listening, any organization you’re a part of, talk to them about calling the Hill. You also, as a business owner, have a ton of autonomy here. You can actually make an impact. When you call a congressional office, whether it’s the district office or the D.C. office, they have to record down what you’re saying. So you’re calling and saying, “Hey, this bill is really important to me, and I want my member to know that it’s important it moves forward.” You don’t even have to be savvy enough to say “in the National Defense Authorization Act,” but just mention the bill. That actually is something that makes it up to the member. They keep track of what people call about. Even from the district, they keep track of what people are talking about. So that is an impact that people can make.

I know I’ve put it out there before and encouraged organizations to talk to all of their members who have been supporting this, but I think it’s going to take the entire community coming together and expressing to both the House and Senate how important this bill is and how important this foundation of small business contracting is.

Sam: That’s a really good insight into how members view input from their constituents. It’s more than just somebody picks up the phone and then says, “Okay,” and slams it back down. They’re actually recording all the calls and tallying it up to see what the priorities are.

Lizzie: You may get a 22-year-old intern, but they are required to do it. Yes.

Sam: I’m sure the member hears that.

GWAC Innovation, Pools, and the Shift in Task Orders

Sam: And don’t let this task order issue prevent you from making that phone call. I’ll tell you why. Yes, of course, I was passionate about this when I was at SBA, but as I’ve been out in the private sector for over a year now, I’ve really seen the power of the GWAC and the multi-agency contract—we’re talking about 8(a) STARS and Oasis Plus and Polaris. I worked with GSA and some of the other agencies on those when I was at SBA. We came to an agreement to have set-aside pools on those. And those pools are becoming prevalent.

Lizzie: Which was amazing, by the way.

Sam: You remember when there was nothing for women-owned small businesses. There was no consciousness. And now we have pools on Polaris. We have pools on Oasis Plus, particularly for women-owned and HUBZone. That’s been a big advancement for small businesses in every stripe.

Lizzie: 100%. We tried to stand up a WOSB GWAC during the first Trump administration, but GSA just said, “Look, this is just too expensive.” Same with HUBZones; they tried to do that back in the day, and it didn’t work. So the pools piece is just incredible, in my opinion.

Sam: Yes, it’s been a terrific innovation. And in a way, that takes some of the pressure off of that task order issue because the pools apply to task orders. Because of the ease of ordering, agencies are using these pools to get to the particular designations that they want. So it’s not as necessary to use the Rule of Two at the order level because agencies can just set aside using the pools. So I think if I recalculated that $6 billion today, that probably would be a slightly lower number because of the pools, actually.

Lizzie: That’s interesting data. You are the data king over here, so that’s perfect.

Sam: Thank you for that. I’m trying to keep it up. So subscribe!

The IT Value-Added Reseller (ITVAR) Size Standard Debate

Sam: We got to know each other by talking about size standards, speaking of numbers and data. Oh my gosh, that is a good one. Yeah, going back to probably the last five-year review five years ago, and now going into another five-year review, let’s talk about why that, for whatever reason, hasn’t come out yet. An experience I remember very vividly at SBA is the debate over the IT value-added reseller size standard and IT value-added resellers as a whole. It’s a big segment of small business contracting that really, when you start out in government, you don’t even necessarily realize exists.

Lizzie: And a lot of veteran-owned companies.

Sam: Yes, a lot of veteran-owned companies are these IT value-added resellers. Can you tell us what is the reason for having this special designation and size standard, what’s your interest in it, and what are you trying to do with that?

Lizzie: Yeah, we have worked with GovEvolve for I think around year eight or nine, which is a trade association just for IT VARs. We’ve worked on things like class waivers for the non-manufacturer rule, and size has always been something that’s been a sticking point for them. I know there was an effort prior to my time around removing a footnote, but basically, the IT VARs operate mainly under a NAICS code that’s 541519, footnote 18, which is quite a mouthful, can I just say?

Sam: You’ve got to really geek out on size standards, don’t you?

Lizzie: I mean, pull me out of the weeds if I get too far in. I feel like I have worked on this now for so long, since we met. And so, the IT VARs are people and products. If you think about it, it’s kind of like the construction industry or the elevator industry faces—they are people and products. I had a client in Michigan who had a revenue-based size standard. Well, think about the labor or the union workforce that he has, plus all of the materials that fluctuate in price. The margins of the contract versus the size of the contract are very different. So, the same thing applies to IT VARs. They have a footnote that dictates an employee-based size standard. It’s 150 people. So at 151 people, you are now supposed to directly compete with the largest multi-billion, multinational global corporations—and I’m not going to name them all, but you know what I’m saying.

Sam: Just one person takes you over. You’re either small or you’re not.

Lizzie: Right. And I think there’s been—and you can correct me if I’m wrong—but in this whole process of bringing this size standard piece to light that we’ve been working on through the past couple of years, I feel like there’s been a notion at SBA that that’s really large, right? Like seeing the numbers and the contracts and being like, “20 million, that’s a huge contract in the IT VAR space.” There’s been a misnomer because, at the end of the day, the margins that the IT VARs make—because again, it’s people, help desk, systems engineers, all the integration, and then the product that they get from the manufacturers—the margins you’re operating on are super thin. So that’s why they need an employee-based size standard. But again, to say 151 people is supposed to compete with the big guys is, to me, kind of ridiculous, if I’m being honest.

Sam: Well, if I remember correctly—and I’m pretty sure this is the case—that is the smallest employee-based size standard. All the other ones are 500, and you have ones that go up to 1,500. So 150 is much lower than it is in other industries.

Lizzie: Definitely. And when we dug into the size standard methodology for our clients, one of the things we found is that there was 2017 census data being used for the methodology. And if you think about the GovCon ecosystem, wow, have things changed since 2017. So that push for a fresh look at all size standards, frankly, is something that SBA is undertaking right now.

Sam: Yes, we’re still awaiting a new size standards final rule and a proposed rule on the employee-based standards.

The Value of ITVARs vs. Direct Procurement and OneGov

Sam: While that is happening, we had this intense period of GSA pushing its OneGov initiative through AI providers and Snowflake fairly recently. During that period, they sent out surveys—first of all about markups—surveys to value-added resellers. They came out with some feedback summaries of those surveys recently, and it seems like the criticism is not as intense as it was when this initially started. But there was a lot of talk about these value-added resellers: Will it just be a pass-through? Is there just marking up of software, whatever it is, for the federal government? What are the value-added resellers doing now, in light of that pressure from last year in the software space, to adapt to the marketplace?

Lizzie: So I’m going to back up on size standards really quick because I wanted to add a piece. The timeline for the rule is probably sometime soonish—summerish, fall. I think SBA realizes that they have to get something out. Businesses need certainty; businesses need to know what they’re going to bid on. But it’s looking like they are going to do a lot of things that will help companies who are trying to transition into mid-size, right? That cliff that everyone talks about. I think you’re going to see a lot of changes in the proposed rule that comes out.

And the reason is, by the way, the new associate administrator, Ryan Lambert, was formerly on the House Small Business Committee. He was a policy director for the majority, and he actually ran a hearing on size standards. It was a full committee hearing where every single member that sat there and asked questions completely understood, and there were IT VARs who were testifying about why there needs to be an entire relook of this process at SBA. That’s where all of these roundtables came from during the pre-rule process. The Office of Advocacy did some, and the Office of Size Standards did some. So I would just implore them to continue that engagement.

Okay, so now on to IT VARs. There’s been such a big emphasis on cost, right? And saying, “We want the best deal.” So the FAS office at GSA has really been leading the charge on OneGov, right? And all these OneGov deals that you’ve seen come out in press releases. And unfortunately, IT VARs have been conflated with just resellers—meaning, “I’m reselling thousands of these pens to the government,” right?

Sam: In some cases, just drop-ship it. All you’re doing is entering something online.

Lizzie: A hundred percent. But IT VARs are rarely just doing licensing, right? That’s almost always coming as a package deal. So I use the example: the Army needs a thousand computers, right? There are so many specialized things. Think about the CAC cards. That’s from one person. Then you’re getting quotes from either Dell, HP, or Apple, trying to figure out what’s the best system to use with what already exists in the agency. What are the requirements that they want? Okay, you need certain licenses; you need certain cloud protection, cybersecurity, a help desk. I could keep going on, but I won’t get too in the weeds.

So all of those pieces are what IT VARs do. And I think where there’s a misunderstanding with OneGov and the huge push to go direct is that the government is then taking out the people who are doing all the integration and trying to make them subcontractors. But if you think back to my cost piece, if you just go direct to one OEM, right—one manufacturer—they’re going to sell you their stuff. If you’re just going to them, they’re going to, of course, say, “Yes, this is the best product that you need,” right? That’s their job. If you don’t have that competition that IT VARs provide, you’re kind of taking out the price controls that they bring, right? And all the competition.

Sam: Yeah, and they act as a consultant to really get you the best value.

Lizzie: 100%. And I think there’s been also a huge push at DOD and DOW. By the way, I’m going to call it both because, yes, technically an act of Congress requires the name change, but at the same time, everyone is calling it DOW. So don’t read into that, whoever’s listening.

Sam: They absolutely could, 100%.

Lizzie: But they have been pushing, kind of saying, “Okay, well, we want to do these enterprise-wide agreements with companies.” And it’s been pretty complicated. And as you said, because of the huge education push through GovEvolve, through our ITVAR Modernization Coalition, and through other companies and organizations that have been working on this, I think we’ve been able to kind of shift the conversation so that IT VARs are not linked in with just plain old resellers. I really wish it could be a different name.

Sam: It’s a mouthful. They are IT VARs.

Lizzie: It’s a mouthful, it’s confusing, but they really do provide value. And if the government says, “Okay, the government only wants to go direct to one OEM,” that OEM would have to stand up an entire division doing exactly what the IT VARs do. If you don’t think a publicly traded company is going to pass all those costs to the government, they absolutely would. They’re not going to eat the cost to set up another division. I’ve had some of them tell me it would be 30% more cost to the government if they had to do that.

Sam: But where do you see this going? Do you see IT VARs looking the way that they do now in five years or so? Do you see them getting swallowed up by the OEMs in a sense of merger action? Do you see them getting a 500-employee size standard, becoming even larger than they are currently?

Lizzie: Well, I’m going to knock on some wood around the size standard. Our friends at The Pulse made a very compelling argument with their data poll around why that should be expanded. So I think that IT VARs, like any industry, have had to completely change their approach, right? With the big shifts in acquisition, there comes opportunity. So they’re both trying to educate on what they do, but I think they’ve had to figure out, “How can we pivot? Are there different ways we need to approach our customers if they’re looking for fewer deals and bigger deals?” Which is also, in my opinion, been a trend.

Sam: Oh, interesting.

Lizzie: Yeah.

The Fight to Raise Sole Source Thresholds

Sam: Let me go back to Capitol Hill. You’ve been working on a bill on sole-source authorities. Tell us what’s happening there. What would happen with this bill?

Lizzie: I’m smirking because the Hill staff joke that it’s going to be on my tombstone: “She raised the sole-source thresholds.”

Sam: Is that what you want?

Lizzie: Oh my gosh, no, I want this enacted into law! A bit of history: this effort started back in 2019 to raise the sole-source thresholds. And that’s for individual 8(a), HUBZone, women-owned, and SDVOSB programs. It doesn’t touch the entity-owned, right? As everyone knows, they have their own rules and their own piece of the 8(a) program, and we’re not trying to touch that—just everyone else.

All the companies that we represent said, “No contracting officer is going to jump through hoops.” Back then, it was $4 million, right? And then $7 million for manufacturing. They wouldn’t jump through hoops for a $4 million sole source, even if they wanted to do it. I had one woman-owned small business in Alaska who was just a WOSB say they told her, “You know, this is a $7 million opportunity. It totally makes sense for where you are and what your specialty is, but legally we can’t do it.” So there have been all these passed-over opportunities where that work then goes to a large business. So we sought out to increase them.

There have been like 500 versions of this bill, just to set the record straight. The original bill was in the House to raise the thresholds from $4 million and $7 million to apply each year, because right now that’s the total over the life of the contract. Then there was an effort during the reauthorization in the Senate Small Business Committee where they said, “You know what, that’s not enough money when we look at the size of contracts. Let’s raise the thresholds to $8 million and $10 million and allow for that each year, right?” So if I was doing math, over five years, what was that? This is why I’m a lobbyist—$40 million and $50 million. And that didn’t go through only because the entire reauthorization effort fell apart over the regulatory title of the bill. At the time, Chairman Marco Rubio didn’t want to move the contracting piece where this sat. And H.R. 190, which was the OG bill for the $4 million and $7 million each year, had passed the House already.

Okay, so then there was an effort because people have always asked me, “Where did this $8 million and $10 million come from?” That’s where it came from. Because then the next Congress, there was an effort just to raise them to $8 million and $10 million. When we’re lobbying for something and you’re using data, we want to make a number make sense. So we don’t just throw out a size standard like, “Oh, we think it’s this,” or “Oh, we think this should be raised.” At the very minimum, we felt like this should be doubled.

Sam: Double the statutory threshold.

Lizzie: Right. Double the statutory threshold and make it tied to something with an inflation adjustment as time goes on. Okay, so that didn’t make it through because it was used as a negotiating piece during an NDAA conference for something else that another one of the “four corners” wanted. That didn’t make it through.

So flash forward to now, we have a bill, H.R. 7154. That raises the sole-source thresholds, again, for those four programs to $10 million across the board. Like, let’s make it simple here. Why are there two separate lines? Let’s just make it one, right? That was Congress’s idea. Is it as large as I want it to be? Absolutely not. But I’ll take it because chipping away at it and making the statement that this is a tool that contracting officers can use when justified is really important. There’s no threshold on the entity-owned 8(a) companies; they get multi-billion dollar sole sources.

Sam: Yeah, that’s an important point to make: when we’re talking about sole sources to small businesses, it’s a tiny fraction of the sole-source contracts that are getting awarded by the government. There are hundreds of billions of dollars of sole-source contracts that are going out every year, and single-digit percentages—like 5% of them—are going to small businesses.

Lizzie: Right. So why not give them this tool when we have business owners continually giving examples of how they’re missing out and the work is instead just going to a large business?

The Impact of Compressed Buying Years and Competition

Lizzie: Especially with the squeezed buying year, right? We all know that there’s probably going to be a CR—a continuing resolution—while the House works on their appropriations bills. Yeah, it’s easier to get it through the House because, unlike the Senate, they don’t have to be bipartisan. So if we go through the usual process where right around the holidays all the members of Congress want to go home and they agree on some type of funding for the fiscal year, that then squeezes where all the money comes from. And contractors have to deal with that every year. So the government, especially I believe with the RIFs and the reorganization, that’s going to become a worry.

Sam: Sure. Fewer contracting officers, fewer competitions—it affects all competition. And then they have this compressed buying year because of the CR. We saw that the Army sent out a memo saying don’t use sole-source authority or 8(a) sole-source authority unnecessarily. Particularly, the Air Force has something similar about not creating new contracts. Is this the right environment to be trying to raise sole-source thresholds when there’s this emphasis on competition?

Lizzie: Interestingly enough, it actually has been. We really bill it as a tool because it is. I know there was an effort by the chair and through the letters that were sent, and then SBA had this whole cascading effect on 8(a). But to me, why are you limiting those companies from opportunity if the industrial base keeps shrinking? The shrinkage of the industrial base keeps getting quoted over and over and over again, so I thought this was the right time to do it.

And it actually is an amendment in the House National Defense Authorization Act that’s up for consideration. It was just submitted on Friday, and it’s bipartisan. It’s with Gil Cisneros, who is the ranking member of the House Small Business Committee’s Subcommittee on Contracting and Infrastructure—mouthful—and Derek Van Orden, who’s a Republican from Wisconsin who really latched onto this issue. He’s not on the Small Business Committee but thought it was really important. So I think that sends a message.

Sam: Yeah, it could really budge the small business numbers. We have not seen the latest SBA scorecard, but perhaps based on the preliminary numbers that I’ve seen, it’s been flat for a while, while the actual industrial base numbers have been going down.

Lizzie: When does that usually come out?

Sam: Summer.

Lizzie: Okay.

Reimagining the OSDBU and the 8(a) Proposed Rule

Sam: I know there was a lot of discussion around the goals, and I wonder if it’s worth noting that Congress has been thinking about reimagining the OSDBU, or Office of Small Business Programs, right? I know I think there was a bill at one point to change the names, right?

Lizzie: Yes.

Sam: But the OSDBUs and the authority that they have—Congress also recognizes that they don’t have enough authority, right? Just focusing on the goals doesn’t really move the needle as much as it should. So I think that’s ripe for opportunity once those scorecards come out and once we see those numbers. That data is invaluable to us just because it helps justify and move forward a lot of the policies that we’re working on.

Sam: Oh, that’s good to know. I mean, people actually read that. Yes, yes. On the name change, the name change would be to take “disadvantaged” out of OSDBU. The “D” in OSDBU stands for disadvantaged. And we’re speaking on the Thursday after a Friday where SBA issued a proposed rule to change the definition of socially disadvantaged for the 8(a) program. The proposed rule has a quick turnaround period—a 30-day comment period.

Lizzie: Don’t you love the Friday drop?

Sam: A Friday drop, and then 30 days that include Juneteenth and July 4th. So two long weekends in it. But July 13th—they’re keeping with July 13th. Already, in just the first week, the agency has received about 20 comments, and there are some that are positive, but probably more that are negative on the proposal. As companies are looking through this proposed rule and putting together their comments, what sort of advice would you give to them in trying to formulate what their thoughts are on the SBA proposed rule on social disadvantage for the 8(a) program?

Lizzie: If you like it, tell them. If you don’t like it, tell them. But “tell them” being SBA, in a very purposeful way. What that means is—and you could speak to this better than I could—in those comments, go into the rule. Find the pieces that you don’t like. Tell SBA how it impacts your business, or highlight the pieces that you do like and how it impacts your business. Because at least on our side, we feel like that is the most compelling thing that you can do as a company when you’re responding to a proposal. I think people often misunderstand and think that SBA is just going to ignore comments. They have to respond to the comments, correct, in the final rule?

Sam: They have to respond to significant comments.

Lizzie: There you go. So “significant,” I’m assuming, would mean something more than just “I hate this” or “I love this, rah-rah,” correct?

Sam: Yes. You tend to think of it as something that provides substantial input, data, or a different point of view on the comment or on the rule. The ones that are not significant are those that are off-topic. People come in with comments on just about anything, but really they need to be on the topic at hand, which is how social disadvantage needs to be designated for them.

Women-Owned Small Business Entry into the 8(a) Program

Sam: On the point with 8(a) eligibility, you lead the Women’s Procurement Circle. And historically, women have been able to use that social disadvantage criteria to gain access into the 8(a) program. What’s your understanding of where SBA wants to go with 8(a) eligibility, and what would be the path for women-owned businesses to enter that program?

Lizzie: Yeah, we’ve assisted WOSBs over the years in getting into the 8(a) program. A lot of the ones that did so successfully were ones who kept good records of that discrimination. So for example, I have a quote because I’ve never forgotten this: one of the companies told me that their boss said, “I’m going to promote this person because he has a family he has to support. You’re single; you don’t need this as badly as he does.”

Other examples have been the denial of capital, the denial of a loan, which was really part of what drove that authorization of the WOSB program back in 2000. So I think for WOSBs—and again, you would know better than I do about this rule—it seems like it will be harder for companies to get into the program. I would advise people maybe not to send their application into this program right now. While there’s so much change and flux, if it were me, I would wait. But that’s just my opinion.

Sam: I’m saying that regarding applications certainly, because it doesn’t seem like—no matter which way SBA goes on this final rule—there’s going to be some change. And during that period of change, SBA seems unlikely to process applications under the old standard, so you might as well just wait to see how this all plays out and then decide whether you want to apply. Not legal advice, just practical advice, as SBA is probably not going to keep doing things the way that it’s been doing them for the past three years.

Lizzie: Right. And there’s change. Look, there’s change in all of the programs. And I think it’s kind of been a wake-up call for everyone in this community—meaning the small business contracting community—just because something has been done a certain way for 20 years is not how it’s going to be done right now. I mean, if we think about OneGov and consolidation, the FAR overhaul, the entire acquisition system has had a spotlight on it. Having all of us nerds in the spotlight certainly wasn’t on my bingo card, right?

And so the other thing I’d say—and this is not specific to the rule, but also kind within people’s power—is tell Congress what you like about the change, or tell Congress what you don’t like about the change. SBA has the authority to change this again. Say another administration comes in—a different administration—they could change it, right? They have these authorities to highlight certain things. So Congress is the only place where you can get something into law regarding what you like or don’t like about these changes to the program.

Legislative Threats to Small Business Set-Aside Programs

Sam: And Congress is talking about the transportation bill, which has the DBE program in it. There seem to be changes there. In your crystal ball, or based on things that you’re hearing in the halls of Congress, do you think there will be any action on the 8(a) program?

Lizzie: Meaning the fact that there were two bills that proposed to eliminate it, right? And I think also eliminate WOSB along with HUBZone. I can’t remember exactly, but basically to eliminate all the programs. This is nothing new. Back in the Section 809 Panel days—now my brain is working—back in that relook of the entire federal acquisition system, there was a proposal to eliminate all of the socioeconomic set-asides in exchange for a 5% price preference. Do you remember that on that commission they did? And this is definitely where they got that from, although I think this current bill just eliminates them outright.

It is not, in my opinion, in any member of Congress’s interest to eliminate these programs because almost all of them have these businesses in their district. They have at least one company, right? And that one company can call, like I talked about earlier, to their congressional representative and talk about why this program is important to them and what it’s done for them. Same with WOSB, same with HUBZone, same with SDVOSB. So I don’t see a world where that’s going to move forward.

Even with people asking, “Would the Republicans in the House move it because it’s easier on their side?” Chairman Roger Williams has not done anything to eliminate the program. He’s not on that bill, right? And I think that just sends a message that the committee and the chair understand the importance of the small business programs. And then on the Senate side, I’m going to remind everyone: it takes 60 votes to get something through. So to get that through would require Democratic support, of which that would never happen. But also, again, Republicans also agree with the small business programs. I think it’s just a small fraction of Congress that thinks they should be eliminated, so I don’t really see it as a threat.

Sam: Yeah, that’s the Eliminating Discrimination in Government Contracting Act. That’s the one that would eliminate women-owned small businesses. I did hear of the concept targeting socially disadvantaged businesses. So that’s a legislative attack. It’s good that you don’t see that gaining much headway in either the House Small Business Committee or in the Senate.

Lizzie: I’ll lay my body over the tracks before I let that go anywhere.

Deconstructing the EDWOSB Audit and Program Origins

Sam: We don’t want that to happen. However, we also have seen news that SBA is initiating an audit of all economically disadvantaged women-owned small businesses (EDWOSBs). So there’s certainly some level of scrutiny on women-owned small businesses generally. Just taking a step back, you mentioned the year 2000. Why do we have a Women-Owned Small Business program? What led to that program?

Lizzie: Yeah, to address the audit, by the way: when I got sent that, the Hill also was like, “Oh my gosh, what is this?” I went through the survey to see what they were asking and then asked a bunch of our EDWOSBs within our Women’s Procurement Circle, “Hey, did you get this? And two, is there any new information they’re asking?” There isn’t any new information. It’s not different than what you’re asked when you are getting certified as an EDWOSB.

And I talked to SBA, and it turns out that they had some very unfortunate timing putting this out because it’s actually not tied to the 8(a) program audit. What they are doing is their normal three-year EDWOSB audit. And every EDWOSB I talked to said that since they got into the program, they haven’t been audited for EDWOSB status; this is their first time. So SBA probably should have clarified that when they did this. I’d be interested in the comments if anyone has actually had this come up faster, right? Like if they got certified last year and then got this letter. But that’s my understanding when I went digging for what the survey was.

Sam: So that at least alleviates the suspicion that SBA is trying to hurt the program through this audit. It’s really just something that they’re required to do, and they’ve gotten around to it in an oddly timed circumstance. But there’s not a motivation in there to somehow hurt the program.

Lizzie: Right. And look, the women-owned companies in the program welcome audits. They are really sick of—at least all of the ones I’ve talked to over the last 10 years—are really sick of the narrative of, “Oh, it’s just a program where, you know, their husbands actually run it,” right? We’ve had a bill to eliminate self-certification in the WOSB program for the last couple of Congresses that hasn’t moved forward, and that had bipartisan support. So companies don’t want that narrative that sometimes the SBA IG will push. They’ve suggested things to eliminate fraud in the program, so I think WOSBs would welcome the fact to get rid of people who aren’t legitimate, right? To really put a lid on that narrative. And when you look at fraud, honestly, in that program, I think the IG has found it’s like 1%. But great—get rid of the 1%, exactly.

Overcoming the Scrutiny and Complexity of the WOSB Program

Lizzie: When the program was authorized in 2000, the reason that it was so important was because there were so many women unable to get capital at that time, right? The examples that I gave. So women business owners really took up the fight to get this program into place. It took Ann from our firm—she led the charge here—11 years to get it into place. I believe another two years to get sole-source authority, and then she also had to fight to remove dollar caps.

Sam: Yes, there used to be a cap on the competition.

Lizzie: Correct. And this program is all founded on a NAICS study—a disparity study—of which NAICS codes show where WOSBs are underrepresented, right? So it doesn’t apply to every single one. It applies to a lot of them, not surprisingly. But I don’t know of a program—and let’s put what’s going on with 8(a) in a box right now for the last year and a half—I don’t know of a program that’s been so scrutinized as the WOSB program since its inception. And I think it’s that narrative of, “These are husbands with their wives running them.” So any effort that Congress wants to do or the SBA wants to do to get rid of that and actually allow the legitimate WOSBs to thrive would be very welcome. They’ve met the goal twice; the last time was 2015. And I think the data that I saw shows that the numbers are actually going to go down for the first time in the history of the program.

Sam: It looks like it’s going to go down from last year. It was 4.97% last year. It was really close to that 5% goal. But it looks like there’s going to be more of a gap based on current issues.

Lizzie: And I’m not going to go down the rabbit hole that you and I talked about regarding double counting and what that number would look like if it was just a pure set-aside.

Sam: Thinking about this, I think about the value over a few years.

Lizzie: Oh man, I really harassed Sam about that when he was at SBA because of Congress. So I won’t go down that rabbit hole, but I will say in this environment, WOSBs I think have an opportunity, especially with the change in the FAR overhaul around “not just once an 8(a), always an 8(a)” contract. So we’ve been telling WOSBs, “Okay, if there is that work, go educate contracting officers on how to use this program.” We had to make a one-pager on how to use the program because there was just still a huge knowledge gap in the acquisition workforce regarding whether the WOSB program even existed and how to use it—which is kind of crazy if you think about it, given it was authorized in 2000. So it’s really been an uphill battle with this program.

Sam: My thought on it was related to the NAICS study that you were mentioning. That is a level of complication that the other programs don’t have, where you have to check the NAICS list. Contracting officers don’t necessarily know to check the NAICS list; that’s not currently embedded in their standard training. So it’s a bit harder to use the program compared to the other programs. But now, as we talked about before with the pools, perhaps that makes it a bit easier because those vehicles have already gone through that NAICS filtering process.

Lizzie: Definitely. Well, and you can get rid of it, right? If you got rid of that study, I feel like that would open it up to so many constitutional challenges, right? I do really wish, though, in this whole thing that we’re talking about, that administrations would stop picking winners and losers. And I’m going to pick also on the Biden administration for raising that goal, right? That was saying, “Hey, this is a really important priority.” Obama did it with something else; Trump one did it with another group; Trump two is doing it with another group. And I just wish that there would be more of a focus on, “How can we make sure this industrial base, in all of these programs that all serve different purposes, is getting access to competition in small versus large?” instead of kind of dog-eat-dogging the programs alive and against each other. It just has been really exhausting, in my opinion, in the advocacy world to be facing that.

Strategies for Capability Statements and Mission Alignment

Sam: Yes. It gives people something to talk about, though, because they say, “Oh, well, it’s not 8(a) anymore, now we’re going to veteran-owned.” Instead of being women-owned, I’ve talked to business owners that say, “I’m being told to take 8(a) or women-owned off of my capability statement and just stick with small business.” What do you say to businesses like that? Do you tell them to keep it on for the next round when women-owned comes back into vogue?

Lizzie: You know, I... every training I’ve ever seen from an OSDBU or from a government contracting organization always says lead with how you align with the mission and not with, “I’m this designation.” Because there’s a lot of back-and-forth around, “We need to find a unicorn of somebody who checks every single designation,” right? I don’t know. I see it as an opportunity, especially for WOSBs, again—Lizzie: ...because of that change around the 8(a) contracts. Um, I wonder if I’d remove it. I think I’d keep it. I mean, I’m a woman-owned small business, so, you know. Maybe that’s my perspective.

Sam: You’ve done very well in that as a nation, as a business. Just overall, when we were looking back in 2025 at a FAR overhaul, there were people who were saying, “Oh, it’s going to get rid of the women-owned program. It’s going to get rid of the 8(a) program. It’s going to get rid of the Rule of Two.” And thanks to your advocacy, we kept that in the FAR overhaul. And maybe it’s actually now. But looking ahead at the political wins and what you’re seeing in potential NDAAs... Do you see the certification programs staying the way that they look now in five, ten years?

Lizzie: No. I mean, I certainly know they’re going to change, right? And SBA is going to look at, under this administration’s—under the next administration, under the next administration—what they can do to align the programs with their priorities, right? That’s just how it works. So I don’t see them necessarily being the same, but I also don’t see them being eliminated, again, to the point of it’s not anyone’s political interest to completely eliminate them.

Lizzie: Now you can take them out of favor, right? And do things to try and influence the acquisition workforce of whether or not they’re going to use them. But I had an attorney point out to me the fact that, you know, a contracting officer is going to do what’s the quickest, right? They might be influenced by the politicals at their agencies, depending how loud they are either way. But usually they’re going to try, especially now, bless people to do whatever they can do to make it the fastest, right?

So then the emphasis is, okay, how can you make small business faster, right? How can you create parity across the programs, across those rules so that you don’t have 400 different rules for each program and the set-aside for this is different than this, right? I think that’s been a huge focus in Congress over the years and I would hope continues as these programs are all shifting.

A Plea for Small Business Unity Against Large Competitors

Lizzie: I’m going to plead with the small business community since you gave me a microphone to really work together to get changes done that impact all of the programs instead of tearing each other apart. You know, there was a change in goaling, right? Just for one program. There’s a push for a sole-source increase just for one program. And what that does is it allows the opposition that would be the bigger companies, right? And their lobby to point to how fractured the small business community is.

The way that we’ve been able to move things forward over the last 23 years as this company has been because the heads of organizations work together to try and push a common goal. And I would really hope that that can continue and we can get back to that because that’s what makes effective advocacy in this community and in this very shifting environment.

Sam: That’s a very powerful message. One team, one goal. We’re pushing to get more small businesses and as many contracts to them as we can.

Lizzie: Rising tide lifts all smalls. There you go.

Sam: All smalls. That’s a great motto. We can use that for GovCon Intelligence.

Wrapup

Sam: Lizzie Sullivan, how do people find you and hear more about Madison Services Group?

Lizzie: Our website is MadisonServicesGroup.com. My email is Esullivan@MadisonServicesGroup.com. We have a LinkedIn page like everyone in GovCon—which, I don’t know how everyone in GovCon spends so much time on LinkedIn, but we have one—you can get in contact with us there. We do a “Reading Washington” that’s kind of our take for the week on big issues. But we’d love to get in touch with companies and organizations.

I want to thank everyone who has advocated for the Rule of Two, but also things right now that can make and strengthen the small business industrial base. It just is such a critical piece that needs to continue. So I also wanted to thank anyone who’s been doing that. And there have been a lot of players in this space.

Sam: Well, we want to thank you for your advocacy, being so visible and outspoken about the importance of small businesses in the federal contracting community. People don’t realize how close it was to not having the preferences and advantages they have now. You are a big part of being able to keep those going and looking at the environment the way that it is now as being a welcoming one to small businesses. So thank you for your role in that and thank you for being on the show.

Lizzie: Yeah, thank you. And I’m going to end with my favorite thing to say: meet, call, write your members of Congress. When they’re back in the district, invite them to your office. You don’t have to come to D.C., although we’d love to see you, to go meet with them and their staff. Getting engaged is something that is so critical for small business contractors writ large and for all of the programs to keep them going.

Sam: Meet, call, write. Yes.

Lizzie: Thanks so much for having me today.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com. This video is for informational purposes only and does not constitute legal advice.

This episode of GovCon Intelligence was produced by Amelia Delphos.

Why SBA's 8(a) proposed rule isn't "colorblind"

Sam Le — Thu, 18 Jun 2026 11:31:46 GMT

“The way to stop discrimination on the basis of race is to stop discriminating on the basis of race,” Chief Justice John Roberts famously wrote in a 2007 opinion, striking down a Seattle school district program for racial balancing. For a few years, that worked—programs actually stopped discriminating based on race. The Supreme Court invalidated college admissions programs, and SBA reformed the 8(a) program’s “social disadvantage” test in 2023. SBA was requiring all 8(a) applicants to submit individualized social-disadvantage narratives. But now, almost 20 years after the Chief Justice’s call, SBA wants to go back to discriminating based on race.

There is no other way to read the SBA’s proposed rule published last Friday.1 Titled “Reforms to Remove SBA’s 8(a) Program’s Rebuttable Presumption of Social Disadvantage for Individually Owned Firms Only,” the proposal would bring the 8(a) program back to discriminating based on race. SBA wrote that the way social disadvantage in the 8(a) program operated until 2023 “rendered white Americans almost totally unable to participate in the program.” Because of this inability, SBA proposes what it calls a “remedy.”

That “remedy,” the Agency writes, would address the prior “unconstitutional discrimination against members of groups who were not subject to the Rebuttable Presumption.” That rebuttable presumption refers to the pre-2023 rule that preferred five groups—Black, Hispanic, Asian, South Asian, and Native Americans—for admission to the 8(a) program.

Who are the groups not subject to the rebuttable presumption? Officially, it’s anybody who isn’t in those five racial categories. But, most obviously, it’s the white Americans that SBA says were “almost totally unable” to participate. The SBA press release claims that the 8(a) program was “crowding out legitimate job creators, especially white Americans.”

Senator Edward Markey, ranking member on the Senate Small Business Committee, issued his own release calling SBA’s proposal ahistorical. “The SBA’s proposed rule grossly diminishes the history of systemic racial and ethnic discrimination in the United States,” Markey said.

In SBA’s proposal, white Americans—and other groups not in the list of five—would be able to claim 8(a) eligibility as “socially disadvantaged.” (I mentioned Middle Eastern/North African in my podcast last week.) They would qualify because “prior iterations of [SBA regulations] … excluded the [applicant’s] racial or ethnic group as a group entitled to a rebuttable presumption of social disadvantage.” Under the new social-disadvantage test, they would be able to self-certify their membership in the excluded group and that they suffered individual harm.

So that’s SBA’s remedy. Because Black, Hispanic, Asian, South Asian, and Native Americans had a pre-2023 rule in their favor, the new rule would favor everyone who isn’t Black, Hispanic, Asian, South Asian, or Native American.

Race would still matter in SBA’s “remedy.” It’s just not the races that mattered before.

What SBA missed in its own data

What about SBA’s assumption that pre-2023 preference “rendered white Americans almost totally unable to participate in the program?” SBA needed only to check its own data to see that it’s not true.

Every year, SBA reports membership in the 8(a) program to Congress. The reports from 2009 to 2024 are up on SBA’s website. The oldest reports actually used to include numbers on the participation of “Caucasian Americans.” In 2009, that category accounted for over 7% of the 8,800 firms in the 8(a) program. It’s not a lot, but it’s also not “almost totally” zero.

Over time, Caucasian was wrapped into a general “Other American” category that represented anyone not in the five preferred groups. The latest SBA report showed that “Other Americans” owned over 5% of the 8(a) firms owned by individuals. Again, that’s not as close to zero as SBA’s “almost totally unable” statement suggests.

Table from SBA’s 2024 8(a) program report

It’s true that these Caucasian and Other American figures are small in comparison; both are under 10%. But remember that those are a percentage of a small segment of government contracting. As Jackie Robinson-Burnette reminded me in our recent podcast, the 8(a) program is just a small part—about 3%—of government contracting overall.

“Other Americans” contracting looks much better when you look at contracting overall. SBA previously published race-disaggregated data that makes this analysis easier. But those figures have disappeared from SBA’s website. Fortunately, the Internet Archive has the old numbers, showing that “Other Small Business”—small businesses that don’t identify a minority group—received 16% of all government contracts in 2024.

SBA FY 2024 disaggregated data, as archived on the Internet Wayback Machine.

Those numbers represent all government contracts, though, including those to big Defense contractors. The more useful analysis is to see how much “Other” received out of set-aside contracts for small businesses. Small businesses owned by “Other” received over half of all set-asides last year. Much of the remaining half went to Native firms owned by Alaska Native Corporations, Native Hawaiian Organizations, and Indian Tribes.

According to this data, “Other” category businesses don’t need the 8(a) program to win contracts. That’s not the case for those businesses in the five racial groups, though. Each one of the five groups receives more than a quarter of its set-aside contracts through the 8(a) program. The Native American category receives the most—again, because of the substantial amount of contracts to ANCs, NHOs, and tribes.

If finalized, the SBA proposal will shift those figures substantially. Companies in the “Other” category—including those owned by white Americans—would qualify as “socially disadvantaged” and thereby receive more of their contracts from the 8(a) program. That would likely add to the $69 billion that those companies already get from set-aside contracting.

The 8(a) program’s intent

Aside from creating a “remedy” for the pre-2023 rebuttable presumption, SBA justified its proposed rule as “ensuring” “that the programs’ intended purposes are not subverted.” But the proposed rule doesn’t discuss what the 8(a) program’s “intended purposes” are. Those purposes are the opposite of what the agency is proposing.

The purpose of the 8(a) program is easy to find. There is literally a law, part of the Small Business Act, that says that “the purpose of section 8(a) [is] to”—and then proceeds to emphasize equality for socially and economically disadvantaged individuals: “promote the business development of small business owned and controlled by socially and economically disadvantaged individuals so that such concerns can compete on an equal basis in the American economy.”

The same law describes what Congress believed “socially disadvantaged” means. “[P]ersons are socially disadvantaged because of their identification as members of certain groups that have suffered the effects of discriminatory practices or similar invidious circumstances over which they have no control.” (15 U.S.C. 631(f)(1)(B).)

The law goes on to list that “such groups include, but are not limited to, Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian Organizations, and other minorities.”

The racial list is in the law itself, so I’m not sure what is “subverting” what here. SBA claims that its proposed rule “aligns with the statutory text,” including that purpose language above. But the proposed rule doesn’t actually have the purpose language. The proposal misses that Congress referred to “certain” groups. It misses that, in the law, social disadvantage comes from “discriminatory practices or similar invidious circumstances.” It misses the emphasis on equality.

This doesn’t mean that SBA’s proposal is necessarily wrong under the statute. But it means that the agency didn’t meaningfully grapple with the 8(a) program’s actual intent, despite suggesting that it had. That oversight is something to watch given the stricter Loper Bright standard for judicial review. Plus there’s the effect of the latest from the Supreme Court.

A “colorblind Constitution”

SBA’s biggest hurdle to finalizing its proposal might be its unintentionally poor timing. Nearly twenty years after Chief Justice Roberts’s call to “stop discriminating on the basis of race,” SBA might have thought that the pendulum had swung so far to the other side that its “remedy” could pass legal muster.

Not so fast. Just a week before SBA issued its proposed rule—presumably while SBA’s rule was in final review—the Supreme Court made a major pronouncement about race-based programs. The Supreme Court declared in a voting-rights case that the United States is bound by a “colorblind Constitution.”

This had been a long-awaited statement for the conservative legal community. The “colorblind Constitution” phrase derives from Justice John Marshall Harlan’s 1896 dissent in Plessy v. Ferguson, and it has gained steam recently as a rallying cry against race-conscious readings of the Reconstruction Amendments. The Pacific Legal Foundation, which I wrote about recently, echoed the phrase in an op-ed about the bill to kill the women-owned small business program—a bill that also eliminates the concept of social disadvantage.

GovCon Intelligence

Why Congress wants to kill the women-owned small business program

Nancy Mace was the first Republican woman elected to the U.S. Congress from South Carolina. She got to Washington by starting her own public-relations business, then ge…

2 months ago · 12 likes · 3 comments · Sam Le

“Colorblind” would seem to apply to all programs that favor some races, regardless of what they are. But SBA’s proposed rule refers to an applicant’s “racial or ethnic group” as a basis for social disadvantage if that group was “excluded…as a group entitled to a rebuttable presumption of social disadvantage.” The SBA proposed rule also says that an applicant can claim social disadvantage because a government or other entity “discriminated or was biased against a clearly defined racial, ethnic, or cultural group.” To qualify as socially disadvantaged, an applicant in one of those groups self-certifies their group membership and their individualized harm.

There could have been another way. As I wrote when it first came out, the Department of Transportation’s interim final rule on the Disadvantaged Business Enterprise program requires that disadvantage “must not be based in whole or in part on race or sex.” That would seem to allow other bases, like disability or religion.

And, in legislation being considered to reauthorize that DBE program, the Build America 250 Act would define disadvantage based on “the types of discrimination prohibited under Federal law.” That implicitly covers race, color, national origin, age, disability, and other criteria.

So SBA had other options. But it chose one that explicitly invokes race. The goal, as the agency proclaimed in its press release, is that no one is denied 8(a) admission “simply because they are white.”

Comments on the proposed rule are due July 13. Then it’s up to the SBA to decide whether, under a “colorblind Constitution,” it can finalize a rule that sees the world in black and white.

Correction: In my livestream last week, I talked about data indicating that the number of 8(a) firms was below 3,000. The SBA database seems to have been glitching the day I pulled that data. According to the database today, the number of active 8(a) firms currently sits at 3,326. That’s the lowest since the mass suspensions following SBA’s 8(a) data call.

This article is for informational purposes only and does not constitute legal advice.

The full title also includes the sentence “Reforms Do Not Impact Entity-Owned Firms.” SBA presumably added that so the agency does not need to hold tribal consultations before finalizing the rule.

SBA's 8(a) eligibility changes, the DoW Small Business Bill of Rights, SBA's Reorg, and more

Sam Le — Wed, 10 Jun 2026 21:41:29 GMT

In this live stream, I analyzed the newly pre-published SBA’s proposed rule that changes the social-disadvantage eligibility criteria for the 8(a) program. Viewers had questions on the proposed rule. We also covered the little-discussed DoW Small Business Bill of Rights, a recent reorganization of staff at SBA, and a few cases involving the mentor-protégé program.

Links and an auto-generated transcript follow. Subscribe to GovCon Intelligence to be notified of future live streams.

Links

SBA pre-publication proposed rule on “Reforms to Remove SBA’s 8(a) Program’s Rebuttable Presumption of Social Disadvantage for Individually Owned Firms Only; Reforms Do Not Impact Entity-Owned Firms” https://public-inspection.federalregister.gov/2026-11765.pdf
NDAA FY24 (see section 876 for Small Business Bill of Rights) https://www.congress.gov/118/plaws/publ159/PLAW-118publ159.pdf
DoW Small Business Bill of Rights https://business.defense.gov/Small-Business-Bill-of-Rights/
PDF of Small Business Bill of Rights https://business.defense.gov/Portals/57/Small%20Business%20Bill%20of%20Rights/DoW%20Small%20Business%20Bill%20of%20Rights.pdf?ver=TGSweXAuiLJkOqERHfZKkw%3d%3d
DoW Small Business Bill of Rights one-pager https://business.defense.gov/Portals/57/Small%20Business%20Bill%20of%20Rights/Small%20Business%20Bill%20of%20Rights%201-Pager%2003.11.26%20-%20fillable.pdf?ver=WOh6YHb4fg84cZg0o1OXYA%3D%3D
SBA policies under review at the Office of Information and Regulatory Affairs https://www.reginfo.gov/public/do/eoReviewSearch
SBA news release: “SBA Announces Agency-Wide Reorganization to Modernize, Drive Operational Efficiency, and Enhance Accountability to Taxpayers” https://www.sba.gov/article/2026/06/05/sba-announces-agency-wide-reorganization-modernize-drive-operational-efficiency-enhance
SBA OIG news release: “Government Contractor and Executives to Pay $21.3M to Resolve Fraud Scheme Involving Service-Disabled Veteran-Owned Small Business Contracts” https://www.sba.gov/article/2026/06/09/government-contractor-executives-pay-213m-resolve-fraud-scheme-involving-service-disabled-veteran
COFC decision on timing mentor-protégé joint ventures: Primary Healthcare LLC d/b/a Anglin Distinctive Health Care JV LLC v. United States, Case No. 25-1795C (2026). https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2025cv1795-40-0
COFC decision on mentor standing: Int’l Bus. Sales & Servs. Corp. v. United States, Nos. 26-401 & 26-425 (Fed. Cl. May 29, 2026). https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2026cv0401-48-0
GAO decision on subcontractor joint-venture past performance: ID8Spark, LLC, B-424253.2, .3, .5, May 18, 2026. https://www.gao.gov/assets/890/886345.pdf
FAR Overhaul proposed rule status: https://www.acq.osd.mil/dpap/dars/opencases/farcasenum/far.pdf
Number of 8(a) participants below 3,000:

Chapters

00:00 - Introduction to GovCon Intelligence

00:52 - SBA Proposed Rule on 8(a) Social Disadvantage

08:00 - Impact of the Proposed Rule on Current 8(a) Firms

11:13 - Group Classification and Historical Context under the New 8(a) Rule

18:12 - Delays in Processing New 8(a) Applications

19:54 - New vs. Old Application Evidence

20:40 - Department of War Small Business Bill of Rights

26:21 - Upcoming SBA Policy Changes and OIRA Reviews

30:16 - SBA Agency-Wide Reorganization and Workforce Reductions

33:20 - SDVOSB Fraud Case: Broadway Electric and Cornerstone Contracting Settlement

37:13 - Court of Federal Claims Case: Primary Healthcare (Mentor-Protégé Joint Venture Timing)

43:13 - Court of Federal Claims Case: International Business Sales and Services Corporation (Mentor standing)

45:08 - GAO Case: ID8 Spark (Subcontractor and Joint Venture Past Performance)

47:19 - FAR Overhaul and Notice and Comment Phase Updates

49:45 - Tracking the Latest 8(a) Active Firm Data

52:03 - Business Activity Targets (BAT) and Closing Remarks

Transcript

Introduction to GovCon Intelligence

Welcome to GovCon Intelligence. I’m your host, Sam Le. It’s a solo episode today.

I’m going to be going over SBA’s proposed rule on changes to 8(a) eligibility. But that’s not the only news that we’ll be going over today. There is big news out of the Department of War on the Small Business Bill of Rights. That’s a good benefit to small businesses, but DOW is not really talking about it. It gives a new avenue for small businesses to get information from DOW, as well as to file complaints with the department if they have complaints.

There’s also been a reorganization within SBA; we’ll go over that. We will also cover some fraud cases and cases out of GAO and the Court of Federal Claims. I’ll also take a look at the latest 8(a) data on the suspensions and the number of companies in the 8(a) program. So, thanks for joining us for this solo episode.

SBA Proposed Rule on 8(a) Social Disadvantage

I’ll start with the proposed rule that SBA has put out on pre-publication today. It actually gets published officially tomorrow, June 11th, and it’ll have a 30-day comment period. The comments will be due July 13th, actually, because July 11th falls on a Saturday. So, we will get 30 days to process this.

But it’s really just a change to one rule. I think 30 days is a decent amount of time to figure out what’s going on here. The proposed rule is called “Reforms to Remove SBA’s 8(a) Program’s Rebuttable Presumption of Social Disadvantage for Individually Owned Firms Only. Reforms do not impact entity-owned firms.”

Yes, they actually put that statement in the title of the rule: “Reforms do not impact entity-owned firms.” So, very clearly, this only applies to individual-owned firms—firms owned by individual applicants. This changes the, as the title suggests, the rebuttable presumption of social disadvantage for the 8(a) program.

It could have been broader. We were potentially looking at changes that might occur for economic disadvantage, potential for success, or maybe business activity targets within the 8(a) program. This rule does not touch those other areas. This proposed rule is only about social disadvantage. To get into the 8(a) program, you need to have social disadvantage, economic disadvantage, potential for success, and good character.

This rule is only about that first part. It’s only about social disadvantage within the 8(a) program. This comes after a three-year period where SBA has been trying to grapple with the Supreme Court’s decision in the affirmative action cases—the one involving UNC and Harvard, Students for Fair Admissions—as well as a district court case out of the Eastern District of Tennessee.

That case was called Ultima Services. Ultima Services specifically dealt with the SBA’s use of the social disadvantage rebuttable presumption. SBA goes through some of the history of that. Apparently, it came out in 1986 until its “demise” in 2023, according to this case. The rebuttable presumption of social disadvantage essentially said that there are five groups that do not have to establish their individual disadvantage.

Right now, as many of you know, you have to write a narrative to get into the program. You have to say how you, as an individual, suffered discrimination or social disadvantage. Under the rebuttable presumption, people in those five groups did not have to write that sort of narrative. The five groups were Black American, Hispanic American, Asian Pacific American, South Asian American, and Native American.

If you were in one of those five groups under the social disadvantage rebuttable presumption, you could just self-certify and say, “Hey, I’m in this group,” and then you could get into the program under social disadvantage. You still had to comply with the other requirements: economic disadvantage, potential for success, and good character, but social disadvantage was taken care of for those five groups.

Since 2023, SBA has not used that rebuttable presumption. Instead, they’ve put in place a narrative process where individuals have to write up their own individual disadvantage. Why were you, as an individual, discriminated against? Then SBA reviews that narrative to decide whether you get into the program, or for companies that are already in the program, how you stay in the program.

Now, SBA is going to replace that narrative process. It may not be exactly what’s in this proposed rule; this is still going to be out starting tomorrow for a 30-day comment. But very clearly, SBA is going to change that process so that the narrative is not that individual social disadvantage.

The big emphasis in this proposal is showing discrimination against a group by a government or a private entity. This is a bit different from saying, “Oh, there’s cultural discrimination,” or “There’s social discrimination.” You have to pinpoint discrimination from a Federal, state, or local government, or a university or corporation—so in general, a government or a private entity.

That discrimination has to be within the applicant’s lifetime. It says that the discrimination “must be within his or her lifetime” “by a Federal, state, or local government, university, or corporation” through a specific action. That’s another element. It refers to an “action, policy, rule, regulation, or other practice of any of the agencies, subsidiaries, or authorized agents.”

This is very different from the narratives that people have been submitting in the past. Previously, the narrative was—I used to refer to it as the three Es—you had some sort of discrimination in employment, education, or entrepreneurship (business ownership).

Now, if this proposed rule becomes final, you have to show that you are part of a group that has been discriminated against within your lifetime by a government or a private entity. There is an element of self-certification of group membership, but in addition to those three elements, you have to show material harm, and that seems to be specific material harm to the individual.

It’s referred to throughout the rule as a citizen. It’s always been the case that you have to be a citizen to get into the 8(a) program, and so now this rule refers to the individual as a citizen. The citizen must establish that the discrimination, bias, or favoritism conferred material harm on the citizen.

We are talking about a very, very different structure than what SBA had before. You saw many people writing narratives during this three-year period starting in 2023, saying, “I’m in a particular industry that discriminates against women,” or “discriminates against people with disabilities,” or “my industry in general is very unwelcoming to a particular race or ethnicity group.”

Under this proposal, based on what I’m reading, you have to identify a particular government or private entity that is engaged in discrimination, and it can’t just be historical discrimination. It can’t be from 100 years ago or so; it has to be during the citizen’s lifetime. Those are the big changes here.

Impact of the Proposed Rule on Current 8(a) Firms

Now, a big question has come out: Does this apply to present firms that are in the program? If you are one of—I’m going to go over some of the stats later—but if you’re one of the, say, 3,000 companies that are in the program, are you going to have to meet this standard?

First of all, it’s clear that this does not apply to entity-owned firms. That’s in the title of the proposed rule: “Reforms do not impact entity-owned firms.” There’s a strange sentence where it says SBA “would not apply the new test to current participants at their next annual review.”

You wouldn’t have to do it at your next annual review, but it kind of suggests: Does that mean that you would have to do it at the annual review after that, so maybe two years from now? Are you going to have to go through that? SBA does seem to indicate later on in the document, if you go into the cost-benefit analysis, there’s a sentence that says, “This rulemaking does not affect participants currently admitted to the 8(a) BD program.”

That sentence is not in the regulatory text itself, so I don’t know that you could take it to court. Maybe you could. It is from the SBA, signed by the Administrator. But first of all, it’s not in the actual regulatory text.

However, there is this indication in the cost-benefit analysis that the rulemaking does not affect participants currently admitted to the 8(a) BD program, suggesting that if you’re in the program right now and maybe you could not qualify under this new standard, you’re going to be able to remain in the program.

It’s not going to be like the post-Ultima state of events where everybody had to reapply under the new standard. After Ultima, companies still remained in the program. But that would be a good area to submit comments on during this 30-day, actually 32-day comment period, because otherwise it would end on a Saturday.

Group Classification and Historical Context under the New 8(a) Rule

So, how is this actually going to work? SBA has made a big to-do about getting rid of the narrative, stating it’s not going to be an individual narrative. It does seem like there’s still going to be a lot of writing involved in this. What might happen is that if you’re a member of a particular group—and I’ll name a few groups that I think might be able to get in under this standard—maybe there will be organizations, nonprofits, or trade organizations that might be able to identify the necessary discrimination by a governmental or private actor to justify that group as a whole. We still have this group basis, but then there’s additionally the requirement that the applying citizen establish material harm.

That part of it is not particularly defined. There’s a lot in here about what sort of groups might qualify and how they would qualify, but the material harm is really just defined as loss of access to or diminished opportunities related to economic advancement. There’s not the same level of detail that SBA used to have with those three Es of employment, entrepreneurship, and education.

You have less specificity on what exactly qualifies as material harm. The SBA gives some examples of how groups would qualify. You self-identify as part of a group, and their first example is the previous rule—the previous social disadvantage rule prior to Ultima. They reference the “prior iterations” of this rule, 13 CFR 124.103, that “excluded the citizen’s racial or ethnic group as a group entitled to a rebuttable presumption of social disadvantage.”

What they’re really saying there, and actually it says somewhere in this document, is that under the previous rule, both the text and its application—this is a quote from SBA—”rendered White Americans almost totally unable to participate in the program.”

SBA says that under the previous rule, because it had the five identified groups (Black American, Hispanic American, Asian Pacific American, South Asian American, and Native American), it made White Americans almost totally unable to participate. I don’t know that to be true. I know that there may be segments of White America that were not able to get into the program.

But if you look at the statistics, there are a lot of service-disabled veterans in the 8(a) program, potentially because they applied under disability. I wrote a note at some point pointing out that. Women were able to write narratives and get in, a lot of them saying, “I’m in an industry that discriminates against women.”

There are not many women construction company owners. Also, people of Jewish faith—Jewish Americans—were able to get in. That actually used to be one of the examples that SBA used on how you would be able to establish social disadvantage.

So, I’m not sure that it’s true that all segments of White Americans were almost totally unable to participate, but that is the statement that SBA makes. Clearly, that is the example that SBA is thinking of when they’re saying, “Here’s a group that the prior version of this regulation excluded as entitled to a rebuttable presumption of social disadvantage.”

But that’s not the only group that was not in that list of five, by the way. It’s not just that White Americans were not in that group of five. When I was at SBA, there was some movement to include persons of Middle Eastern or North African descent (MENA), particularly because post-9/11, most people would agree there was clearly discrimination against people of Middle Eastern and North African descent.

Some of that still exists today. So, that’s another group that was not under the rebuttable presumption—Middle Eastern and North African descent—that could potentially qualify under the SBA example. Additionally, you have to point to specific government or private entity actions.

One thought that came to mind is the countries that are on the travel ban. There are a lot of countries now under a travel ban, and that is a government action. Now, you’d have to make a showing about the material harm to the individual and show the discrimination. That may be a hard case to make now, but maybe in the future, you could say, “Well, in 2024, 2025, or 2026, this country was under the travel ban, and I identify as a person of that origin, and that was government discrimination against people of my nationality.”

I think this move covers more than just White Americans, as the proposed rule suggests. The fact that it’s pointing to the exclusion of the companies that were entitled to the rebuttable presumption does give kind of a strange vibe. These folks who were in that list of five got contracts—less than 50% of the program, by the way, because entity-owned firms make up more than 50% of the program.

They got 8(a) contracts, and now we’re going to push them from being the favored group in favor of everybody else—everybody else that was not in the rebuttable presumption. We’re trying to get those contracts back. Now, that’s not what SBA is saying; I’m not trying to put words in their mouth, but it does give this strange vibe of, “Well, this previous classification had these favored groups. We’re going to switch it around to say if you were not in that favored group, now it’s your chance to get into the program and benefit from all the elements that make the 8(a) program successful,” like sole-source contracts, 8(a) STARS, that sort of thing.

The big areas of comment, I think, will be: How do you actually justify this? What’s the effect on people that are in those rebuttable presumption groups? Is it basically impossible now for them to get in?

Another question that comes to mind, too, is: What about folks with multiple heritages, people of mixed race? The actual wording of the regulation seems to say if you are a member of this group or not a member of the favored group, you can use that identity to qualify for social disadvantage. What if you’re both at the same time? The “or” seems to mean you actually could get in under having mixed-race heritage. Some comments will deal with some of those specifics.

It may deal with this vibe of, “Okay, we had some people that were favored, now we’re going to go the other way and say that everybody that was not in the rebuttable presumption groups now gets favored status.” Then I think the big question will be: Is SBA going to apply this to current firms? It is not entirely clear. They probably want a more clear statement from SBA that it’s not going to apply to current firms.

There is that sentence in the cost-benefit analysis that says it will not apply. “It does not affect participants currently admitted to the 8(a) BD program.” But then there’s also the statement earlier on that it’s “not intended to apply to current participants at their next annual review.” That’s not particularly clear because that means you could change your intent, and also, what about after that annual review? You could have something else happen there.

Delays in Processing New 8(a) Applications

Let me answer a couple of questions in the chat before I move on to the next topic. This will be available on demand later. It’ll be on YouTube and on Substack. I’ll send it out by email to all the subscribers.

Kevin H. notes that this was discussed at the National Small Business Contractor Association regional conference yesterday in Alaska. Seems like a lot of people were there at the conference; I’ve heard it was sold out. Sounds like people were having a good time there. “One of the biggest takeaways was hearing that delays in approving new 8(a) applications were connected to the new proposed rule, with SBA saying they need to enforce rules already in place to ensure that only truly eligible firms are in the 8(a) program.”

I’ll be going over the stats later, but just to give you a preview, I think we’re at 299 days now since SBA last approved an 8(a) application. The last 8(a) application was approved August 15th, 2025. There’s a website, 8afacts.org, that puts a counter up that tracks the number of days since the last application approval, like a “number of days since the last accident” sign. I think last I checked, it was 299. So tomorrow, if they don’t approve an application today, it’ll turn 300. We’ll have 300 days since the last application.

Kevin is suggesting that that’s because of this rule. Now, it’s still a proposed rule; it’s not a final rule. So, I assume if that’s the reason, they’ll continue this delay in processing applications while they get the reviews in. That also brings to mind the question: Since this doesn’t apply to entity-owned firms, why didn’t they just approve entity-owned firms? Every application has been stalled since August of last year. So, why not just approve the entity-owned firms?

New vs. Old Application Evidence

Michael asks, “Thoughts on applicants who have been waiting for their decision? Will new examples need to be provided, or will the examples provided under old rules be honored?”

That’s a good thing to put into the comments. Based on what SBA did with Ultima, where they made everybody go back and get new narratives, I wouldn’t count on them taking the data from your existing application. I suppose you could say it was valid at the time you applied, but it’s such a big shift. It would be hard to approve people under the same administration that’s putting in place these shifts. It would be hard for them to say, “Well, we’re going to approve you under the prior narrative analysis,” especially when they made a big deal about doing away with the narratives.

Department of War Small Business Bill of Rights

All right. Now, I do want to break some news here because the Department of War (DOW) has been required to issue a Small Business Bill of Rights. This was from the National Defense Authorization Act (NDAA) of 2025, which passed December 23rd, 2024. They were supposed to do it within 12 months, but it’s okay—they got around to it not too long after.

They published it online recently. I kind of happened upon it; I was referred to it. I don’t know that they put out a press release, and I haven’t seen any coverage of it. The requirement from the 2024 statute was for DoD—DoW, we’ll probably refer to them as DoW because it’s called the DoW Bill of Rights. I’ll call it the DoW Bill of Rights.

It authorizes the Director of Small Business Programs within DoW to establish a resolution process for small businesses to submit complaints and inquiries to DoW, and then have the Office of Small Business Programs request assistance from the acquisition workforce to resolve those issues.

This is a very small business-friendly move. It gives you another avenue to make your complaints known, particularly with the biggest buyer in the world, the Department of War. The same statute required the Department of War to inform small businesses of what rights they have under the Small Business Act, under the Small Business Regulatory Enforcement Fairness Act, the Ombudsman, and how to contact components within DoW.

It gives small businesses all that information about their different avenues to make their complaints known to DoW. And lo and behold, the DoW has now published that Small Business Bill of Rights. Let’s see if I can bring it up here. Here we go. Here is the page: the Small Business Bill of Rights.

You will note it says, “This program is not live.” I think the first time I went to this, it did not have that. But they’re very clear that they do not want people submitting their forms quite yet to DoW on the Small Business Bill of Rights. But the page is up. I’m sharing it here right now. It tells small businesses they can learn about their acquisition rights and report potential infringements.

That’s the important part. The rights, yes, are good to have all in one place. You can go to the SBA National Ombudsman, you can go to the APEX Accelerator, or you can go to your Office of Small Business Programs under the industrial-base office within DoW. But the important part is having this new resolution submission form.

It’s not labeled a complaint form, but you can think of it as a complaint form. You go to this form and you fill in your SAM.gov data, your CAGE code, your name, prime or sub status, and it does refer to it as a complaint. I assume if you submit this that you get another form to state what your actual complaint is. It doesn’t seem to be live yet, but the idea is you would submit this complaint and then the Office of Small Business Programs would send it to the contracting office to get that complaint resolved.

There are a few more components of this Small Business Bill of Rights. Here is a glossary of terms, an executive summary of the actual Bill of Rights, and here is Article One. It has the same kind of structure as the Constitution. Article One is Advocacy and Assistance.

Article Two is Fairness in Contracting and Agreements. You’re entitled to transparent contracting and agreement opportunities. Article Three is Small Business Priorities and Exemptions. You have priorities for American small businesses first in contract agreements and elsewhere, along with some exemptions.

Here’s the important part: the Complaint Resolution—the ability to raise concerns and seek resolution regarding regulatory compliance and enforcement. You can also challenge unduly restrictive solicitations and call for efficient and cost-effective resolution of competency determinations and contract claims. Small business contracting is there.

There’s also a one-pager on the site for the Small Business Bill of Rights. It’s a very attractive graphic. It’s actually two pages, but it looks really good. Here are those four areas again about the rights that companies have to submit their concerns. Here it says, “Submissions are reviewed by DOW contracting and small business professionals.”

An important part of the law is that DOW has to submit reports to Congress and to the Secretary of War annually on the complaints they get through this process. They’re going to be tracking this. Congress is going to be tracking this. I see this being a significant avenue for small businesses to get resolution from the Department of War. The website says it’s still not live yet, so we may see that in the next few weeks or so. But the website’s up, the form seems to be up, and they’re almost ready to go on the Small Business Bill of Rights after getting it passed by Congress in 2024.

Upcoming SBA Policy Changes and OIRA Reviews

Up until this morning when SBA published the proposed rule, I was going to talk a lot about other SBA policy changes on tap. That seems to be less important now that we’ve seen the big policy change on the 8(a) program. But SBA just last week had put out to the White House Office of Information and Regulatory Affairs (OIRA) that they were going to finalize two policy changes.

When you get something from OIRA, it doesn’t really give you much detail. It just gives you the title of the policy change. The two policy changes that SBA sent to the White House for review were, number one, “Removing Constitutional Concerns from SBA Programs,” and number two, “Rescinding Unnecessary Notice and Comment Procedures.” These were both received by OIRA on June 5th, which was last Friday.

OIRA has a 90-day review process, although it can go longer because there’s still the proposed rule on “Fraud, Waste, and Abuse reforms” that I talked about months ago. That’s still on the tracker for OIRA, so that’s been well more than 90 days at OIRA.

What’s interesting about these two submissions is that they’re final rules; they’re not proposed rules.

Usually, just like they did with the 8(a) social disadvantage change, you have a proposed rule, then a period for comment—with the social disadvantage change, it’s 30 days—and then you have a final rule. Here, with those two policy changes, SBA is going straight to final.

How are they doing that? They’re probably using a White House memo that said agencies can move straight to final on unconstitutional policies. Let see if I can find it... It’s called Directing the Repeal of Unlawful Regulations, dated April 9th from 2025.

It basically said if something violates one of 10 Supreme Court cases—and one of them is the Students for Fair Admissions case, another one is the Loper Bright Enterprises case—then agencies can and should dispense with notice and comment and go straight to a final rule. It’s hard to tell based on the titles of these final rules what they’re going to be.

If you had asked me on Friday what it means, I would have thought, “Well, that’s going to be the change to the SBA social disadvantage rule. It’s going to be implementing Students for Fair Admissions and saying we’re taking the rebuttable presumption out.” But SBA is going through notice and comment for that. They are using comments for that.

So, what Removing Constitutional Concerns from SBA Programs means is kind of a mystery to me. I’ll have to think about that more. Maybe there are other areas where there are racial or ethnic preferences that they could target, maybe in the Small Disadvantaged Business (SDB) area. Although SDB just points to the 8(a) rule, so it seems like by changing it in 8(a) you’d also change it in SDB.

And then Rescinding Unnecessary Notice and Comment Procedures. It seems like SBA doesn’t want to go through public comments as much anymore. They do have a rule, 13 CFR 101.108, that says SBA will use public participation requirements for rulemakings related to public property, loans, grants, benefits, or contracts.

Maybe they’re going to change that regulation and dispense with public comments for certain areas of SBA operations. That’s pretty much all SBA does, right? Public property, loans, grants, benefits, or contracts. What else does SBA do? Maybe entrepreneurial development, but if you take out public comment from all those areas, there’s really not much left that you’re getting public comment on.

SBA Agency-Wide Reorganization and Workforce Reductions

Let me talk a bit about SBA’s news releases recently. SBA had announced an agency-wide reorganization. Let me put that up on the screen here. This was also on Friday: SBA announces an agency-wide reorganization to modernize, drive operational efficiency, and enhance accountability to taxpayers.

If you go down to what they actually did, it looks like they’re centralizing many different functions into particular offices: centralized disaster-related functions within the Office of Disaster Recovery; centralized data analysts, economists, grants, and acquisition professionals in the CFO office; centralized IT professionals within the CIO office; human resource professionals within the Human Capital office; and attorneys and paralegals within the Office of General Counsel.

I was in the SBA Office of General Counsel at one time. There may have been a smattering of attorneys outside of that office, but for the most part, I think they were already within the Office of General Counsel. To me, the biggest point within this press release... Well, actually, I think the biggest point is SBA says that they’ve reduced their workforce by over 50%.

If you remember back in April of 2025, SBA said, “We’re going to start reducing our workforce.” They gave a percentage of how much they wanted to reduce it; it was not 50%, it was 43%. SBA said, “We’re going to reduce our workforce by 43%.” So, the fact that they’re now coming back and saying that they reduced their workforce by over 50% means that they overshot the amount that they were intending to reduce.

Maybe more people took the Deferred Resignation Program (DRP) than they had expected. Maybe more people just took early retirement or other opportunities, but they actually overshot that 43% and reduced their workforce by over 50%. That’s the biggest news coming out of this news release.

The second is the fact that data analysts and economists are going into the Office of the Chief Financial Officer. This is significant within government contracting because there are economists in the SBA Office of Government Contracting and Business Development, and they’re apparently going to move outside of that office.

Why are there economists within the Office of Government Contracting and Business Development? It’s because of size standards. The economists within the government contracting office work on size standards. They actually published a size standards rule in August of last year—a proposed size standard rule for revenue-based size standards.

It was going to change things like engineering; it was going to bump up the engineering services size standard. It was going to bump up a few other size standards as well; consulting was another one addressed in that proposed rule. The economists work on those size standards. Now they’re moving to a different office?

That suggests to me that the size standard proposed rule is going to take a long time to go to final, and maybe we’ll see another proposed rule before we actually see a final rule. The fact that economists are on that list indicates to me that we’re going to be waiting a long time before we see more out of SBA on size standards.

SDVOSB Fraud Case: Broadway Electric and Cornerstone Contracting Settlement

One more SBA news release I wanted to bring up, and this one deals with service-disabled veterans. This was from the Office of Inspector General (OIG) yesterday. The SBA Office of Inspector General said that they’d reached a settlement with a couple of businesses that received Service-Disabled Veteran-Owned Small Business (SDVOSB) contracts.

The businesses were named Broadway Electric and Cornerstone Contracting. Those two businesses, as well as a CEO and president, agreed to pay $21.3 million to resolve False Claims Act allegations about improperly obtaining SDVOSB contracts. It seems like the scheme here was that there were SDVOSB firms that were legitimate firms—probably certified firms—that were put forward to win contracts.

The VA was involved, so probably VA contracts. But then the work was actually performed by these other firms. It says Broadway and Cornerstone personnel, in fact, primarily controlled execution, staffing, and financial administration. The individuals were not service-disabled veterans and were not qualified to own or control service-disabled veteran-owned businesses.

This case, which ended in this $21 million settlement, was brought by a whistleblower. I think there’s a point in here where it says at least one SDVOSB owner raised concerns regarding compliance with Federal control and participation requirements, but the defendants did not implement material changes to the structure or operation of the arrangement.

Meaning, the SDVOSB firms that were put forth as qualified weren’t doing the work. They weren’t complying with the limitations on subcontracting and the anti-pass-through rules—maybe non-manufacturer rules as well. They raised those concerns to these companies, but they were not heard, and that ended in this $21 plus million dollar settlement.

When I was at SBA, the big scheme was the “Rent-a-Vet” scheme, where you’d have a company where the people behind the company were not the veteran. They’d put a veteran as a figurehead, but the veteran really wasn’t doing anything. This is a bit different than that. This sounds like there were actual independent companies that were put forward, but they would participate in this scheme. They’d get some percentage of the work, and they’d pass on the rest of the work to Broadway and Cornerstone, ending in this $21 million settlement.

It will be interesting to see what the total value of the contracts was. I don’t think I see that in this summary. It’s a long-running scheme, from April 2017 through May 2025, so just to the end of last year. Is $21 million the total value of those contracts, or is it some percentage of those contracts?

It does state that there are relators. Under the False Claims Act, you can have relators. There were two whistleblowers in this case: a veteran of the United States Air Force and an executive with an SDVOSB firm. They will receive $3.6 million from this settlement as relators in the False Claims Act case.

Court of Federal Claims Case: Primary Healthcare (Mentor-Protégé Joint Venture Timing)

There are a number of important court cases and GAO cases that have come out recently; I’m going to go through some of those. There was a Court of Federal Claims case about the Mentor-Protegé Program, and it follows on a previous SBA OHA (Office of Hearings and Appeals) case that made a bit of an impact in the industry because it affects the timing under which Mentor-Protegé joint ventures are qualified to bid on contracts.

In this case, the case is called Primary Healthcare. Primary Healthcare was actually a joint venture between a mentor and protégé in SBA’s Mentor-Protegé Program. The parties—the mentor and protégé—terminated their Mentor-Protegé agreement. A mentor notified SBA that it was going to terminate its Mentor-Protegé agreement, but the joint venture between the firms still continued to exist.

So, they terminated the Mentor-Protegé agreement, but they still had the joint venture. At the point that the companies terminated their agreement, they had already submitted a bid on a contract. Then, after they terminated the Mentor-Protegé agreement, that bid required a final proposal revision.

Maybe the agency asked for discussions and got a new proposal from the company—the agency here being the Defense Health Agency. So the question here is: When do you have to have your Mentor-Protegé agreement in place? If you had asked most lawyers six months ago when you have to have your Mentor-Protegé agreement in place, the answer would be: before you submit the proposal on the contract.

The general rule has been, or at least the general advice has been, that you have to have your Mentor-Protegé agreement in place before you submit your bid on the contract, and you have to have your joint venture agreement done and finalized before you submit your final proposal revision.

This case says, “Ah, wait a second. You also can’t terminate your Mentor-Protegé agreement between the original offer and the final proposal revision.” It basically says you need to have your Mentor-Protegé agreement in place both before you submit your bid and before your final proposal revision. Primary Healthcare was excluded here; they lost a size determination at SBA and ultimately an OHA decision because the company had terminated the Mentor-Protegé agreement after the initial offer but before the final proposal revision. The Court of Federal Claims upheld that decision.

Now, the company gave a couple of arguments to say why it should still be qualified even though it had terminated the Mentor-Protegé agreement. Number one, it said this is just a “check the box” exercise. To that, the court said, “Well, SBA has the rules. They say their rules require a final proposal revision.” That’s what the judge said at SBA. So even if it’s a check-the-box exercise, that’s the rule. You have to turn square corners; you do have to check the boxes in order to win the contract.

Their number two argument was that SBA has allowed this in other cases. They’ve allowed firms that have terminated or even graduated from the Mentor-Protegé Program to win contracts where the termination occurred after the offer but before the final proposal revision, and that SBA is being arbitrary by not allowing it here.

The court notes, “Well, if you look closely at those cases, those are old cases.” SBA changed its regulations in 2020 to require compliance as of the final proposal revision, and those cited cases are from pre-2020—there’s one from 2019. There were different regulations in place at that time, so you can’t use those old cases to interpret a regulation that came into place in 2020.

Then there’s an argument that SBA’s interpretation is unworkable and potentially manipulable. Primary Healthcare said you could try to draw this out so that your competitors have expiring Mentor-Protegé agreements. The biggest impact of this is if your Mentor-Protegé agreement expires, because your Mentor-Protegé agreement expires within six years. You can extend it another six years, but it’s going to expire at some point.

If you’re in the middle of a bid, you can’t control whether the agency is going to ask for final proposal revisions. You could be out just based on that expiration of the Mentor-Protegé agreement. The company puts this point up that using this rule creates a lot of risk for Mentor-Protegé joint ventures because they could have their agreement expire during the solicitation phase and then have to submit a final proposal revision after that.

But the court says, “Oh, you know, that may have merit, but the court’s role here is to apply the law and interpret regulations, not take sides in a policy debate.” So basically: go complain to SBA about this manipulation and this unworkable regulation; don’t come to the court for this. It’s kind of a surprise to people who have been working in the Mentor-Protegé area for a long time. This case says you have to have your Mentor-Protegé agreement in place as of the final proposal revision, not just when you first bid, but also when, after discussions, you submit a new proposal to get awarded that contract. It doesn’t mean that you have to have it at contract award, so I wouldn’t take it that far. We’ve seen some VA cases that have been surprising on that matter with service-disabled veteran status, but at least you want to keep it around for long enough so that you get to the final proposal revision.

Court of Federal Claims Case: International Business Sales and Services Corporation

There’s another Court of Federal Claims case that I’ll mention. It’s called International Business Sales and Services Corporation, and it is also about the Mentor-Protegé Program. This is really interesting, just the facts of it, because it’s another Mentor-Protegé agreement gone bad where the mentor terminated the Mentor-Protegé agreement.

The mentor and the protégé had a falling out, and their joint venture had won a multiple-award contract. After the mentor left the Mentor-Protegé agreement, the agency, NOAA, novated the contract to the protégé, and the mentor protested that, which is interesting in its own right.

The court says you can’t protest that because you didn’t actually bid on the contract. Even though you’re part of the joint venture, your name is not the name of the company that bid on the contract, so you don’t have standing. You’re not an interested party to bid on this.

There was another protester in this case as well that won the contract. It’s a multiple-award contract, so you have several different companies on this. That company that won the contract also was found not to have standing because it won a contract, so it can’t both win a contract and protest the contract of another company that won. That same reason would also seem to apply to the mentor, too, since the joint venture won the contract and the mentor was part of that joint venture. Maybe they could protest the novation, but the court says novation is a matter of contract administration, not a matter of contract award. Just the facts alone—the fact that the mentor is going against the joint venture—makes for an interesting scenario that I haven’t seen before. That was the International Business Sales and Services Corporation case.

GAO Case: ID8Spark (Subcontractor and Joint Venture Past Performance)

One case out of GAO: there was a case called ID8 Spark about subcontractor past performance and joint venture past performance. We’ve seen a number of these subcontractor past performance issues or affiliate past performance issues come up at GAO and the Court of Federal Claims.

This case stands for the principle that an agency can, if it wants to, ignore the experience of a subcontractor’s joint venture. In this case, the offeror, ID8 Spark, had a subcontractor that is a small business joint venture, and a member of that joint venture was on a previous contract. They tried to use that previous contract as their past performance, and the GAO said the agency can ignore that for a couple of reasons.

First of all, that past performance is not of the prime; it’s of a subcontractor. Also, the prime was not in the joint venture that is trying to get the contract. It’s a bit convoluted because there are so many redactions to this. It says, “Even though the quotation did identify [deleted] as a joint venture of [deleted] and [deleted], that would be a subcontractor to ID8 Spark, not ID8 Spark itself.”

This falls under an SBA rule, 13 CFR 125.8(e), which says if you’re bidding as a joint venture, the agency has to take into account the past performance of the members of the joint venture. If that joint venture had bid on its own, then it could potentially have used the past performance of its members, but not here where ID8 Spark is the prime and is not part of the joint venture that’s trying to use that past performance. So, this is another case where the agency is able to exclude or ignore the past performance of a subcontractor.

FAR Overhaul and Notice and Comment Phase Updates

Some updates on the FAR overhaul. Also last week, a lot happened at the end of last week. The White House OIRA office gave the green light to publish a number of proposed FAR rules, so we’ll probably be seeing those in the next couple of weeks. It’s a lot at one time, so I’m sure there’s a lot of formatting that they have to do behind the scenes to get this out, but it’s a large part of the FAR overhaul that will be coming out.

We’ve got FAR parts 1, 2, 4, 5, 6, 7, 10, 18, 24, 26, 29, 33, 37, 39, 40, 41, and 53. All those parts were cleared to go out as proposed rules. Remember when the FAR overhaul first came out, it was under class deviations. Essentially, they published it on a website and asked for comment from the public through a website form. It was not through the official notice and comment process. Now they have to go back and put it through the official notice and comment process, which is a proposed rule, a comment period, and then a final rule.

The proposed rules for all those parts that I just mentioned—probably around 15 parts, maybe 16 or 17 parts—will be coming out as proposed rules in a number of weeks. Part 19, which is the small business section, hasn’t been cleared by the White House office yet. That says OFPP (Office of Federal Procurement Policy) is reviewing it, so it still has to go through the Office of Federal Procurement Policy and the Office of Information and Regulatory Affairs.

Oh, I missed some; they’re on another page. Parts 3 and 49 are also cleared to go out, so probably up to about 18 parts there. I think I got it this time: 19 parts that are clear to go forward to a proposed rule that we’ll probably see in the next couple of weeks from the FAR overhaul.

Then we’ll see whether it’s a 30-day or 45-day comment period on it. If they are going to publish them all at the same time, it seems like 30 days is pretty fast to give comments on 19 parts. I don’t know if they’ll stagger their proposed rules, but all of these were approved by the White House around the same time.

Tracking the Latest 8(a) Active Firm Data

Okay, a quick update on 8(a) numbers. I haven’t done this in a while; it just seemed like not much was happening, and I sort of fell out of practice, but I was tracking all the 8(a) numbers. If you’re following online, I’m looking at the number of active 8(a) firms according to SBA’s database.

You start out in January of this year at over 4,000—4,333—before SBA starts the data call and starts suspending firms. Then it drops to about 3,200. Over a thousand firms were suspended for not responding to the data call. Some of those firms got back in because they responded to the data call, but then it drops again because SBA suspends and proposes for termination over 200 firms for economic disadvantage.

So, you’re back down to 3,200. Some of those firms get back in because they establish that they are economically disadvantaged. We roll along at 3,300 or so for a while, then it goes up again as some of these firms get off the suspension list and more firms get their data call information in, so we get back up to 3,400.

But guess where we are now? As of today, when I last looked into the SBA database, we had fewer than 3,000 active 8(a) firms: 2,981 firms. This is a result of firms naturally leaving the program. It is a 9-year program, so there are firms graduating every day from the program, but there are no new firms coming in to backfill them.

I talked about this with Jackie Robinson-Burnette on the podcast last week. The firms that are leaving aren’t having more firms come in behind them, so you’re seeing at least a tenth of the program leave every year. Now those firms are naturally leaving. Firms have also withdrawn from the program under pressure of suspension or just because they see the writing on the wall: the 8(a) program is not as effective as it was previously. Many firms have withdrawn, and now we’re under 3,000 active 8(a) firms—2,981, at least based on the data that I saw at SBA today.

52:03 - Business Activity Targets (BAT) and Closing Remarks

Let me just check the chat to see if we have anything else. We see another comment from Kevin H. stating that the mandatory SBA HQ review of all annual reports is resulting in the rejection of waivers for good faith efforts to meet BAT targets. That’s a good point; I’ve heard that as well.

BAT stands for Business Activity Targets, which is a requirement that firms in the 8(a) program—in the second half of their participation in the program—must meet benchmarks on getting work outside of the 8(a) program. If they don’t meet those benchmarks, the consequence is that they are not able to receive sole-source contracts from the 8(a) program.

Previously, it had been the case that SBA would allow you to show good faith efforts—that you were going after contracts outside of the 8(a) program to show you weren’t solely dependent on it. But according to the comment in the chat from Kevin H., the SBA is reviewing the annual reports and it’s resulting in rejections of those good faith effort reports to meet the business activity targets, putting more pressure on firms in the 8(a) program to stay in compliance to benefit from the program.

We’re seeing a lot from SBA. Just to recap: a proposed rule is coming out tomorrow on removing the rebuttable presumption of social disadvantage from the 8(a) program. Comments will be due in 30 days, so they’ll be due July 13th since July 11th is a Saturday. There is much more coming up in terms of final rules from SBA.

You’ll see the FAR overhaul proposed rules come out very soon. We still have some congressional news, too. We’ll be talking with a podcast guest in the next couple of weeks about the Rule of Two, as well as some of the action around the Women-Owned Small Business (WOSB) program and the certification programs generally.

A lot is happening in small business GovCon. Again, thanks for joining GovCon Intelligence, and I will see you all again soon. Thanks.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

Available for iOS and Android

How 8(a) survives (with Jackie Robinson-Burnette)

Sam Le — Tue, 02 Jun 2026 10:48:19 GMT

Ahead of her presentation at this week’s VETS conference, former White House appointee and 8(a) associate administrator Jackie Robinson-Burnette joined me on GovCon Intelligence. Jackie and I worked together at SBA in the aftermath of the Ultima court decision to save the 8(a) program, and we talked at length about what the program will look like after this latest crisis.

I also got her thoughts on the Rule of Two, the attack on the women-owned small business program, and how small businesses are faring generally. Finally, she shared her lessons on leadership based on a 35-year career in public service.

Please visit www.govconintelligence.com for a full transcript and show notes.

Chapters

00:00 – Introduction & Jackie’s Background

00:18 – Jackie’s Historic Legacy at the SBA

01:20 – Deleting the Presumption of Social Disadvantage (Post-Ultima Reforms)

04:59 – The Impact of the 8(a) Application Freeze on Small Businesses

07:05 – Streamlining and Digitizing the 8(a) Application Process

10:37 – Individual vs. Entity-Owned 8(a) Firms (Alaska Native Corporations)

12:51 – The Rule of Two and Preserving the Small Business Industrial Base

16:15 – GWAC Pools (Women-Owned and HUBZone Set-Asides)

17:40 – Defending and Improving the Women-Owned Small Business Program

21:22 – Debunking Fraud Myths and Highlighting the Multiplier Effect

23:35 – Predictions for the Future of the 8(a) Program

27:19 – The Reality of Sole Source Contracts in Federal Agencies

31:06 – Consolidating the Four SBA Systems into One Unified Platform

36:02 – How System Consolidation Saved Public Service Jobs From DEI Cuts

38:03 – The Mid-2026 Sentiment and Financial Anxiety in the Small Business Community

41:21 – Refection on Returning to Government: Was It Worth It?

44:44 – Leadership Insights: “How Successful People Lead” and Leveling Up

47:46 – Conclusion & Where to Connect with Jackie

Transcript

Introduction & Jackie’s Background

Sam: Welcome to GovCon Intelligence. My guest today is Jackie Robinson-Burnette. Jackie, welcome to GovCon Intelligence.

Jackie: Thank you, Sam. I am happy to be here.

Sam: Thanks for inviting me. Thanks so much for coming. Jackie Robinson-Burnette is a nationally recognized authority in federal procurement and a steadfast champion for America’s small businesses.

A Senior Executive Service leader with more than 35 years of federal service, she built a reputation as a transformational executive known for delivering measurable, historic results. After retiring in 2017, she got a call from the White House to return to public service under presidential appointment as the Associate Administrator for Government Contracting and Business Development at the US Small Business Administration (SBA), where, by the way, she was my boss. In this role, she oversaw all federal small business contracting programs. Her leadership drove major modernization efforts, including the consolidation of SBA certification systems, and contributed to a record-setting $183.4 billion in federal small business contract awards for the first time in history. By the way, that’s still a record. I’ll just mention, it’s still there. Jackie is the owner and founder of Senior Executive Strategic Solutions, or SES2. She is married to Army Lieutenant Colonel Victor Burnette, retired, and they are the proud parents of three adult daughters, all commissioned Army officers.

Deleting the Presumption of Social Disadvantage (Post-Ultima Reforms)

Sam: Jackie, I wanted to start with some somewhat breaking news from the SBA, from the policy front. You were there with me for a number of policies and they’ve just been kind of quiet on policies for a bit right now. There was a size standard proposed rule, but they haven’t done much with the fraud rule that they were thinking about doing, and on the program front, there hasn’t been much. You ran the 8(a) program for quite some time at the SBA, and then when you were Associate Administrator, you had the responsibility of oversight over the 8(a) program. The SBA is proposing to make a change to the 8(a) program. This is one of the first policy changes to come out from the SBA during this administration. They sent a proposed rule to the White House OIRA office May 22nd to delete the presumption of social disadvantage for individual-owned firms only. It’s clear that these reforms do not impact entity-owned firms. Could you tell us a bit about the presumption of social disadvantage, why the SBA might be removing it, and what people have to know about this policy change?

Jackie: Yes. Good question. So, the presumption of social disadvantage is pretty simple. If you belong to a certain race or ethnic group, you’re presumed automatically disadvantaged because of historical discrimination in the United States, especially for Black and brown companies. In the 1970s, maybe they had only one percent of all federal government contracts.

Sam: Yep. That’s right.

Jackie: When the 8(a) program was stood up, we realized we could go through a process of determining if these certain groups were disadvantaged, or we could just presume that they are. This means when they submitted an application for the 8(a) program, they didn’t have to write out a justification of how they were socially disadvantaged; it was just presumed. They checked that box of a certain race or ethnic group, and they were automatically disadvantaged. After the Ultima lawsuit, the SBA removed the social presumption. So, every firm that was applying for the 8(a) program had to outline how they were disadvantaged.

Sam: So that’s the social disadvantage narrative.

Jackie: Yes, the social disadvantage narrative that all the firms had to do. Even the firms that were already certified, of course, had to go back and explain how they were disadvantaged. All the firms were frozen in the program, except the entity-owned firms. I think the SBA is now just putting into law and solidifying that every firm has to explain how they are socially disadvantaged, and no certain group can just automatically be presumed socially disadvantaged.

Sam: This is really just putting into the regulation what it’s looked like since Ultima in operation, essentially.

Jackie: Yeah, basically what is in operation since the Ultima challenge.

The Impact of the 8(a) Application Freeze on Small Businesses

Sam: Which, when you were a presidential appointee as Associate Administrator, you came in just about when the SBA was bringing applications back after Ultima. So, that was thousands of reviews that the SBA had to do.

Jackie: Yes, definitely. At this time, of course, we didn’t grow the number of certifying officials or the certifying team members in the SBA. So, they were not processing new applications while they were trying to bring these firms that were suspended back on.

Sam: Meanwhile, you had the freeze there after Ultima while the SBA was trying to figure out this presumption of social disadvantage. Now you have a dark freeze, I’d say, because no one’s really talking about it, but the data seems to show that the SBA has not approved a new application in the 8(a) program since August of last year. There’s a counter on 8afacts.org. The last time I checked, it’s 285 days or so. How damaging is that, and how different is that from when you were there? I mean, you ran the 8(a) program. Going to zero, what difference does that make in the community?

Jackie: It makes a huge difference because every year a large percentage of the firms are graduating. If we don’t replenish that, it means that the program dies. It also means that Contracting Officers are going to be hesitant to put actions into the 8(a) program because it may not have the competitive base of firms to compete for that work. Historically, we used to say if you put something in the 8(a) program, it was always in the 8(a) program, which is not really the case. It just means that you had to get approval from the SBA to pull it out. Contracting Officers are now, at a greater number, pulling acquisitions out of the 8(a) program because they’re able to justify that 1,000 firms were suspended, and they don’t see a specific number of firms in the program that can compete for their work.

Streamlining and Digitizing the 8(a) Application Process

Sam: All right. I’ve been tracking this. A lot of firms have withdrawn from the program because of the data call and because of suspension, so you’re now under 4,000. Do you remember how much it was when you were there?

Jackie: I don’t remember the exact number. But when I first came to the SBA back in 2014—I think you were in OGC at that time—the application process was huge. It was a million boxes of paper; it wasn’t digitized.

Sam: Yeah, I remember the files. Remember when we’d get the files for OHA.

Jackie: Yes. Yes. And 60% of the applications were returned or rejected.

Sam: Mm.

Jackie: 60%.

Sam: What happens to 8(a) contracts if you have a lower number of firms? We’re now below 4,000 firms that are in 8(a).

Jackie: Well, it’s a significant impact, Sam, because Contracting Officers lose faith in the ability to put actions into the 8(a) program and have sufficient competition. As a result, they will start asking the SBA if they can remove those acquisitions from the 8(a) program. The program only survives if we continue to put in new companies. Every year, we have at least 300 to 400 companies that are graduating.

Sam: Right. It’s going to be a tenth because it’s a nine-year or ten-year program.

Jackie: Yes. And so you can actually just look down the line to see how many are coming out every year versus how many are coming in to see when there won’t be any firms in the program. We know that 1,000 firms were suspended and some removed from the program over the last year, so this is pretty significant. When I was the Associate Administrator overseeing the 8(a) program, when I first got there, there were about 1,200 applications every year. This was back when it was not digitized; we had boxes of paper coming in. 60% of them were rejected or declined and sent back. I started looking at how we could streamline this process and why they were being returned. In some cases, 30% of them were being returned because they were applying on the wrong form. So, I kept asking my staff, “Why are they all applying on the same wrong form? Where is this form at?” Well, it was the form on the SBA website.

Sam: Oh, no.

Jackie: So, then I started looking at whether we were declining these applications and rejecting them for eligibility issues or for technical paperwork things in the application that had nothing to do with eligibility. We just started streamlining the process. We brought OGC in, OHA, and other groups in the SBA, and we came up with a streamlined application. We went from a rate of 90% of the applications being declined—I want you to think about this: 1,200 applications coming in, only 25% of them got through the process for a decision to be made, and then 90% of them were declined.

Sam: Wow.

Jackie: So, it was really bad. There were a lot that weren’t even getting to the decision. Exactly, even when you get there, it’s hard. It was really bad. We turned that around to doing about 1,200 approvals a year. This last year, I think in 2024, because we were catching up from the freeze on the Ultima challenge and then we were trying to shift into the new certification system, I think we processed 2,000 applications.

Sam: That’s a lot.

Jackie: That’s a lot.

Sam: Yeah. Yes. And some of those firms are probably withdrawing from the program or have been suspended. It just looks like a different program now.

Jackie: Yeah, unfortunately. The thing that makes it worse is that it is a once-in-a-lifetime opportunity. You get 8(a) certification once, and you can never get it again. Right now, for a lot of political reasons, all of these socially and economically disadvantaged, underrepresented firms are losing their once-in-a-lifetime opportunity to get a foothold in federal government contracting, and that is forever. They can never come back and get that certification again.

Individual vs. Entity-Owned 8(a) Firms (Alaska Native Corporations)

Sam: Yeah. Then on the other side, so that’s the individual-owned firms. On the other side with the entity-owned firms, those entities have a business strategy where, as firms graduate, they get new firms into the program so they can fill that void in a particular industry or NAICS code. If you have a freeze that now is probably going to go from nine months to a year, they can’t backfill those firms that have graduated.

Jackie: That’s true. There are people that are against the individual 8(a) companies as well as the entity-owned companies. One reason is they think it’s so unfair that the entity-owned companies can regenerate themselves with new 8(a) company spinoffs. But the difference, of course, that everyone should think about is individual-owned companies—all that revenue is for them, their family, and whatever they want to do with it. The entity-owned company is supposed to be refueling jobs, hospitals, and schools, putting money back into those communities that are depressed.

I actually had a chance to go to Alaska and walk through hospitals and schools that were built by additional funds that these entity-owned Alaska Native Tribal companies put back into the communities from the contracts that they won.

Sam: Yeah. I just want to remind people that there are numbers out there showing Alaska Native firms get X million dollars or billions of dollars in contracts, but only so much of that is going back to the community because on a government contract, you have costs. A $10 million contract might have only a 5% profit margin, and it’s really only the profits that you could sink back into the community.

Jackie: Of course. Of course.

Sam: Yeah, so I’ve seen some inaccuracies out there on that. But you did more than just work on the 8(a) program while you were at the SBA. While we were there, we worked closely on the Rule of Two. We put out a proposed rule from the SBA that then became a proposed rule from the FAR. Now, there is a Rule of Two bill that is going through Congress. It just passed unanimously through the House Small Business Committee a couple of weeks ago. What is the reason for the Rule of Two, why is it important, and why is it important for small businesses to track this bill as it’s going through?

The Rule of Two and Preserving the Small Business Industrial Base

Jackie: Well, first, Sam, I need to give you kudos for helping get that Rule of Two pushed through. I mean, you have been working on that for years. Do you remember how many years you were behind the scenes continuing to put that before new senior executives that came in, different political parties, talking to people on the Hill, talking to OMB? You did that for years.

Sam: Well, it’s important to note that this is a bipartisan issue. I mean, we’re talking about something that unanimously goes through Congress. There’s very little that people can agree upon, but they can agree on the Rule of Two.

Jackie: Yeah, definitely. So, FAR Part 19 says that when there are two or more small businesses that are capable of bidding on the work, they show interest, and they have the ability to bid on the work at a fair market value, that work should be set aside for small businesses. The Rule of Two comes from that—”two or more.” So when people say, “Well, where’s the Rule of Two? I can’t really find that in the FAR,” it is that FAR Part 19 clause regarding two or more. There were some discussions on how to apply that across federal government contracting. Does it apply to GSA? GWACs? Does it apply to agency-wide IDIQ contracts? Now it is solidified that when there are two or more, this work should be set aside.

When we first implemented category management—and I think the discussions on category management started around 2010 or slightly before—the way we implemented it actually ended up losing 40% of our small business industrial base. The idea was great to consolidate and get economies of scale, but the contracts were just so huge. Once we made these large contracts, we never thought about making sure that there were small businesses on them so the actions that could be set aside for small businesses could be set aside. As a result, we thought large companies would give small businesses subcontracts. In some cases they did, but you still lose your industrial base when you don’t have prime awards for small companies. I think we went backwards in terms of building our industrial base, and then we kind of learned a little bit from that. Now, pushing forward with the Rule of Two, all of these category management contracts that are coming out have small business set-aside provisions in them. So, you have pools for large and small companies, or if they’re all together now, you can use the Rule of Two to set aside work if small companies can do it on those vehicles. I think it’s very important.

GWAC Pools (Women-Owned and HUBZone Set-Asides)

Sam: Yeah, the bill that passed from the House committee put that task orders are specifically excluded from the coverage of the Rule of Two. But the point that you made is an important one: a lot of these GWACs have pools. When you were there, we worked together on the MAS pool. Remember the GSA Schedule pool for 8(a)?

So, the Rule of Two, in my view, becomes less important when you have all of those pools available because agencies can go and use those set-asides on the pool. They don’t necessarily need the push of the Rule of Two. So, it makes a bit of sense in the world where you have a lot of pools to look at the Rule of Two on a contract level rather than going all the way to the task order level. I think reasonable people can disagree on that. I certainly had a different viewpoint on that, but I do recognize that these big GWACs like OASIS Plus and Polaris are coming out with pools, and they’re pools that include Women-Owned Small Business and HUBZone, which we haven’t seen in the past. We’ve had 8(a) STARS and VETS, but these are the first vehicles that have that special women-owned set-aside. That’s really important for that program.

Defending and Improving the Women-Owned Small Business Program

Sam: Nevertheless, that program is under attack. It’s the next one after the 8(a) program. We’ve seen a lot of movement on the 8(a), but now the WOSB program is under threat by certain members of Congress. They’re looking at killing the program entirely. Now, you made a big effort while you were at the SBA to address a very long WOSB backlog in the certifications of applications. I think it was at a year at some point—people were waiting over a year. What happened there?

Jackie: Well, before we consolidated the certification system, you could be a service-disabled veteran, a female service-disabled veteran, and submit an application and get certified as an SDVOSB in two weeks. But then you’d have to submit a separate application into the women-owned portal, and that could take a year or a year and a half because that program wasn’t funded well.

The veteran program was funded very well; the women-owned certification program wasn’t. It was understaffed. Once we consolidated the systems, now you can submit one application, check the boxes, and the company will get all their certifications at the same time. Now, of course, since 2025, the applications that also include 8(a) certification have stalled because the SBA is not able to just make a decision on some of the certifications and not the other. They don’t want to make decisions on the 8(a) applications, so that whole package gets stalled.

Sam: So that’s an important point. If you’re thinking about women-owned plus maybe veteran plus 8(a), you would get caught up in the 8(a) freeze.

Jackie: Yes, yes. So you have to make a decision now whether you want to pull your application back, take 8(a) off the table, get your other certifications, and then apply for 8(a) later. But WOSBs are still underrepresented in the federal government contracting space. Even with the five percent goal, they’re getting less than five percent. The set-asides—we’ve never set aside anywhere near five percent of the work in order to reach the five percent goal. The way that women are winning is because they’re competing as a veteran, an 8(a), or a small business, and those contracts still show up as a WOSB contract if they are certified. But you rarely see WOSB set-asides, and so they are still underrepresented.

I just think about how it was only a couple of years ago at the SBA that we removed the requirement for a woman to have her husband, who had no affiliation with her company, sign on a loan application.

Sam: Oh, wow. Just a few years ago.

Jackie: Just a few years ago. The husband could be unemployed, uneducated, not working, and the woman could be educated, winning millions of dollars of contracts, but she had to get her husband’s approval to apply for a loan for her business. So, we changed that. But women need to persevere.

I think about some of the women that have done some remarkable things in the federal space in bringing innovation. You lose that ability to have smart women, like the woman who helped create the GPS system, or the woman who did the math for the trajectory of NASA and John Glenn for the space shuttle. It was an African American woman that helped come up with the COVID vaccine. Wow. So, when you think about not considering opportunities for this group, those are the things that you lose. I want us to think about what is the percentage? 5%? We’re just asking for women to get 5%.

Debunking Fraud Myths and Highlighting the Multiplier Effect

Jackie: We kind of skipped over the percent for the 8(a) firms, but I also want to just stress, Sam, that still with 8(a), only 3% of contracts get awarded through 8(a) procedures. 3%. That means that leaves 97% for everything else.

Sam: Well, yeah. If you look at sole source contracts, there’s a big deal about, “Oh, 8(a) is ripe for fraud because it’s mostly a sole source program.” The amount of sole source contracts that go through the 8(a) program as compared to the whole is tiny.

Jackie: It’s tiny. It really is. Half of that 3% that is awarded through the 8(a) procedures is going to the entity-owned companies. Then the other half is going to those firms that we want to say are DEI, race-based, ethnic group firms. So, that’s 1.5%. This whole target of fraud and all of this push is to really stop the 1.5%. Can they have the 1.5%? Regardless of whether it’s a sole source award or a competitive award, none of this is free money. It’s an opportunity to work and create jobs because whatever firm wins that contract has to have a line of credit or funding to do the work. After they do the work and it’s accepted by the government, they can submit an invoice for the work to be paid. None of this is free money. It’s opportunity—opportunity for job creation, really.

Sam: Yeah, that’s the multiplier effect. I remember at the SBA they did a study about which program had the largest multiplier effect, and it was actually the women-owned program which had the largest multiplier effect of all of them. So, that was a good support for the program. Maybe it has something to do with the industry designations and how you have to get this NAICS code approval list from the SBA; only 70% of the NAICS codes are in that. As this program is under attack with the bill that’s out there that would eliminate the program, what is it that small businesses of any type—WOSB or whatnot—can do to recognize the importance of the program if they feel it is important?

Jackie: I think Congress definitely has to be engaged in solidifying the importance of this program. WOSBs really need to petition those that represent them in Congress, those that they voted for that are in Congress, and stress the importance. When the 8(a) program was under attack, I explained to all the other companies: just because it doesn’t impact you doesn’t mean it doesn’t matter. It’s important for all of us to fight for all these programs because there’s room at the table for everyone.

So, those of you that are not WOSBs, just because that doesn’t apply to you, it doesn’t mean it’s not something you should be fighting for. The attacks start on one group, and then they roll down to the rest. So, we now see 8(a), now it’s women-owned. But it’s important because WOSBs create jobs, they generate solutions, and it’s important that they have a place at the table.

Predictions for the Future of the 8(a) Program

Sam: What’s your prediction for the 8(a) program? Where do you see it in 5 or 10 years?

Jackie: The 8(a) program has survived so many attacks. It has survived so many attacks, so I think this is a recalibration again of the program. I think it can definitely come back strong. In the meantime, it’s important for companies to continue to bid, compete, and strengthen their past performance with other set-asides. Even if they are capable, go after unrestricted opportunities. For firms to team up, for companies to engage in the Mentor-Protégé program—what’s the sad thing right now is that 8(a) companies may be going through the program and opportunities are diminishing. Their certifications may be threatened all the time. I just had an 8(a) company that lost 50 employees overnight from the USDA, and it’s not because the USDA didn’t need the work. They took the work and modified it under a large business contract.

Sam: To a large business?

Jackie: And no one’s paying attention. Can’t get anybody on the phone to look at it or discuss it. I think it was for political reasons, honestly. The work was still needed, and this just isn’t something that should occur. It’s not even allowed in the FAR to take work that is within the scope of another contract, terminate it for convenience, and then just roll it into a restricted pool.

Sam: Yeah, the new FAR—the FAR overhaul—says shift 8(a) to HUBZone or women-owned service advantage. You don’t go to large business.

Jackie: Yes. Typically, if you’re going to do that, it would be that you decide not to exercise an option or you wait until the contract expires, but just not in the middle of a performance period. So, I think the program can come back stronger, though. I actually do. Definitely, we’re not going to have the presumption of social disadvantage, but I think firms don’t need it.

They can write their story. What’s important is we have to have people that are objective to look at those stories and make the right decisions, and I think the SBA will be shifting towards that. People just need to stay encouraged. It’s a time of high anxiety for companies, but I think we will come out of this. Sometimes I like to use my Bible verses: “This too shall pass.”

The Reality of Sole Source Contracts in Federal Agencies

Sam: It may come back in a different form than it looked before. You’re already seeing, for example, the Army has reportedly come out and told its Contracting Officers, “Don’t use sole source.” So, maybe you’re looking more at competitive environments or things like 8(a) STARS, maybe other vehicles that could include only 8(a) firms. Do you predict that other agencies—the USDA, for example—would follow the Army in that movement? And how does the VA look after that?

Jackie: Across the federal government, there’s an undercurrent where Contracting Officers are being told not to award sole source 8(a). The SBA definitely needs to give waivers so they can be compliant and allow those contracts under $5.5 million to be competitive. I hope they will continue to put contracts in the 8(a) program at every dollar amount. Because if you say, “Don’t do it under $5.5 million,” and there’s no authority to compete at that level, then those contracts aren’t even going to go into the 8(a) program; they’re going to be issued elsewhere because the rule says under that threshold it has to be sole source. So that needs to be addressed too. When I was in the 8(a) program, I gave the Corps of Engineers a waiver. So, anything they wanted to compete at that time—it was $4.5 million—under that, they could just do it. That’s the better solution. But Contracting Officers are being called on the carpet if they’re trying to award or keep things in it. So, I think competition is definitely going to increase for those.

The bottom line is the federal government will always need sole source contracts. They will always. I spent most of my career in the DoD, and in the DoD, things hit the fan overnight. You need someone to go and set up camp in another country or handle a catastrophe like Katrina with the Army Corps of Engineers. We need people out putting roofs on buildings; you don’t have time to do a full competition. Sometimes you just need to get a contract in the hand of a company and say, “Go out there and start passing out water, picking people up on a bus, and driving them out of the war zone,” or wherever there has been a FEMA disaster. All of those contracts—they can’t be competitive. You can have IDIQ vehicles in place, but once a task order is going to be awarded, if there are multiple awards, you still have a need for sole source contracts. You don’t have the time to compete.

Of course, we always have FAR Part 6 where you can do a justification, so it’s not necessarily going to an 8(a) company. But for the government, why go through the whole approval process of a FAR Part 6 acquisition when I can go to an entity-owned 8(a) and get exactly what I need? It doesn’t mean that you’re going to pay double because each of those contracts still has an IGE—an Independent Government Estimate—where we make a determination of what it should cost. There are some emergencies where we say “go” and we’ll figure out the cost later. But even still, they can’t bill for something that’s unreasonable because the government is going to determine what it should cost.

Sam: Yeah, and even with the emphasis on competition, you’re seeing some agencies—the National Park Service, it sounds like—discovering the ease of sole source contracts. There was news that the renovation of Lafayette Park is under a sole source contract. Other contracts in the DC area, as far as beautification, are under sole source contracts as well.

Jackie: Possibly, yes.

Consolidating the Four SBA Systems into One Unified Platform

Sam: One thing you did when you were in the Associate Administrator position is you changed the certification process for the programs, combining all of them together. Why did you do that? Were you somehow anticipating what could happen today? Because it actually is very important that you did it that way. Tell us a bit about why it’s so important.

Jackie: First, I never anticipated what’s going on right now; I just can’t imagine that it would happen the way that it is. But I was retired, happy, enjoying myself in Florida when I got this call from the White House to come back. It was a huge financial sacrifice for me to shut down my company and come back. I always used to tell you all, “I’m here for GS-13 pay,” and that was true. But at the time, Administrator Isabel Guzman really wanted to do this, and this was part of her vision. She had this idea. We were talking about this maybe eight or nine years earlier, before I had retired back in 2016 or 2017—we wanted to streamline the processes. This was even before the Service-Disabled Veteran program came over to the SBA.

But when I arrived, I looked at what we had. We had four different systems: 8(a), Women-Owned, HUBZone, and Veteran. There were four different teams, four different leaders, and executives running those teams. So, if you were a women-owned, veteran, socially disadvantaged company, you had to submit the same application to three different systems. If you were in the HUBZone, you had to submit to four different systems—the same tax returns, the same business documents to be reviewed by four different teams right there in the SBA, all on the same floor, looking at the same taxes and the same governing documents to make a decision.

The Veteran-Owned program was funded well. You could get processed in two weeks, and the only difference in that Veteran-Owned application for the Women-Owned program was the birth certificate to show that you were a woman. But it would take a year and a half to get the women-owned certification because they weren’t just looking at the birth certificate; that team was looking at all the stuff that the Veteran-Owned team had already looked at. Then it was the same for 8(a)—now you’re looking at economic disadvantage and social disadvantage. We consolidated all of those team members into one team, shut down all four IT systems, and created one IT system that would take an application and allow us to check the boxes. That meant I had to train all of the processors on every application. So, if a person used to just work in the WOSB program, they had to learn the veteran-owned rules, the 8(a) rules, and the HUBZone rules. Because if they got an application that had those boxes checked, they had to know how to read the regulation and apply it.

That was a big deal to change all of the performance requirements for all of those employees, change their job descriptions, and then train them on all those applications before going live. It was a huge deal. Then, of course, all the applications that were in the old systems—we wanted to get those all processed. I came to the SBA in January, and we wanted to get all of those applications processed—probably three years’ worth of applications for women and 8(a)—by August so we could go live on the new system. It was a lot to do, but we were successful and got it all done, really doing about four years’ worth of work in one year.

In addition, you were on the forefront of going through the rules and regulations that needed to be changed now that we were consolidating this. What do we need to change in the CFR? Because there are things that have a little difference in how these applications are being viewed. What are some of the things that we could just say, “This will apply to all”? You did all of those regulations and changes and, I mean, it was just a lot. It was a lot of work, but I’m so happy. Someone just posted recently on LinkedIn that they submitted an application to renew their certification. Not for an initial, but to renew, and they submitted, and within seconds it came back approved.

Oh my gosh. Because there are some things that once you answer the questions in the system, you don’t need a person to touch that application. Previously, you’d have to submit to four different teams who would hand-review with their eyes whether you continued to be eligible, and you’d have to wait. Now you submit it once, and it’s coming back instantly if all the boxes check.

How System Consolidation Saved Public Service Jobs From DEI Cuts

Sam: The genius of it is—and this came up very early in this administration—the White House was cutting so-called DEI offices. I remember there was an office at the EPA where they said, “We’re just going to eliminate this whole office.” The genius of consolidating the programs is there’s not an 8(a) certification office that you can cut.

Jackie: Exactly. As I was trying to convince the staff—because some staff members, it wasn’t easy, right? Change is always hard. Some of the staff members wanted to know, “Well, I was a GS-13 processing one application. Why am I going to be a GS-13 and I have to now review and be competent in all of the application processes?” There was a time when I told them things change as we move forward. Because of the Ultima challenge, and we still hadn’t received a decision on the Ultima challenge—like what’s going to be the judge’s decision on us removing the presumption? Is that going to be enough?

I explained to the team, “It’s important that you diversify and you become a unified team.” Because now if they cut the 8(a) program, that’s one office and employees that would go. They don’t have that vulnerability now because they’re all one. Of course, the same thing would happen with the women, which was a small group of people, but if you cut the women-owned program, well, we don’t need that certification process anymore.

Sam: It probably saved people’s jobs and kept the 8(a) certification process going because otherwise, you can just cut an entire office. You’ve seen this elsewhere. It’s not that the functions go away, you cut the budget away, but you just cut that whole office, and then, of course, that work isn’t getting done.

The Mid-2026 Sentiment and Financial Anxiety in the Small Business Community

Sam: This was all part of a very tumultuous 2025 at the SBA across contracting. It does seem to me that things have calmed down a bit. I mean, we haven’t heard nearly as much out of the SBA and others about suspensions and the 8(a) program. You run a successful consulting firm now. You have a very busy speaking schedule coming up. You’re headed to New Orleans this week for the VETS conference. What is the sentiment among small businesses that you’re talking to right now in mid-2026? Are they optimistic, or are they still reeling from that tumultuous 2025?

Jackie: A lot of companies went bankrupt. This is what’s not in the news, right? But a lot of companies went bankrupt. When you have ten contracts and nine end up becoming a word now... “dodged”—my contracts got dodged. A lot of companies went bankrupt. Those that are persevering and staying with it still have anxiety because they don’t know what’s next. Like I told you, it was just last month, within the last 30 days, that a company at the USDA just lost 50 employees. That’s huge for a small business because the average small business has 25 employees. So if they got to the point where they have 50, that’s a large number of their employees.

The other thing that makes it difficult for companies to continue to persevere is their access to capital has changed. It used to be when a bank saw a contract that had a base year and four option years, they felt confident to give a small business a loan because they could give them a line of credit or a loan to perform. They knew that at least that base year would be finished and the company could repay them. But now, in the middle of the base year or the middle of an option, contracts could just be terminated. So, it’s making it more difficult for small companies to get loans from banks, which then could tip them into predatory lenders, which exacerbates the whole problem.

Sam: Oh, that’s interesting. So their cost of capital goes up because of the uncertainty around whether contracts are going to be terminated.

Jackie: Exactly, because small business contracts aren’t as stable anymore. But we need clear guidance from Congress and the SBA on the future of all of the programs. We need stability in how Contracting Officers are going to treat small business contracts. They are our partners. When you think about a business, small businesses that support and serve the federal government are the federal government’s partners. How do you treat your partners? How do you treat your business partners?

It’s important for them to have some type of stability. I think companies are teaming up more. Acquisitions are getting larger because of bigger contracts, and small businesses can’t go after them on their own, so they’re teaming up to work together. They’re supporting each other. Where they’re not able to pick up the phone and get advice and guidance from the SBA or the OSDBU offices that have been gutted, they are calling each other and learning from each other. I always thought that the best way for a small business to learn is from another small business. But it doesn’t mean that the SBA SCORE, Apex Accelerators, and all of these entities need to lean backwards; they still need to lean forward and really do more now.

Reflection on Returning to Government: Was It Worth It?

Sam: You mentioned that you came back from retirement to join the SBA, and part of your call was to create this unified certification system. So now you’re over a year out, maybe a year and a half now. Was it worth it to go back into government?

Jackie: It definitely was worth it. Yeah, it definitely was. I want my legacy not to be everything that I’ve gotten for myself, but the number of ways that I’ve helped other people. That’s what I want my legacy to be about; it’s not just about what I do for myself. I think about all of the companies that were certified. I think about the companies that were inspired by the ability to knock on the door at the SBA and receive assistance. It’s important because jobs were created. We see things shifting now, but jobs were created, companies were certified, and contracts were won as a result. Most importantly, for the first time in probably 10 years, the team in the Government Contracting and Business Development office worked collaboratively together to make tremendous change for small businesses when they streamlined these processes and consolidated this certification.

This was huge. It will go down in history for years to come. It was just such a smart decision. I definitely came back to help lead it, but I wasn’t the brains behind it. Being able to put what needed to be done on the table and watch all the smart people in the SBA—like you, like Van Tran, like Larry Stubblefield—come to the table with the solutions and make this happen was wonderful. Sometimes I think about the hard work and late nights that all of these government employees put in, and it just brings tears to my eyes. I always talked about leadership, and when you’re leading public servants, it’s important that you understand the sacrifice that they’re making to serve publicly.

Probably you realize now, “Wow, I could’ve gotten out a long time ago and made all of this money that I’m making now,” but you make a sacrifice to say, “I’m gonna serve my country.” You make more money outside, and so when you look at people that have committed their life to public service, you have to lead them with integrity and character, and they have to know that you value what they bring to the table. I was never the smartest—you know that. I was never the smartest person at the table. It was all of the leaders around me, and that has been the way that I led: to say, “Hey, here’s the problem. Let’s put it on the board. What do you all think we need to do to get this fixed?” So, yes, it was worth it because of the things we accomplished and because I was able to allow leaders to step forward and do something miraculous.

Sam: Well, that was a tremendous effort that you led to consolidate the certification programs. It’s a huge difference now to have this 8(a) program at least still able to fight another day because of the work that we did together.

Leadership Insights: “How Successful People Lead” and Leveling Up

Sam: I’ll get you out of here on this. When we were together in 2024, I remember the principle “leaders eat last.” We had a good story about that. I’m not going to share it. Then the bus, right? Yeah, get the right people on the bus. Any additional leadership stories or tips that you want to share? You named your company SES. I know leadership is very important to you, and the path to the Senior Executive Service is important to you. What would you tell our listeners about leadership?

Jackie: Another book that I love to talk about is How Successful People Lead by John C. Maxwell, and also the concepts from Jim Collins. This concept is so simple, and if any leader or aspiring leader would just read it—it takes about an hour to read—it says getting the position of leadership is just the first level. That’s the first level of leadership, and it doesn’t really mean you’re a leader; it just means you have the position.

You don’t really get to the point where you start being able to make change until you get to level two, where you start engaging and building relationships with your workforce, and they know you and they trust you. Just because you got the position doesn’t mean that they trust you or that you care or value them.

So, you’ve got to get to that level two in order to get to level three, which is where you can bring change. A lot of leaders want to get the position and come in and immediately make change, but you’ve got to get the position, then develop the trust of the workforce, and then you can get to level three to make change.

Level four is developing other leaders. That’s what you want to constantly be doing; that’s what your legacy should be—developing and producing other leaders. You do that by making sure they have an opportunity to lead something and not having you, as a leader, being the only voice of authority in the room.

I think that is a level-one leader who comes in and says, “It’s my way or the highway. I don’t care if people like me. I don’t care if people want to listen to me; they have to because I’m the boss.” That’s a level-one leader, and you always want to aspire to be greater than that. You can’t get to those higher leadership levels until you develop relationships with your people, execute change, and then develop other leaders.

So, when we did the certification process, that’s what you saw: me getting the position, developing the trust with the people, and then putting people in positions where they could work their pieces to make change and execute—whether it was policy, IT, or personnel—and letting them lead it. You develop other leaders, and that is what a good leader is.

Conclusion & Where to Connect with Jackie

Sam: That’s been very important as you’re not there anymore and I’m not there anymore. Many of the leadership team members have left, and the SBA is continuing to serve small businesses because of that development of additional leaders. It’s been so fun going down memory lane with you and talking about these policies that we worked on and the certification system. Jackie, if people want to contact you, how do they find you?

Jackie: The best place to contact me is on LinkedIn; then you’ll get a chance to see me. I respond to messaging on LinkedIn. We can connect that way—I’ll get to see your face, and you get to see mine.

Sam, thank you so much. I want to thank you for everything that you did while I was there because I absolutely would not have been successful achieving the things that we did in that one year—which, like I said, was four years’ worth of work in one year—without leaders like you.

I depended on you a lot. I took you to every meeting with me with the Administrator because she was deep into the regulations. I used to say, “She’s in the weeds, and if she asks a tough question, I need the smart people with me.” So, I always brought you, and I just appreciate how you served, how you led, and how you built your team. It was just amazing.

Even when there was an opportunity for me to promote you and move you higher to supervise two other senior executives, you said, “Let me stay here because I’m just building my team.” That meant the world to me. It showed you weren’t there for position or title; you were there for the work, for policy, and for doing the right thing for small businesses. So, I appreciate you. It meant the world to me.

Sam: Thank you. We did a lot of great work together. Thank you for trusting me to support you and support the Administrator. You can see it in the policies that we put out. I have not done nearly as many policies in this last year and a half than we had when we were at the SBA. But I think we truly listened to small businesses, tried to figure out what we could do from a government perspective to help them, and I think we did a lot of good.

Jackie: We did. We did.

Sam: Thank you so much for being on the show, Jackie.

Jackie: Thank you. Thanks for having me.

Sam: Thanks, everybody.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

A judge ruled that SBA mishandled the ATI case. But the company remains suspended.

Sam Le — Thu, 28 May 2026 18:06:36 GMT

Matter of ATI Government Solutions, LLC, SBA No. BDPT-728 (2026).

The Small Business Administration failed to provide a Federal administrative judge enough information to review the agency’s decision to suspend ATI Government Solutions from the 8(a) program, SBA’s Office of Hearings and Appeals ruled earlier this month. But despite sharply criticizing the agency’s handling of the case, the judge allowed the suspension to remain in place while SBA assembles a complete record.

SBA suspended ATI from Federal contracting on October 21, 2025, and followed up with a suspension from the 8(a) program two days later. The suspensions followed a video published by the O’Keefe Media Group where ATI staff appear to acknowledge “pass-through” schemes using ATI’s 8(a) status.

Under SBA rules, an 8(a) firm can appeal its program suspension to OHA. OHA then reviews the SBA’s administrative record—the collection of all the documents that SBA relied on in deciding on the suspension—to rule on whether there was enough evidence to justify the suspension.

But, in response to ATI’s appeal, SBA filed just one document as its administrative record—and it wasn’t even the 8(a) suspension letter. “I must conclude that the Agency’s proffered Administrative Record here met none of the requirements for submission of the Administrative Record,” Judge Christopher Holleman wrote in the decision. His ruling does not address whether the allegations against ATI are true, instead focusing on whether SBA followed proper procedures.

Judge Holleman remanded the case to SBA, ordering the agency to file a new administrative record by June 12. In the meantime, however, ATI remains suspended from both the 8(a) program and governmentwide. OHA’s jurisdiction reaches only to the 8(a) program. So, even if OHA were to lift ATI’s 8(a) suspension, that would not affect ATI’s continued suspension from receiving new Federal contracting actions. ATI would need to challenge the governmentwide suspension elsewhere under the procedures of FAR Part 9.4.

O’Keefe: “The biggest story we’ve ever done”

SBA suspended ATI just days after the O’Keefe Media Group published a video in which alleged ATI employees discussed doing as little as 20% of the work on 8(a) contracts. Owned by the Susanville Indian Rancheria, ATI qualified as a tribally owned 8(a) participant and was therefore eligible for sole-source 8(a) contracts up to $100 million. Public records show that ATI received $227 million in 8(a) contracts.

More recently, O’Keefe published a video with undercover interviews of alleged staff from Cherokee Federal and Chenega Corporation. James O’Keefe referred to the 8(a) investigations as “the crusade on the biggest story we’ve ever done.”

Both videos implicate the SBA’s rule on limitations on subcontracting. For services contracts, the rule limits spending on subcontractors to 50%. But there are many exceptions, as described in this article on GovCon Intelligence:

In its filings at OHA, ATI referred to the O’Keefe video as “selectively edited” and “obtained by deceptive means,” according to the published OHA opinion. ATI stated that the individual depicted in the video was a short-term employee with no actual personal knowledge of compliance with 8(a) program regulations.

ATI also claimed that SBA did not conduct its own investigation, relying entirely on the video to support its suspension action. “SBA has usually investigated allegations of violations of the regulations before suspending 8(a) firms, and it has not done so here,” ATI argued, as paraphrased in the opinion.

SBA switches its reason for suspension

In its administrative record to OHA, SBA filed a single document: the October 21st letter suspending ATI governmentwide under FAR procedures. But the FAR suspension isn’t why ATI was suspended from the 8(a) program, OHA ruled.

Instead, according to the later 8(a) suspension letter—which OHA received from ATI—the 8(a) suspension was based on the statements from ATI’s employee.

SBA switched its reason for the 8(a) suspension midstream, Judge Holleman concluded. At first, the 8(a) suspension pointed to the video’s statements. Then, after ATI appealed, SBA claimed that it had the authority to suspend from the 8(a) program because ATI was suspended governmentwide. “A FAR suspension is adequate evidence for an 8(a) program suspension,” SBA argued.

But the judge disagreed, stating that SBA’s switch was an impermissible “post hoc rationalization.” “The Agency has thus stated on appeal a completely different justification for its action than that given at the time it was issued,” Judge Holleman wrote.

The problem with the switch, Judge Holleman ruled, is that it doesn’t reflect what SBA actually used to suspend ATI from the 8(a) program on October 23. As a result, SBA must go back and collect the documents upon which SBA officials relied to issue the suspension.

The judge directed that if the SBA consideration “includes videos, the videos must be included in the electronic submission of the Administrative Record.”

ATI remains suspended on both fronts

OHA has lifted 8(a) suspensions before in cases where SBA hasn’t justified the suspension. But OHA didn’t do so in this latest decision. Instead, SBA has until June 12 to provide additional documents to OHA.

“The Agency must bear in mind that it has the burden of showing that its decision to suspend Petitioner must have been based upon adequate evidence that protection of the Government's interest requires suspension,” Judge Holleman advised SBA, observing that the relevant standard is similar to the “probable cause” needed for an arrest or search warrant.

But, even if OHA were to lift the suspension or SBA were to do so on its own, ATI would still need to grapple with its continuing governmentwide suspension under FAR 9.4. The FAR provides that suspensions are for a “temporary period pending the completion of an investigation and any ensuing legal proceedings.” The suspension must be terminated within 12 months after the notice if legal proceedings are not initiated, unless the Justice Department or a prosecutor requests a six-month extension. The FAR suspension prevents ATI from receiving new contracts and most new contracting actions, including orders and, importantly, 8(a) awards.

After SBA’s filing on June 12, ATI has until June 22 to file objections and until June 29 to file a substantive reply. OHA Judge Holleman retains jurisdiction throughout, setting up a ruling on whether SBA can substantiate one of the most closely watched suspensions in the 8(a) program’s history.

This article is for informational purposes only and does not constitute legal advice.

Navigating the Messy Middle of Federal Contracting (with Stephanie Kostro)

Sam Le — Tue, 26 May 2026 09:01:44 GMT

"When we talk about small businesses being under a microscope, I do worry that the person looking through the lens isn't sure what they're looking for," PSC President Stephanie Kostro said. Fresh off the Professional Services Council annual conference, Stephanie joined Sam on the podcast to discuss the biggest policy issues for small businesses: fraud investigations and audits, the next stage of the FAR Overhaul, and acquisition reform in the military and at GSA.

She also imparted advice for contractors preparing for an audit or coping with the “messy middle,” this interim period between the FAR Overhaul’s publication as deviations and as final rules. Finally, she walked through the biggest legislative priorities for government contractors looking ahead to the FY27 NDAA, including the potential for action on the Rule of Two. A full transcript is online at http://www.govconintelligence.com.

Links

Stephanie Kostro bio https://www.pscouncil.org/a/Bios/PSC_Staff/Stephanie_Sanok_Kostro_Bio.aspx

About PSC https://www.pscouncil.org/psc/About/About/__p/ca/About.aspx

JD Vance’s Anti-Fraud Task Force Uncovers $6 Billion In Suspected Fraudulent Government Contracts https://dailycaller.com/2026/04/08/jd-vance-task-force-eliminate-fraud-six-billion-government-contracts-gsa-edward-forst-taxpayer-waste/

OneGov Saves Taxpayers $1.1 Billion in First Year https://www.gsa.gov/about-gsa/newsroom/news-releases/onegov-saves-taxpayers-11-billion-in-first-year-04292026

GSA Announces OneGov Agreement with Snowflake to Accelerate Data-Driven Technology Adoption https://www.gsa.gov/about-gsa/newsroom/news-releases/gsa-announces-onegov-agreement-with-snowflake-to-accelerate-datadriven-technolo-05212026

Promoting Efficiency, Accountability, and Performance in Federal Contracting (EO 14402) https://www.federalregister.gov/documents/2026/05/05/2026-08900/promoting-efficiency-accountability-and-performance-in-federal-contracting

H.R.2804 - Protecting Small Business Competitions Act of 2025 https://www.congress.gov/bill/119th-congress/house-bill/2804/text

PSC 2024 Federal Small Business Scorecard https://www.pscouncil.org/__p/cr/r/2024_Business_Forecast_Scorecard.aspx

Timestamps

Introduction: The State of Federal Contracting 00:00:00

Navigating Fraud Task Forces and Small Business Audits 00:03:33

The Burden on Small Businesses and the Shrinking Procurement Workforce 00:13:37

PSC’s Advocacy Priorities and Defense Acquisition Reform 00:15:27

Looking Ahead to the FY27 NDAA and Commercial Harmonization 00:19:20

Value-Added Resellers in a OneGov World 00:26:20

Mitigating Vendor Lock-In Risks 00:31:21

Anticipating the Revolutionary FAR Overhaul Proposed Rules 00:32:38

Critical FAR Parts for Small Businesses to Track 00:37:32

Navigating the Fixed-Price Contract Mandate 00:38:54

Risk Tolerance and Price Adjustments 00:44:45

Codifying the Rule of Two at the Task Order Level 00:48:00

Tracking Federal Market Forecasts and Scorecards 00:50:56

Conclusion: The Upcoming Federal Acquisition Conference 00:53:30

Transcript

Introduction: The State of Federal Contracting

Sam: Welcome to GovCon Intelligence. My guest today is Stephanie Kostro. Stephanie, welcome to the show.

Stephanie: Thanks so much, Sam, for having me.

Sam: Thanks for coming on. Stephanie Kostro is the president of the Professional Services Council, the leading trade association and voice of the federal contracting industry. As president, Stephanie guides PSC’s strategic direction, advocacy, and member engagement efforts across growing federal industry priorities. She has more than 20 years of experience in the U.S. government and industry, and brings a wealth of knowledge in federal procurement, policy and acquisition regulations, government processes and programs, and public-private partnerships.

And boy, you have been busy lately. There has been a lot happening. So what is the vibe among your members right now at PSC with this torrent of policy changes, the FAR overhaul, and small business action? Just generally, how have they fared through the last year to year and a half?

Stephanie: It is a great question, Sam. We have not rested in the last 15 months, it’s fair to say. Let me give a quick thumbnail sketch of who PSC is, if I could. We are, as you mentioned, a trade association. We represent more than 400 government services and solutions contractors. And by solutions, I mean technology, innovation, et cetera—so not manufacturers per se, but those who offer the other end of the spectrum of services and solutions.

I would also note that of our 400 member companies, a full 65% qualify in some way, shape, or form as a small business. And so I would love to talk specifically about how the last 15 months have touched on and impacted small businesses in particular. A lot of the executive orders that have come out have been unique; what’s different about this president is a lot of the executive orders have directly touched on federal contracting. It’s been an amazing tidal wave of what’s been coming over the transom for us. I think whether it’s consolidation of procurement at the General Services Administration or some of the sea changes that we’re seeing at the Department of War, there’s a lot in the mix over the last 15 months.

Sam: Yeah, that’s a really interesting point because I saw the executive order directing the FAR Council to issue deviations, and I thought, “Wow, somebody at the White House knows what a deviation is.” That’s interesting. And then you have Secretary Hegseth talking about the 8(a) program and the SBA. So it’s gotten more attention in the highest levels of government than I’ve seen in previous administrations.

Stephanie: That’s absolutely true. And we do have someone heading up the White House Office of Federal Procurement Policy—for those of your listeners who dork out like I do on this stuff, that’s OFPP—who has industry experience. I think that’s a critical component of what we’re seeing here, whether it’s the move towards fixed-price contracting or commercial solutions. I think it plays a big role that we have a lot of folks with experience in business now in the government.

Sam: And that’s Dr. Kevin Rhodes.

Stephanie: That is Dr. Kevin Rhodes, yes.

Sam: Did you have him recently at your conference?

Stephanie: We did have him at our annual conference. The Professional Services Council has a big event in West Virginia every year, and we had all of the FAR Council principals come on a panel and talk about what they’re doing with the revolutionary FAR overhaul, what they’re doing on contract consolidation, et cetera. Dr. Rhodes was one of our guest speakers alongside Jeff Koses from the GSA, Marvin Horne of NASA, and John Tenaglia of the Department of War.

Sam: Oh, what a great get to get all those people in one room together.

Stephanie: Yeah, I’ve warned them that this is going to be an annual thing. It’s an annual conference, and we should get them all in West Virginia every year.

Sam: Are they going to do a FAR overhaul every year? Let’s see what they have to say for next year.

Navigating Fraud Task Forces and Small Business Audits

Sam: Well, we’ll start at the top of government—not quite with President Trump, but we’ll go to the next level with Vice President J.D. Vance, who has started up a fraud task force. One of the first functions of that fraud task force, it appears, is to look at government contractors. Small businesses have been very familiar with this over the last year. We’ve been covering it a lot on GovCon Intelligence with audits in the 8(a) program, and then there was an audit by DoD—the Sledgehammer audit. It sounds from press reports that the GSA has begun to send out direct inquiries to contractors they view as fraudulent. It’s not really clear where they’re finding fraud here, but they’ve at least started to send out these letters. And then, of course, the SBA is continuing its 8(a) audit. The inspector general at the SBA is going to look closely at the WOSB and SDVOSB programs as well.

I’ve been working with many small businesses. All of them that I’ve worked with are above board; they’re doing their best to be compliant, but they’re very scared about getting caught up in these fraud investigations, audits, et cetera. How worried should small businesses, like that 65% you mentioned at PSC, be about this fraud task force and additional audits and investigations?

Stephanie: It’s a great question, Sam, because PSC’s mission as a trade association, like a lot of our brethren out in our space, exists for three main reasons. One is to advocate on behalf of our members. One is to educate—and in part, that is helping the broader American public know the value that contractors bring to the table, but it’s also to let executive branch and legislative branch folks know how important this segment of industry is. Then, finally, we exist to facilitate that networking, that meeting of minds, so that we can have a healthy discussion and candid back-and-forth between customers and industry.

So, how worried should small businesses be? We’re asked by a lot of our member companies what they should do, and it’s a fair question. Just to back up a little bit, the task force reportedly is investigating $6.3 billion worth of contracting dollars that have gone out. I’m not sure where that number comes from, but that net captures a lot of companies, large and small. What are they looking for, and what are these hundreds of letters that have gone out between the task force and the General Services Administration?

Just on the letters themselves: if you receive a letter, you have 30 days to respond. We are encouraging any business that receives such a letter to be responsive, to be timely, and to meet that 30-day requirement. But even before you get a letter—and this goes back to the 8(a) audit that was launched a year ago—the first thing you should do is look at your own house. Make sure everything inside your company is in order so that you can be responsive and ensure you have the documentation.

What is the task force and what are these GSA letters looking for? They are looking to see if you are a shell company or a legitimate small business. By “shell company,” I mean putting forward something where we consider it false ownership or control. Are you misrepresenting yourself as a small business when actually you’re not? What are the pass-through schemes?

I use that word “scheme” deliberately, Sam, because I think any reasonable government official would say, “Okay, we’ve awarded the contract, and your work share when you’re performing the work is different from what you proposed.” That is reality. When I was growing up professionally at the Department of Defense, the plan was great until it had first contact with reality, right? You have to shift resources, staffing shifts, et cetera. But the scheme aspect is important because they are looking at whether you are habitually going out with a large company, bidding in a certain way, and at the end of the day, as a small business, you’re claiming a fee and doing minimal work while the large business is getting the lion’s share. They’re looking for patterns like that. If you do your due diligence inside your company first and run your own internal reviews, you can mitigate your audit risk.

I’ve got five suggestions that we give to small businesses. The internal review is first. The second is that you should expect requests for evidence of eligibility. What does that mean? Do you have a physical location where you say you have a physical location? For example, are you trying to get a HUBZone award because you say you’re located in a HUBZone, but your headquarters isn’t there or you don’t have the number of employees you claimed were there? They’re looking for evidence of eligibility.

The third is to be prompt with your response; we went over that briefly. The fourth piece of advice is if you have a joint venture or subcontracting arrangement, that will receive scrutiny, so please ensure that your compliance and documentation are in order. JVs in particular and sole-source awards have come under additional scrutiny, certainly during the 8(a) program audit, but also in these other ways. Finally, it’s more prospective and less responsive: as a small business, you should expect strict eligibility reviews and recertification requirements coming down the pike to make sure that if it is a socioeconomic set-aside, it is going to someone who is legitimately eligible.

The Burden on Small Businesses and the Shrinking Procurement Workforce

Sam: Based on what you’re saying, it sounds like small businesses are even more under the microscope than large businesses because they have these additional compliance requirements with joint ventures, the limitations on subcontracting, and the HUBZone program you mentioned. Does it seem like it’s putting more of a burden on smalls than it would be on those that aren’t in those programs?

Stephanie: I’d say it’s under a microscope in terms of they are getting looked at. We do have folks on the Hill—and we can talk about this later on or now if you’d like—who are introducing legislation to remove some of these socioeconomic set-asides, whether it’s WOSB, et cetera. Will that see the light of day? What is that going to do? There’s a lot of conversation happening here.

I think if you also look at what has happened to the federal workforce in the last 15 months, it has undergone a sea change as well. OSDBUs—these Offices of Small and Disadvantaged Business Utilization—in a lot of the departments and agencies are much smaller than they used to be. That means the workload has increased on the few civil servants who are left in those offices. While I do think there might be heightened scrutiny, I’m not sure who’s going to be conducting that scrutiny because there are fewer civil servants, and to be honest, political appointees, in these jobs than there were 15 months ago.

Sam: From the small business perspective, the fear is that the people who are conducting these investigations or audits won’t have a full understanding of the programs. The HUBZone program you mentioned is very complex. The limitations on subcontracting and joint ventures are also very complex. You saw some of that with the ATI videos where people came out afterwards and said, “Actually, you can do some of these things that they’re talking about as being pass-through schemes.”

Stephanie: Yep.

Sam: So that’s a really good point. With OSDBUs on the decline in numbers, there may just not be the people with the substantive knowledge to understand what the actual rules are, and whether you’re right on the line of compliance or over into non-compliance.

Stephanie: I think that’s true. I think also when you look at the scrutiny coming from DOGE last year—the Department of Government Efficiency—a lot of the civil servants across the board, not just in acquisition roles or CO/KO roles, but across the entire civil service, either took voluntary early retirement or did that deferred resignation program that we heard so much about this time last year. They RIF’d people too; there were reductions in force as well. With all of that happening, the civil service across the board is smaller than it had been.

They did actually hire some people back, and they do have some new people at the table, but those people are generally not getting hired into OSDBU roles. I do think the numbers aren’t where they need to be in these offices, and I think as a result, you’ve got folks who are not particularly well-trained yet might be new to the role.

I can’t cite the specific department because this was in a meeting under the Chatham House Rule, but when I sat next to a senior procurement executive from a sizable department, she was telling me that as of September 30th of 2025, she had 600 contracting officers. At the beginning of the year, in January of 2025, she had 1,800. So she had a third of the workforce in 1102 billets—those contracting officer billets—than she did at the beginning of the year. If you’re a contracting officer and you’re looking to the seat to the left of you and the seat to the right of you, and they’re both empty, I’m not sure you’re going to sign up for a training course to understand HUBZone requirements better, right?

Sam: Right, you’ve got three times as much work anyway.

Stephanie: Exactly. You’re probably having heart palpitations while you’re sitting there going, “What am I doing? I’ve not managed this particular program before. I don’t know what is going on in this space, so let me just sort of copy and paste what my predecessor in this role had done.” I think there’s a bit of a learning curve for the new folks coming in. But again, I don’t think they’re coming into OSDBU roles. So when we talk about small businesses being under a microscope, I do worry that the person looking through the lens isn’t sure what they’re looking for.

PSC’s Advocacy Priorities and Defense Acquisition Reform

Sam: It sounds like your focus, either on your own, Stephanie, or through PSC, is very much on the procurement workforce—whether it be OSDBUs or contracting officers. We’re certainly seeing declining numbers in the 1102 ranks, and that impacts anybody the small businesses work with. You’re actually seeing that play itself out in bid protests and the decisions that are coming out, where it seems like the government is skipping steps potentially because of having fewer people around. How does that play into the work that PSC is doing on the Hill or advocacy within the agencies?

Stephanie: We have five priorities at PSC. One of them is to highlight the value of the federal contractor. The second is to make the government a smarter customer and a better buyer—a “smarter customer” knows what capabilities are out there, and a “better buyer” improves the way they access them. The third is access to tech and innovation, and the fourth is actually federal workforces.

When we talk about federal workforces as a priority area, it is not just contractor workforces when we focus on things like suitability requirements, security clearances, and recruitment pipelines from colleges and universities (or vocational schools, training programs, and apprenticeships if you’re in the manufacturing world). We also talk about contracting officers, contracting officer representatives, program managers—the entire suite of the acquisition profession.

When we go to the Hill, that is certainly one of the four prongs that we highlight. We are working closely with folks at my old job—I used to be on the House Armed Services Committee staff as the policy director—so we are working with the House and Senate Armed Services Committees. They have a must-pass bill every year: the National Defense Authorization Act. Last year, for FY26, there were a lot of provisions that were very helpful for acquisition and transformation. We saw a lot of that come out. You mentioned Secretary Hegseth talking about acquisition transformation, talking about the 8(a) program, and talking about program acquisition executives versus program executive offices. For those who don’t know the defense world, they sound the same, but they’re very different; it’s about portfolio management as opposed to just a specific program office. As we move forward with folks on the Hill, we are very interested in talking about acquisition workforce reform within the context of that larger transformation.

Sam: What was PSC’s view on how Hegseth was transforming the acquisition and workforce organization? People argue whether the revolutionary FAR overhaul is truly revolutionary or not, but this legitimately feels revolutionary.

Stephanie: PSC was one of the associations that attended, alongside 300 industry CEOs, the Arsenal of Freedom speech that Secretary Hegseth gave back last November. It was about 75 minutes of Secretary Hegseth speaking about acquisition. I never thought a secretary of defense would do something like that, but he was very conversant in what he was talking about. It was about acquisition transformation, reorganizing how they conduct the work they’re doing, and emphasizing commercial solutions. We’ve seen that in some executive orders and White House statements as well regarding access to commercial products and services through fixed-price contracts or what have you.

I was very interested in hearing about how they were structuring things at the Pentagon in terms of not just the acquisition tools they were using—whether it’s Other Transaction Agreements or Commercial Solutions Openings—but also how he was emphasizing having commercial components to an acquisition. You may have something that is very bespoke with military capabilities being acquired, but it can have commercial components to it, and he was emphasizing that.

The second leg to that stool, in addition to how things get acquired faster or cheaper, was the requirements process. I think that’s often a problem that is seen as too hard to resolve, so people kind of push it to the side. But the requirements process at the Pentagon and elsewhere is so lengthy, particularly in fast-evolving situations like emerging technology. Whether it’s quantum or artificial intelligence, if the requirements process takes two years, it is way too slow. I am thrilled to see that the Pentagon is relooking at and transforming that piece.

The third leg of that stool was the foreign military sales piece: how do we get capabilities and capacities into the hands of our friends, allies, and partners quicker? With those three legs of the stool, I really do think the Pentagon has a once-in-a-generation opportunity to make real change, and we are seeing activities.

The one caveat I would add, Sam, is that last I heard, they had 38 working groups at the Pentagon looking at this. That’s too many working groups. It’s too much of a bureaucracy to move quickly. I understand why they have the 38 working groups, and I hope a lot of them are reaching out to industry to see what is in the art of the possible. I’m hoping it can get rolled up in a very efficient way, but once I heard that number, that first little niggle of doubt came to my brain.

Sam: You can’t be the federal government without working groups and committees. That’s true. But you’ve got to give people something to do.

Stephanie: It’s always amazing to me though, because once you create something, it’s really hard to disband it. I always try to err on the side of streamlining things. Having five or six working groups is one thing, but 38 right out the gate seemed like a lot. I want to be wrong on this, and I hope that I am. I hope they roll things out very efficiently and quickly.

Sam: Yes, and it sounded like during that speech, this stuff was supposed to happen tomorrow, so having 38 working groups is going to prevent it from happening in the near future. You mentioned the NDAA, and some of the emphases of the FY26 NDAA were commercial buying and the revitalization of the workforce. What about the next route for this must-pass bill? What is PSC looking at there? What is industry interested in seeing in the FY27 NDAA?

Looking Ahead to the FY27 NDAA and Commercial Harmonization

Stephanie: New amendments are due in late May, at least for the House side, and the Armed Services Committees have their chairman markups coming up in a couple of weeks here in early June. As we move forward, I’m very interested to see what the personal offices have to say as part of that committee markup process.

Last year, the FY26 NDAA was very groundbreaking in its acquisition reform. A couple of things are noteworthy. One is their treatment of non-traditional contractors. That is a phrase that has been used repeatedly over the last decade or so, and there are some non-traditional contractors who have been classified as such for 20 years now. It’s kind of funny to say, given the definition of what non-traditional is, at what point do they cross the Rubicon and become traditional?

That said, what we’re hoping to avoid in the FY27 markup period and also in conference is anything that hints at a set-aside for non-traditionals. What do I mean by that? We are very supportive at PSC of socioeconomic set-asides. We have a lot of small businesses as part of PSC—women-owned, veteran-owned, et cetera. There was a movement afoot in the FY26 NDAA process to have a set of work set aside for non-traditionals, and I don’t know that that is a healthy way to think about how to leverage their capabilities.

What I appreciate about what they did last year is that they made things easier from a Cost Accounting Standards—the CAS requirements—standpoint for non-traditionals. I would like to see in the FY27 bill a shift toward GAAP, the Generally Accepted Accounting Principles, across the board for all contractors. I think that would be great, not just for non-traditionals. If we’re going to make things easier for one segment of the industrial population, I think we should do it for everybody. That’s what we’re looking to work on with HASC, SASC, and the appropriations committees as well.

I would also note one area that we talked about last year that we’re going to continue to talk about this year for the FY27 bill is intellectual property and tech data rights. We have licensing agreements that oftentimes will allow the department or the customer to have access to technical data and intellectual property, which is particularly important when the government has contributed the costs to develop that IP. The government has some ownership stake there. But I also want to make sure that we are protecting against intellectual property flight; it’s a matter of how we are going to protect that information if the government does have access to it.

Finally, one of the areas we want to work on with HASC, SASC, and others this year will be on that workforce issue we talked about, to make sure that if there are training modules going forward, industry can contribute to them or can actually receive the training itself. What I found really helpful from my conversations with the FAR Council principals about the FAR overhaul is that they are developing training for the new class deviations and proposed rules we’ll see at some point soon, hopefully. They’re going to have to train the acquisition workforce on that. I understand they are developing training modules that will be accessible by both government officials and industry officials so everyone’s hearing the same thing. I think that should be more of the rule than the exception going forward. To the extent that you’re going to explain industry to government officials taking these training courses, I’m happy as a trade association to help develop those materials so it’s an accurate representation of what industry is interested in.

Sam: You often hear from industry, from small business especially, that they sometimes have to educate their contracting officers themselves on what the authorities are and how far they can go. What should small businesses be looking for in this FY27 round of NDAA negotiations?

Stephanie: Because it’s a must-pass bill, the NDAA is often termed either a Christmas tree that ornaments get hung on or a tractor that’s pulling other things across the field. As we look at the FY27 NDAA, we should look at what is going on with the Rule of Two, and see if any language creeps into the NDAA to ensure there’s a statutory basis for the Rule of Two and how it’s applied, whether it’s at the contract level or at the task order level.

I think we should also look at whether or some of the authorities granted for the Department of War last year get extended to civilian agencies. Small businesses should keep an eye on that to make sure that if things are going to get easier—whether it’s Cost Accounting Standards, et cetera, for defense companies—those same rules apply to companies that support civilian agencies. We almost got there last year with applying some of those reforms to civilian agencies, but there was an outside jurisdiction issue, and the committees of jurisdiction decided not to let those move forward. We need to have these conversations, and I hope we have them in the next six months.

Sam: It’s very good, particularly for these non-traditional companies coming from the outside, to have consistency. If they’re working with Homeland Security as well as with the Department of War, they need to be able to predict what the IP rights are going to be or what the accounting standards are.

Stephanie: That’s a really good point, Sam. When we look at companies and what they’ve gone through over the last 15 months because of DOGE and a lot of the rescopings, descopings, and contract terminations, it has really forced a lot of government contractors to think differently about their customer base within the government. Some who were solely defense contractors are now also Homeland Security contractors. Or maybe if they worked for the Defense Health Agency, they’re now looking more at HHS and other health agencies. If we are making it easier for defense contractors, we should also be making it easier for folks who are sometimes defense contractors or would like to be defense contractors.

This goes back to things like the Cybersecurity Maturity Model Certification program, or CMMC, at Defense, where you have a certain cyber standard there but not for the rest of the industry that works with civilian agencies. You create a dichotomy where if you’re a defense contractor, you have this set of rules, and if you’re a civilian agency contractor, you have this other set of rules. I think that creates inefficiencies. If we could have similar, common-sense rules across the board, that would be helpful. That’s the kind of thing that when we have conversations about the NDAA—because it is legislation that gets signed into law every year—presents a really great opportunity to level that playing field and make it easier for companies to do business with the government.

Value-Added Resellers in a OneGov World

Sam: That’s true. It’s the one way that you can promote consistency—that the FAR is something everybody has to follow, ensuring everyone follows the same law and the same regulations.

Switching gears now to GSA’s OneGov initiative. GSA came out this week stating that it had saved $1.1 billion through the OneGov initiative. They also said earlier this week that they have reached a deal with Snowflake. I was a Snowflake user when I was at the SBA, and we had a value-added reseller that sold us Snowflake. They’re actually located down the hall. I wonder if they’re hearing this. I don’t know if they are going to continue doing that or, if they still use Snowflake, if they’re going to go straight to the OEM.

In addition to OneGov, GSA last year sent out these data calls about reseller markups too, and I imagine PSC was very involved hearing from the companies that received those markup letters. Value-added resellers have been concerned about OneGov. They’ve been advocating for their role in the marketplace. What is that role now in a OneGov world for value-added resellers?

Stephanie: To review for your listeners what OneGov is: it was announced just over a year ago as a way for the government to leverage its enterprise-wide power to work with vendors. I hesitate to say “monopsonistic,” because a lot of times it’s commercial goods and services, so they’re not a monopsony or the only user of these things. But they do have enterprise-wide sway over how they work with and gain access to capabilities.

IT is the first sector out of the gate for OneGov, but it’s not going to be limited to IT going forward. My understanding is they are going to look at how to leverage the federal government’s enterprise-wide power over things like hardware platforms, infrastructure, cybersecurity, et cetera. But on the IT front, the goals of OneGov were to negotiate directly with the original equipment manufacturers, or OEMs, to secure 70% to 90% discounts on software. I mean, that’s huge. A 90% discount from Google or Microsoft is enormous.

So that was one of the focuses. The others were to access prenegotiated agreements through value-added resellers on the Multiple Award Schedules. This speaks exactly to what you’re asking about: how are value-added resellers positioning themselves given the additional scrutiny that they’re coming under?

There was a rumor out there that the government wanted to limit the markup for value-added resellers to a certain, very low percentage. I think that reflected an unclear understanding of the value that value-added resellers bring to the table. We did talk to folks about that Request for Information to help respond to the government about what value-added resellers bring to the table.

There are a couple of things that they do, and this is how we advise companies to talk about themselves. They help with procurement efficiencies. They accelerate tech acquisition by using existing, pre-existing contract vehicles like the Multiple Award Schedules and NASA SEWP, so that you can bypass lengthy open-market bidding. You also have regulatory compliance support when you use a value-added reseller. They can do systems integration and customization.

I mention that one specifically because there was a memo coming out of the Pentagon just over a year ago that talked about the need to move systems integration into the civil service as a core competency. I don’t think they’ve gotten super far on that. I do think there is a real business case to be made to actually outsource systems integration to companies. Value-added resellers are part of that ecosystem that can offer the systems integration and the customization piece.

Sam: You would need really high technical expertise to be able to do that within government because the components of the system are changing all the time.

Stephanie: You do need to stay up to date. Not only that, but you have to have that agility to be able to go out into the marketplace, test things out, and bring the best solutions back to the job that you’re doing. I’m not sure currently that the government is structured to have that level of agility and flexibility within the civil service to go ahead and do that. I’m not saying they couldn’t get there; I’m just saying there’s a business case to be made for outsourcing that.

Value-added resellers can do that. They can also do some risk management and cybersecurity elements, and they provide life-cycle support. When we were talking to the government about what the value is that value-added resellers bring, and why they deserve more than a couple of percentage points of a markup, it’s because they bring these additional capabilities to the table, and it shifts some of the risk to the company.

I’ve mentioned a few times now this fixed-price executive order, and I think your listeners probably know that when you have a fixed-price contract, a lot of risk gets shifted to the contractor because they are tied to that price that they’ve negotiated. They don’t get reimbursed for additional costs that they might incur due to inflation or supply chain disruptions. I like to couch this value-added reseller conversation in a risk basis because you’re outsourcing some of the risk there.

Mitigating Vendor Lock-In Risks

Sam: That makes sense that now the contractor has to take all the risk. That’s the preference for a fixed price, and that’s why that executive order came out a couple of weeks ago.

One of the arguments against OneGov that I’ve heard—and I think it might have come up on this show—is that in negotiating these steep discounts, there could be vendor lock-in for the government. You’re basically having this OEM buy-in early, but then the government becomes dependent on that OEM once they are integrated into all the systems. Do you have that fear at PSC? Is this billion dollars going to continue to build on itself, or could you actually get some of that clawed back on the back end due to lock-in?

Stephanie: I do wonder if you could get some clawed back. I wonder also about the terms of these agreements: how long are they, and when do they have a little bit of flexibility to terminate and then renegotiate? From my understanding of some of these agreements, what I’ve been told is that they might have offered a 70% to 90% discount in year one, but not in the out-years. So then the question becomes: what are the long-term cost savings, and do you smooth out that discount as a company over the course of the entire agreement? If I were the company, I would try to do that, but I’m not sure what’s going on with the deal teams that are creating these on the government side.

Sam: Yeah. Well, $1.1 billion is a big splash in just a year. That’s a big amount of money.

Anticipating the Revolutionary FAR Overhaul Proposed Rules

Sam: You mentioned the FAR Council, having them at the conference, so you may be more in tune with the FAR overhaul process than others just hearing freshly from the FAR Council principals. We’re in a state right now where class deviations are out. They’ve been adopted by pretty much every agency, but we’re still waiting on the proposed rules to come out. At some point, there was a lot of talk they would come out in April. We’re now toward the end of May, so we are probably looking at June, maybe even later. They’re on the OIRA list right now. There’s speculation that the proposed rules might be different from the class deviations, which were essentially what was posted on the website. What do you expect to see from the proposed rules?

Stephanie: I’m going to be honest with you, Sam, I hope the proposed rules are different from the class deviations. It’s not because the class deviations are bad in any way, shape, or form. It’s the fact that there were comments submitted from industry and the broader public on those class deviations, and I understand that the FAR Council and others are incorporating some of that feedback. So I do hope that the proposed rules are not exactly the same as the class deviations.

But that does create an issue, right? Because you’ve got some legacy clauses—old FAR clauses—in existing contracts. You’ve got these class deviations in existing contracts, and you’re going to have new clauses incorporated into contracts. This is what some of the government folks have been calling the “messy middle”. How do you deal with legacy clauses, class deviations, and new FAR clauses going forward? It is going to be messy. It’s going to cost a lot to change some of these. On the contractor side, you’re going to have a lot of attorney costs—general counsel, outside counsel, et cetera—to help you understand, accept these new clauses into your contracts, and then comply both with legacy and new clauses.

There was a joke that the ones who are really benefiting from this FAR overhaul are the attorneys. I would say all of us are benefiting in the end, but we would really like to see these proposed rules come out. Just like you, I heard they were coming out. I was told it wasn’t going to be a holiday present, that it was going to come out in January, then it was going to come out in February, and now we’re marching towards the middle of the year. But I have confidence that they’ll clear OIRA, and then we’ll start to see them. Some, of course, will impact small businesses more than others, so I’m looking forward to seeing those.

Sam: In defense of the FAR drafting teams—because I was on a FAR drafting team—these things take time to write, especially if you have industry comments that address particular areas. These FAR drafting teams have people from many agencies. Definitely the FAR Council agencies, but the SBA is involved, and a lot of civilian agencies are involved. So you have different views on that, and you have to figure out where you’re going to come out, and handle people who dissent from the majority view on how it comes out. It takes a while to go through, especially when you have comments, to get the language right.

Stephanie: The adjudication process is always lengthy, and so I have a lot of sympathy. Having been a government civil servant myself, I understand how long these processes take. This is not an indictment of how long it’s taking; it’s just that I’m very eager to see what the FAR Council produces. If the product at the end of the day is better than it was because of this process, and I think it will be, take all the time you need.

I do think, though, when you talk about whether this is actually a revolutionary initiative, it is. But I also think a lot has been pushed into the companion guides, et cetera—the ecosystem that crops up around this FAR overhaul.

We mentioned earlier that sometimes you’ve got defense contractors who are now also in the Homeland Security space, or the VA, or HHS, et cetera, and they all have their own supplements. One of the issues that we’ve highlighted several times with the FAR Council—and they’re aware of it, it’s just going to be hard to deal with this piece—is that you’ve got the FAR proposed rules coming out, and then you’ve also got changes underway regarding each of the agency supplements. Each agency has its own team looking at the base FAR language and then coming up with its own supplement language. They may interpret something differently than their colleagues down the street in a different agency might.

If you are a contractor, and now you have a DFARS clause because you’re a defense contractor, and you also have the FAR supplement for HHS because you’re an HHS contractor, and they’re just slightly different, this is a compliance burden. Again, it’s the messy middle. It’s not just about the FAR overhaul; it’s about all of the supplements as well. The first thing out of the gate needs to be these proposed rules for the FAR itself, and then hopefully we can have a conversation about aligning all its supplements.

Critical FAR Parts for Small Businesses to Track

Sam: What about from the small business point of view? What sections of the FAR or potential changes should they be paying attention to?

Stephanie: It won’t come as a surprise: FAR Part 19, obviously, and any changes in that. Aside from the normal sorts of things to watch about the Rule of Two and how multiple-award contracts are being treated at the contract level and the task order level, one of the FAR parts that we are tracking very, very closely is actually FAR Part 10. One of the first class deviations that came out was, “let’s take a look at the market research piece,” because that is critical to determining whether or not the Rule of Two applies.

The market research phase is going to be critical. Documentation and transparency are needed to make sure we know what efforts the government undertook for market research in order to make a determination about which kind of acquisition approach they’re going to take. I think that is going to be critical.

We are also looking at FAR Part 12, which is commercial. We’re going to take a look at the simplified commercial buys and streamlined procurement procedures. We also look at FAR Part 33, which covers protests, suspensions, debarments, and all of that as a result of protest actions. Those are the ones that we’re watching out for. From a small business perspective, they have very specific concerns in our community about market research, commercial acquisition, and protests.

Sam: Market research was a big one. It’s like they took every mention of small business out of Part 10. It seemed like it was a find-and-delete exercise. Maybe there will be enough comments to put one or two of them back in.

Navigating the Fixed-Price Contract Mandate

Sam: Let’s go back to that executive order on fixed-price contracts. One thing that made a splash when it came out is this requirement that the agencies go back and look at their top 10 non-fixed-price contracts within 90 days to review them and potentially modify them into a fixed price. Even going forward, agencies have to award fixed-price contracts unless there’s a justification. What do small businesses do now in this new fixed-price regime? How does this impact them, and what sort of adjustments can they make?

Stephanie: Let’s unpack the top 10 requirement first. The executive order—which, for those of you following at home, I had the number here somewhere but now I don’t—did ask all of the agencies, presumably defined in Title 10 of the U.S. Code, to look at their top 10 non-fixed-price contracts by contract value. They have to modify or restructure them.

When I was talking to small businesses about it, I said, “Listen, for the top 10, chances are it’s not going to be a small business contract. However, it might be a subcontract or have some other relationship that is impacted by that contract review. So watch it very, very carefully.”

It’s also about how you define an agency, or how the agencies are going to implement guidance that presumably is coming out from OMB. Here, I believe the guidance is coming out on June 14th, if I have my math correct—45 days after the EO was signed. Is it going to be the top 10 contracts from each of the military services, the defense agencies, the operating divisions over at HHS, or the components of DHS? Is it going to mean more than just the top 10 at the department or agency level? Is it going to be the top 10 for everybody? Let’s take a look at that, because small businesses might be more impacted by that approach than the previously mentioned one.

In addition, what I found interesting is that this is going to require the potentially overworked contracting officer workforce to provide written justification for every non-fixed-price contract. According to FAR Part 16, a fixed-price contract could be one of five or six different kinds; it’s not just firm-fixed-price. It could be fixed-price ceiling, or fixed-price with economic price adjustments, et cetera. In talking to the FAR Council principals, they said they could have hybrid contracts, but there should be a fixed-price element somewhere. If it’s not the master contract, then maybe some large portion of it needs to be fixed-price.

But that written justification requirement is going to be a burden on that contracting officer. If it goes above certain thresholds, not only does the contracting officer have to provide written justification to the agency head, but the agency head has to approve it. Those thresholds, for the good of your audience, are $100 million at the Department of Defense, $35 million at NASA, $25 million at DHS, and $10 million for any other agency. The agency head, or whoever they designate—and the EO is clear that it has to be a political appointee—has to approve it above those thresholds. That is going to have a chilling effect on anything other than fixed-price contracts.

Sam: It’ll take weeks.

Stephanie: It’s going to be huge. As we move forward, they now have to report on their progress on all of this. The reporting requirements are due—the first one is due July 29th, if my math is correct, 90 days after the EO. Please don’t check me, but it should be July 29th.

Moving forward, I think it’s going to be interesting. I would note, however, there is something in the FAR already that expresses a preference for firm-fixed-price or fixed-price contracts. This is not a new movement, but it’s that risk conversation that we need to have. If you’re going to have a fixed-price contract, you’re asking the contractor to accept more of the risk, whether it’s inflation risk or supply chain disruptions. The cost might actually go up, and the government should understand that fixed-price contracts are not necessarily the cheapest kind of contract you can have. It is shifting the risk, but it comes at a cost. That’s a conversation I think we need to have more candidly and openly, with transparency. Much of industry is happy to do fixed-price contracts; they’ve been around since time immemorial, and they are used to it, but it’s not necessarily going to be the cheapest option.

Risk Tolerance and Economic Price Adjustments (EPA)

Sam: The concern for an individual small business might be, though, that some of that gets washed away in competition. You see some of these small business competitions where there are hundreds of companies coming in, and they’re going to have different risk tolerance levels. It’ll end up being the company most willing to take on the risk that wins, rather than the company that might provide the best value.

Stephanie: If you have a contract with the government—say it’s a long-term contract—what is the likelihood that you’re going to have a clearly defined statement of objectives or requirements on day one that is not going to change over the life of a 5- or 10-year contract? A lot of the costs come into play when there is a change order. How is this going to be addressed? That also comes into how willing contractors are to work on the fly, taking that risk initially, knowing that they’re going to have a whole bunch of change orders that the government is going to pay for later anyway. That’s part of the calculation as well.

Sam: One other item on my mind is the rising cost of everything. I’m headed to California this summer to drive from Yosemite to LA, where gas might be $7 a gallon when I’m up there. Small businesses are going to take some risks there as well if they enter into a long-term contract. Is there anything they can do in that scenario?

Stephanie: I’m encouraging folks to look at FAR Part 16 as currently formulated, and as it comes out in the new FAR overhaul. Do not conflate this executive order and call it the “firm-fixed-price executive order.” It’s not. It’s a fixed-price executive order. Avail yourself and talk to your contracting officer, or whoever is putting out the solicitation, about EPA clauses—economic price adjustments.

There are certain departments and agencies that are really used to having EPAs. The Navy, in shipbuilding, is very used to having EPA clauses as part of their contracts because the window for building an aircraft carrier, destroyer, or frigate is years long. They have built-in EPA clauses to adjust for inflation. I’m encouraging people to have conversations with their customers about whether a contract could be a fixed price with an EPA built in, so that you can address things like the rising price of fuel. Fuel is a huge issue. Coming from a Pentagon background, I know their entire budget display devotes significant attention to petroleum, oil, and lubricants. They have to plan for these price fluctuations over five years or longer.

Smaller agencies don’t have a FYDP—the Future Years Defense Program—which looks five years out. They may not realize that if we have 2% inflation now, but it goes up to 7% like it did a couple of years ago, you’re going to need an EPA clause in that contract, which is allowable under FAR Part 16.

Sam: Some other areas where that might be useful include technology; you can’t find a Mac Mini right now because of rising memory prices and graphic processors. I think the challenge from the agency point of view is how they obligate the funds for civilian agencies. Can they find the funds to obligate on an EPA, and how do they calculate it?

Stephanie: How do they calculate it, and how do they build it in? It’s going to really impact these multi-year contracts. If it is a short-term, one-year contract, there’s less of a risk of inflation going haywire. But over the longer term, you’re not entirely sure what it’s going to do. Historically, we’ve been between a 2% and 3% rate of inflation, but a few years ago it hit people like a load of bricks to realize it was at 6% to 7%. At that time, GSA started asking if they could start talking about EPA clauses and allowing companies to come and request equitable adjustments. As we have this conversation about fixed-price contracts—not firm-fixed-price, but fixed-price—let’s discuss some of the flexibilities that you can incorporate into those agreements.

Sam: So, not firm-fixed-price, but potentially leading to a fixed price with economic price adjustments.

Stephanie: As an option.

Codifying the Rule of Two at the Task Order Level

Sam: We’re talking today on the same week that the House Small Business Committee held a markup. On May 20th, the House Small Business Committee unanimously passed H.R. 2804, which was the Protecting Small Business Competitions Act. You mentioned this earlier, that it codifies the Rule of Two, but the markup added a major amendment exempting task and delivery orders. What is your view on the Rule of Two, its application to orders, and how this impacts small businesses looking at big multi-agency vehicles or IDIQ contracts?

Stephanie: The Rule of Two matters because it is widely viewed as essential to maintaining a competitive marketplace that allows for innovation, particularly among small businesses, and to preserving a meaningful ecosystem of set-asides.

The FAR overhaul took a similar approach of allowing Rule of Two certification at the contract level so you then didn’t have to recertify your small business eligibility for each individual task order. That is a common-sense thing; if you’re already on the master vehicle, why would you have to redo it for every task order? My sense is that amendment took the same approach: if you can do it at the master contract level, why do it at the task order level? I do think this is opening folks up for protests, and we will see how that is actualized. Of course, now this bill has to have a companion in the Senate to see what happens, or it can be folded into the NDAA. That’s something that we’re watching very closely.

Sam: So it really puts the Rule of Two in the same place that it is for the FAR overhaul, potentially making it easier to integrate into an NDAA as you go down the line.

Stephanie: What I appreciate very much about the small business committees on either side of the Hill is that they really do care about the community. Whether looking at changes from the 8(a) program audit, women-owned small businesses, or any of the others, we are looking at a congressional community that cares about small businesses. The idea of putting it into statute is not a bad one, considering that the FAR overhaul is trying to strip the FAR down to what is statutorily required. Having these conversations is helpful, and I’m glad they had that markup to show how much they care about the community.

We had Small Business Week not that long ago in May, and I would like to see more statements of clear administration policy on how they would like the treatment of small businesses to proceed going forward. It could help. I would also like to see dollars flowing to small businesses—not just rhetoric, but actual contracts going to them.

Sam: Yes. GSA has been very good about putting out the pools, and Oasis+ seems to be heating up. Polaris has been restarted too. Small businesses are getting work through those vehicles now, but you’re right that during Small Business Week, we did not hear very much about contracting. It would be nice to get more of an emphasis on small business contractors from the White House.

Tracking Federal Market Forecasts and Scorecards

Sam: What else on Capitol Hill might small businesses want to track besides the Rule of Two? Is there anything else from this markup or anything else that you’re looking at for the NDAA?

Stephanie: For the NDAA, it’s the whole host of issues. I would also mention that for six years straight, PSC put out a scorecard for federal market forecasts. We would look at the web-based procurement forecasts for all of these departments and agencies, and evaluate whether they were easily accessible, whether it was clear who to contact for certain solicitations, et cetera.

We didn’t have our scorecard last year in 2025 because a lot of the websites were paused or taken down due to DOGE and the changes underway. We are now taking a fresh look at what those scorecards and web-based forecasts will look like. A lot of times, those were required to be compiled by the OSDBUs. With shrinking OSDBUs, it’s not clear who might have the responsibility to put out these web-based forecasts going forward, but hopefully someone will.

Going forward, we want to work very closely with the White House and the Office of Federal Procurement Policy regarding what those forecasts look like, what the small business opportunities are, and what requirements are coming down the pipe for joint ventures or mentor-protege relationships. As we move forward, it’ll be critical to see what the next generation of federal contracting looks like given all of the change that we’ve seen in the last 15 months, and how it will shape up.

The White House is very interested in attracting more new entrants to the federal marketplace. One way to do that is to have a reliable, accurate, and accessible web-based forecast so companies thinking about doing work with the government can see what they might qualify for and what they might want to do. Working with OFPP to increase that industrial base to support federal missions is critical. We’re part of the conversation across the board, and those conversations are going to continue well into the future.

Conclusion: The Upcoming Federal Acquisition Conference

Sam: I love scorecards. I’m going to venture a prediction that your next forecast scorecard will have a different winner than your last forecast scorecard. We’ll see what happens.

Stephanie: Years ago, USAID was the winner, and considering that agency has been largely dismantled, you’re absolutely right that we’re going to have different folks going forward. But we’re also changing our approach. Our next forecast will come out in 2027, but we’re announcing that approach next month at our Federal Acquisition Conference, which will be on June 25th. I’m excited to get this ball rolling again because as part of the federal ecosystem, we’ve got military personnel, civil servants, and the federal contractor, and it is critical that all three of those function together.

Sam: All right. The next conference is right around the corner. Stephanie, how do people find you, and how do they learn more about PSC?

Stephanie: Thanks for asking. We are at pscouncil.org. We are located in Arlington, so we’re local. We have conferences; please check out our website at pscouncil.org. If you are interested in membership, emailing membership@pscouncil.org will take you directly to our VP in charge of membership, Matt Busby, and his team. You can also reach me personally, as well as the policy team, at policy@pscouncil.org.

Sam: Stephanie Kostro, thanks so much for being on the show.

Stephanie: Thanks, Sam.

Sam: Thanks, everybody.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

Why Congress wants to kill the women-owned small business program

Sam Le — Wed, 20 May 2026 12:20:37 GMT

Photo by Connor Gan on Unsplash

Nancy Mace was the first Republican woman elected to the U.S. Congress from South Carolina. She got to Washington by starting her own public-relations business, then getting into political journalism. Now, from inside the institution, Mace is reporting on the misogyny in Congress and its Republican leadership.

“Women will never be taken seriously until leadership decides to take us seriously, and I’m no longer holding my breath,” Mace wrote in The New York Times in December.

Since then, Mace was the first legislator to call on Eric Swalwell to resign over sexual misconduct allegations. Last week, CNN reported that Mace had uncovered over $500,000 in Congressional sexual harassment settlements, paid for with taxpayer dollars.

The misogynists in Congress are now coming for government contractors. There are 22,486 contractors in SBA’s women-owned small-business program. Now opponents in Congress want to eliminate the program entirely. The bill—the Ending Discrimination in Government Contracting bill—would even stop SBA’s reporting on contracts to women-owned small businesses.1

So far, the bill hasn’t gained much traction. The only Senate sponsor is Mike Lee, the senator from Utah who single-handedly blocked creation of a Smithsonian women’s museum. On the House side, the lone sponsor is Wisconsin Representative Glenn Grothman.

Grothman is an ardent opponent of Federal programs for women, advocating for a “way back to where America was in the 1960s.” He opposes women’s equal pay because “you could argue that money is more important for men.”

These aren’t legislators who just want to level the playing field between women-owned small businesses and other contractors. They don’t want women-owned small businesses to exist at all. And they’re using the current anti-DEI fervor to push an anti-women agenda. That’s the Congress that Nancy Mace warned us about.

How the WOSB program differs from DEI

The organization behind the Ending Discrimination bill is the Pacific Legal Foundation. PLF discussed its reasoning in National Review last week: “The same constitutional principle that forbids racial preferences in college admissions forbids them in awarding a bridge construction contract,” wrote Maddie Salamone, PLF policy counsel. That “constitutional principle” refers to the Supreme Court’s decision in Students for Fair Admissions. The problem with PLF’s reasoning, though, is that the decision only addressed racial preferences. Sex-based programs, like the WOSB program, haven’t been struck down.

PLF is out on its own. When the Trump Administration banned “DEI discrimination” by Executive Order, it only banned “racially discriminatory DEI activities.” The White House hasn’t come for the WOSB program. In fact, SBA Administrator Kelly Loeffler defended the importance of women-owned businesses during her confirmation hearing:

Senator Markey. Do you believe supporting women-owned businesses is DEI?

    Senator Loeffler. Senator, I’ve never said that. Senator, I can assure you that I will uphold the law. I was a women-owned business. I had a majority, minority women-owned business for a decade. I understand the importance of it.

The PLF article also ignores that the WOSB program is uniquely designed to survive Constitutional challenges. The drafters of the WOSB program learned from affirmative-action rulings from the late 1990s, like Adarand v. Pena. The WOSB program operates only in specific industries where SBA has found women-owned small businesses to be “substantially underrepresented.” (Set-asides for economically disadvantaged women-owned small businesses are authorized for industries where WOSBs are merely “underrepresented.” Those set-asides are rare.)

There are no WOSB set-asides for interior design, for example, because SBA hasn’t deemed that industry to be one where women-owned businesses are underrepresented. Same for plumbers, electricians, and dentists. WOSBs aren’t underrepresented in those industries either.

SBA updates the industry lists every five years. The most recent list from 2022 included 733 NAICS codes. That means almost 300 industries are excluded from the program.

The Federal government has achieved the goal of awarding 5% of contracting dollars to women-owned small businesses only twice: in 2015 and 2019. (The Ending Discrimination bill would end that goal.) The number of WOSB set-asides is far fewer than the set-asides in SBA’s other socioeconomic programs. In 2025, there were only 566 new set-aside awards using women-owned small-business set-asides. All the other programs were in the thousands.

Based on this data, it seems like agencies look at the WOSB program last. That might be because SBA has had a long backlog of certification applications. So the number of certified WOSBs is about a third fewer than certified service-disabled veteran-owned firms. In the draft House Appropriations report on the FY27 appropriations bill, the committee expresses “concern” over “a months-long backlog of applications” for WOSB certification.

It’s also because of the industry restriction, though. The FAR requires contracting officers to check SBA’s list to see whether the contract is in an authorized industry. That’s an extra step that isn’t required for the other programs.

Additionally, in the past WOSB set-asides haven’t been conducted on multi-agency contracts. The 8(a) program has 8(a) STARS, and the service-disabled veteran program has VETS. Both are huge governmentwide contracts that are available to all agencies. But there isn’t a governmentwide contract for WOSBs. That is changing, though. Both the OASIS+ and Polaris multi-agency contracts have WOSB pools.

The low number of WOSB set-asides also partially explains why the program hasn’t been reviewed—let alone struck down—by the courts. There just aren’t enough contracts to draw attention from conservative groups, other than PLF. And it’s hard to find a male-owned business that has standing to bring a lawsuit based on losing a contract.

The attack on a growing program

This existential threat comes just as the WOSB program is having its best year ever. The program is on pace to award the most set-asides in its history. Agencies are moving away from 8(a) sole-source awards, and the women-owned program is the biggest beneficiary. WOSB set-asides are up 60% from last year to this point, the largest increase for any set-aside program:

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Even with that 60% increase, the number of WOSB set-asides (213) to date is still a small fraction of service-disabled veteran-owned set-asides (1,889) or small business set-asides (7,558).

And remember that WOSB set-asides are only authorized in NAICS codes where women-owned small businesses are substantially underrepresented. Service-disabled veteran-owned set-asides, on the other hand, have no such restriction. Of the 32,000 certified service-disabled veteran-owned firms, only 15% identify as women-owned. So, as the SDVO continues to outpace the women-owned program, women-owned firms become even more underrepresented.

On a broad basis, you can see the underrepresentation in the headline numbers. Women own 40% of U.S. businesses, but the Federal contracting goal is 5%. Even then, the government hasn’t met the 5% goal in six years.

That analysis compares the share of businesses to the share of dollars, which isn’t really fair. A fair assessment is better. Women-owned small businesses represented 20% of the small businesses that won government contracts in 2025. That percentage—20% to women—has gone virtually unchanged in 15 years. But it’s still half of 40%.

So, if women own about half the share of small-business contractors as they do of businesses generally, why do members of Congress want to eliminate the WOSB contracting program?

It probably won’t pass—at least this year

Marjorie Taylor Greene, the former MAGA Republican from Georgia, delivered a stark assessment of Congressional leadership on her way out. “They want women just to go along with whatever they’re doing and basically to stand there, smile and clap with approval, whereas they just have their good old boys club,” Greene told the Atlanta Journal-Constitution.

That “old boys club” oversaw a 119th Congress that, for the first time since 2016, had fewer women than the Congress before it.

To me, that explains why the Ending Discrimination bill would kill the WOSB program. Research from Jonathan Brogaard of the University of Utah closely links the election of female legislators to new contracts for women-owned small businesses. “Female political representation causes an increase in government contracts allocated to WOBs,” Brogaard and his collaborators concluded.

As Congress has become more male—both in its full composition and at the leadership levels—it appears more willing to lump WOSB preferences into the broad category of “discrimination.” Senator Lee and Representative Grothman introduced a bill together two years ago, the Ending Racism in Government Contracting bill. But it didn’t have WOSB in it. The Ending Racism bill would have removed racial preferences from the 8(a) program. It gained eight cosponsors in the House. It wouldn’t have touched the WOSB program.

Now in 2026, with PLF’s support, Lee and Grothman added the elimination of the WOSB program and renamed the bill “Ending Discrimination.” They timed the bill to be introduced in the midterm election cycle. Evidently, they thought it might find support with voters. There’s some support for that. I talked with Jayna Rust about how even Democratic Party voters disagree with their party’s stance on government-contracting preferences.

But that voter preference was specifically about contracting programs based on race. Programs based on sex haven’t faced the same backlash. Part of the reason for that is, in other contexts, the preference works in the opposite direction. Colleges heavily recruit men, who apply and enroll at lower rates than women. Colleges would “skew to 65 percent female overnight,” if those programs ended, said Ted Mitchell of the American Council of Education, in an interview with the Washington Post.

It’s hard for me to see how, in a midterm election year, killing a program with just 500 set-aside contracts a year—less than 1% of all contracts—could be a winning issue. Small business owners tend to lean Republican. Why antagonize 40% of business owners over 1% of contracts?

For that reason, I don’t see the Ending Discrimination bill passing this year. It hasn’t gained any cosponsors. The bill wasn’t referred to the Senate Small Business Committee and hasn’t been docketed for a hearing.

Legislators who support small businesses would be better off spending their time on the Protecting Small Business Competitions Act. That bill would preserve the small-business Rule of Two. The Rule of Two requires agencies to set aside a contract for small businesses if at least two are competitive. The bill could be marked up by the House Small Business Committee as early as today.

Next year is not an election year, though. And PLF appears bent on taking down the WOSB program. So expect the bill to come up again. Nancy Mace, a former WOSB owner herself, is running for South Carolina governor, so she won’t be in Congress anymore. The future of the WOSB program will be up to the “old boys club” or the legislators who replace them.

This article is for informational purposes only and does not constitute legal advice.

You might have heard that the same bill also would eliminate the SBA’s 8(a) program, but that’s not exactly true. I’m not here to defend the bill, but my read of it and its 2024 predecessor is that they delete the purpose of 8(a) while keeping the 8(a) contracting authorities intact. What the bill removes is the requirement that an 8(a) firm be owned by socially and economically disadvantaged individuals, or an Indian tribe, Alaska Native Corporation, or Native Hawaiian Organization. That would presumably leave the program open to small businesses regardless of their owners’ designations. It’s not clear how SBA would then select businesses for the program, though.

From the Front Lines: Bid Protests and Beyond (with Scott Flesch)

Sam Le — Tue, 12 May 2026 09:01:44 GMT

I sat down last week with Scott Flesch, probably the most experienced bid-protest lawyer ever. Scott was the Chief Trial Attorney for the Army, where he worked on over 2,000 bid protests. He is now a member at Miller & Chevalier, a D.C. law firm. Our conversation started with the most recent Executive Order mandating fixed price contracting, and moved into the risks that contractors face from the FAR’s new class deviations implementing the DEI Executive Order. Scott also discussed the importance of intervening in protests, the differences between GAO and the Court of Federal Claims, and how small-business issues have come up in some recent cases.

Links discussed

Scott Flesch bio (Miller & Chevalier)

Intervention Download: Why Offerors Must Prepare for Bid Protests

Executive Order: Promoting Efficiency, Accountability, and Performance in Federal Contracting

FAR Council Memo: Agency Implementation of Executive Order 14398, Addressing DEI Discrimination by Federal Contractors

Life Sciences Logistics LLC v. United States (Court of Appeals for the Federal Circuit)

Global Connections to Employment, Inc. v. United States (Court of Federal Claims)

Noblis MSD, LLC v. United States (Court of Federal Claims)

Revelations Counseling and Consulting LLC v. United States (Court of Federal Claims)

CSlope Solutions LLC (GAO)

Timestamps

Introduction and the Value of the ABA Public Contract Law Section 00:00:00

The Shift Toward Fixed-Price Contracts 00:03:20

Dealing with Ambiguous Requirements and Bid Protests 00:09:58

Navigating the DEI Executive Order and False Claims Act Risks 00:14:37

Understanding CICA Stays at the GAO 00:23:27

CICA Stay Overrides 00:29:33

Procedures at the Court of Federal Claims 00:38:28

The Role of Intervenor’s Counsel in Bid Protests 00:41:12

The Noblis Case and Pleading for Injunctive Relief 00:50:32

Choosing Between the GAO and the Court of Federal Claims 00:53:21

The Revelations Case and Limitations on Subcontracting 01:00:44

The Certificate of Competency (COC) Process 01:05:23

Conclusion and Contact Information 01:10:20

Introduction and the Value of the ABA Public Contract Law Section

Sam: Welcome back to GovCon Intelligence. My guest today is Scott Flesch. Scott, welcome to the program.

Scott: Sam, it’s a pleasure to be here. Good to actually sit down with a friend. I do consider Sam a friend. I knew him when he was in the Small Business Administration when I was in the Army. You’ll hear a little bit about that. But it’s personally rewarding and professionally rewarding to keep in touch with Sam. He is brilliant on small business issues, and I have gone to him several times.

Sam: That’s very nice of you. Yes, we’ve had great collaborations. Scott is a member at Miller & Chevalier in Washington, D.C. He’s a longtime government contracts litigator—one of the best, if not the best, I would say. Former bid protest chief and then chief trial attorney for the Army. He advised the Army and several DOD contracting entities on contract matters, policy, and litigation. Scott was a former adjunct professor at Catholic University’s Columbus School of Law. He’s a U.S. Army veteran who served on active duty in a reserve capacity and as a government civilian attorney for the Army for over 25 years. And you’re now the current secretary of the Public Contract Law Section for the American Bar Association, and that means you’re going to be president soon, right?

Scott: A couple of years. My sentence is over in about four years.

Sam: How’s it looking so far?

Scott: Oh, it’s fun. For those folks that know a little bit about the American Bar Association, it is a valued asset. It is a collegial space for attorneys, especially in the procurement sectors, to get together, compare ideas, utilize each other for expertise referrals at times, but just to comfortably get together and talk about the hard issues. And this past year has been chock-full of significant changes that really drive the conversation for us to help our clients, but also compare ideas. It’s definitely like a box of chocolates every week. And the one thing that our clients do want is consistency in our advice. The problem is keeping tabs on all the changes in order to give them competent advice of the day and how that translates into their long-term strategic plans, their budgeting, and their business development goals. And we’re going to talk a little bit about an executive order and a FAR deviation that could impact whether or not they choose to get into the federal side or continue to, because it is challenging.

It can also be rewarding. Government contracts help serve a number of purposes. I’ll get on my high horse a little bit about just federal procurement law. But you want to distribute wealth, and that is federal government contracts. The wealth is distributed not only to larger businesses, but small. And the more diverse, in fact, that the contractor base is, the healthier the economy is. The healthier the industrial base is, the more capability it gives to the Department of War or Department of Defense. And so you do want to encourage businesses to participate in the federal procurement system, and you do that through transparency, through fairness, and predictability, and that leads to increased competition, lower prices, and better quality. It’s when that entire process gets disrupted that lawyers, unfortunately, have to get involved for these clients. They have to spend money at times, and it can chill their interest in proceeding and taking on risk. So that’s going to permeate some of the discussion today, I think.

The Shift Toward Fixed-Price Contracts

Sam: That’s a really good and important point about the business aspects of government contracting. There are some companies that are 100 percent government contracting, and they know the game very well. But what the government really wants are companies that might be in the commercial space and coming into government and finding a welcoming environment there. So on that note, we saw an executive order come out at the end of last week—I think it might’ve been on Friday of last week—about mandating fixed-price contracts and preferencing fixed-price contracts. Agencies have to write a justification if they move away from that, either to time and materials, labor hour, or cost reimbursement. What are the legal issues in that executive order? And then how do you think it’ll affect this welcoming environment for commercial contractors?

Scott: I think the best term of art I’ve heard, and I use too, is that it was a little bit of a nothing burger. The federal government has always consistently preferred fixed-price contracting, and that is an allocation of risk. On a firm-fixed-price contract, the government is able to offload substantially the amount of risk towards performance and cost to a contractor. At the same time, a contractor doesn’t want to absorb all the risk, and they like those sorts of contracts at times, if in fact the requirement and the facts call for it, to structure it to shift that risk back to the government.

This is a criticism of mostly cost reimbursement type contracts. Cost contracts are usually very large in dollars and in complexity. But the reason it normally is a cost contract is because it’s hard to define the exact requirements as well as all those factors that are influencing the requirement and the ability to perform. Think war zone, contingency operations, research and development. And so in order to incentivize those contractors from getting into that space and participating and making the investment, the government takes on a little more risk on cost contracts. They’re going to pay all reasonable, allocable, allowable costs, plus a fee. And so the government usually pays more and takes on more risk. The contractor’s risk is minimized.

But the government’s trying to get away from that because these contracts are extremely costly and burdensome to administer because there’s a lot of cost accounting that goes into them. They take years to close out. They’re complex. And that’s why you don’t see a lot of small businesses in the cost space—because they don’t have the infrastructure for it. They don’t have certified cost and pricing teams and auditors, and they don’t want to be in that business. They want to be more commercial-like.

And so this is consistent. It’s a nothing burger really, because the government’s just reinforcing the preference towards fixed-price contracts. That’s where commercial vendors reside mostly. And the risk is on the contractor to keep quality up but prices down. That’s what the government wants. And they don’t have to take on all the overhead of cost and accounting teams and certified pricing and costing data. It keeps it simple.

However, there’s another piece of that preference to fixed-price contracts in the executive order that I don’t know if it’s been fully thought through yet, and we’re going to see when the DFARS provision gets issued how it’s going to be implemented, and that is firm-fixed-price contracts or performance-based metrics type contracts.

Sam: What does that mean?

Scott: Good question. We’re going to see in the DFARS provision. But what it normally means—FAR Part 6 lists out all these different types of contracts. Firm-fixed-price is in there, cost is in there, but also incentive-based contracts. Even incentive-based firm-fixed-price contracts. And what it is, is just you have the firm-fixed-price, but you add another element to it that if a contractor—it could be goals, performance; it’s very subjective, but you lay that out in the actual contract, in the agreement with the parties—achieves those milestones, they’re owed an additional fee.

With that comes surveillance, potentially submission of a request for the incentive fee, proof that you’ve earned it, and possibly a fight and dispute. And that can be quarterly, that could be annually. It’s dependent on how the contract is structured. So if you really want to get away from complex contracting and go back to firm-fixed-price, but then you have this other potential of performance-based metrics type contracts, it’s not really simplifying at all.

Another example is award fee type contracts. Award fees, those are, again, you’ve got a fixed price that a company will perform for, but then the ability to effectively earn more if they achieve certain metrics. There’s an award fee plan. There’s administering that plan. There’s submission that I achieved these goals and a fight over that. And again, it could be quarterly or whatever the contract is agreed to. That is very administratively burdensome and not simplified.

I understand shifting the risk to firm-fixed-price contracts. The administration is all about making contracts more commercial-like, and that is a good goal. You want to make the contracting process easy and familiar, especially to small companies and vendors. You want them to participate to, again, control costs and improve competition. But at the same time, if the company’s risk is higher because they’re not sure they’re going to actually meet those performance-based metrics and take a loss, it could be a disincentive for some, it could be an incentive for others, but it’s not simplified.

Sam: Yeah. When I was in government, we didn’t do many incentive-based contracts because you’re working off of annual appropriations, and you have to obligate that at the time that you award the contract. So when you get down to the point of providing that incentive, the government has a big encouragement to provide the incentive, because otherwise they can’t take it back. It’s not like a private company where you can take the money back and shift it over to another contract. You’ve already obligated that ahead of time. So I wonder if they solve that issue as they come through, that if you deny them the incentive, what are you going to do with that money? You can’t go back and obligate it on another contract.

Scott: The interpretation of fiscal rules these days, we know, are under stress, for lack of a better term. But you’re right. Those types of contracts, they do have to obligate, but they’re always going to have it being subject to the availability of funds clause. And so a contractor is not going to go into that sort of contract knowing that all dollars will be available throughout the period of performance, and so it increases their risk.

Dealing with Ambiguous Requirements and Bid Protests

Sam: The other thought on fixed-price contracting, you mentioned this with the cost reimbursement, is for those cost reimbursement contracts, they’re not particularly well-defined. So if the government really is going to shift cost reimbursement to fixed-price or time and materials, labor hour to fixed-price, they have to define the requirements better than what they’ve been doing. And that’s difficult to do when you have a contracting workforce that has left because of DRP or has just undergone attrition. What is a contractor to do when it gets a fixed-price solicitation and doesn’t understand what the requirements are?

Scott: This is definitely a two-part problem. One is literally in the bidding stage, the formation of the contract. And we’ll talk about existing contracts that may be converted in a moment because that’s another issue. So at the formation stage, when a business is looking at a solicitation, it’s structured as a firm-fixed-price opportunity. And they’re reading the requirements and the statement of work, whatever it’s called. Agencies call them different things. But those are the requirements, right? It specifies literally what you have to do. It should tell you what the limitations are. It should say what the government’s expectations are as well.

And if there’s ambiguity in what the government’s even asking for, how do you price that? How do you build a team? How do you recruit personnel? How do you potentially get financing for it? Because some of these are privately financed, and companies may not have that kind of capital. And that is going to be difficult when you do have a lot of the infrastructure on the acquisition side that has eroded over the years, this year especially, and they’re not putting forth very clear, concise, measurable, and achievable requirements. Number one, it’s a disincentive for businesses to step in to the extent that maybe the government’s asking for too much and/or too much risk to be absorbed by a contractor.

Contractors these days should be very loath to just assume, “I’m going to make it up on the back end.” Especially if the requirements are crystal clear what they had to do. It’s that ambiguity that becomes a problem. If you don’t know what the government is actually asking for, what the expectations are, what you have to do to perform and succeed, you’ve got a couple of choices. You can take on that risk and assume you’re going to perform well and the government’s going to like it. Some businesses may assume that they’ll make it up through change orders and requests for equitable adjustment later if the government issues directions that change the requirement, but then you maybe have a fight over whether there’s a change.

But what you can do upfront, and what I advise businesses do all the time, is if there is a clear ambiguity, we call that a patent ambiguity. That is something that on the surface a reasonable contractor would see as a disconnect from the requirement, something that’s fuzzy, they can’t tell what it means. They have to, and should, take advantage of the bid protest process and issue an agency-level protest, a protest at the GAO, or you could go to the Court of Federal Claims. But you see a lot of solicitation challenges at the Government Accountability Office (GAO).

And the timing on that is very important. You’ve got to submit that protest, even just seeking clarity if the agency’s refusing to clarify via the Q&A system, or their response is just a disconnect from what the requirement actually says, which happens sometimes too. You’ve got to submit that protest before the deadline for receipt of bids and proposals. If you wait past that, you’re going to be untimely at the GAO, you’re going to be untimely at the agency, and you’re likely to be untimely at the Court of Federal Claims.

Sam: And we see that a lot with post-award protests too, where the GAO says, “Oh, you should have... This was a patent ambiguity. You should have protested it back before bids were due during the solicitation stage.”

Scott: Yeah. The only ambiguities that can be raised in a timely fashion at the GAO and the courts is a latent ambiguity, something you could not have reasonably anticipated until another issue pops up. The agency said something more. There’s a post-award direction that makes you say, “Wait a minute. This is different than what I understood, and I could not have reasonably anticipated the agency’s reasoning. They didn’t elaborate in a Q&A. They didn’t tell us otherwise. This has created what we see to be now an ambiguity in the solicitation that is latent, not patent.” I didn’t know, I didn’t have a reasonable expectation, or I could not reasonably see that there was vagueness or ambiguity in the solicitation terms. You can raise that, but you better raise it within 10 days of when you knew or should have known. Else you’re also going to be untimely at the GAO.

Navigating the DEI Executive Order and False Claims Act Risks

Sam: Speaking of ambiguities, I think there’s an ambiguity here in the executive order that came out on racial discrimination in government contracting. The deviation has now come out from the FAR Council. They did it in less than thirty days. They had thirty days to do it. They beat that, which was surprising. And then agencies presumably will start implementing that deviation into their contracts soon. And then they’re supposed to go back and modify previous contracts. There’s a whole schedule for that. But there’s this question, if you have this clause in your prime contract of what to do with subcontractors. So tell me a bit about that, about this reasonably knowable standard that they have for subcontractors, and what is a prime contractor expected to do to oversee its subcontractor’s compliance with that new FAR deviation clause?

Scott: I think this leads us to go back in time a little bit, about a month from now, roughly. On March 31st, 2026, President Trump issued a new diversity, equity, inclusion related executive order titled Addressing DEI Discrimination by Federal Contractors. This follows a number of other executive orders in play addressing what the government believes to be illegal DEI. This one clarified it a little bit more and talked about the illegal activity, as applied to contracts, which is racially discriminatory DEI activities in a very broad sense. But it does go further and define racial discriminatory DEI activities as disparate based on race or ethnicity in the recruitment, employment, meaning hire and promotions, contracting, program participation or allocation, or deployment of an entity’s resources.

It goes a little further to define program participation as membership or participation in, or access or admission to, training, mentoring or leadership development programs, educational opportunities, clubs, associations, or similar opportunities that are sponsored or established by the contractor or subcontractor. And so it raises a whole host of questions about, okay, we now have a definition, but that is extending to the company’s activities, programs, clubs, and associations. Okay, what does that mean? It’s where they expend resources, okay? Program participation is a little bit broader. If the company actually spends its resources on those that meet that definition, it could effectively violate this executive order, not that it’s criminal or civil in and by its nature. But now we’ve got these deviations which are going to implement these new clauses in contracts.

Originally, the executive order talked about contracts in the future, new contracts. However, we now have guidance and a deviation that’s going to implement it in existing contracts by the end of the year, and a FAR clause that’s going to be in all new contracts within the next thirty days. And this flows down. This creates an obligation for the primes to monitor their subs, and for the subs to also follow this new deviation via contract. And why it’s also significant is it’s going to require the companies to acknowledge that the government’s payment on the contract is tied to this. And if a company violates it or doesn’t report it or spends resources in violation of it, it literally could be a false claim because they’re certifying compliance with it. False claim liability now because of DEI programs and companies spending resources on clubs, associations, training resources, the whole laundry list.

Sam: That false claim could mean that it’s subject to the whole value of the contract?

Scott: Oh, it could be more than that. Treble damages. Yeah. It literally could be a company termination clause, effectively. Because companies that go through the false claims process effectively, especially small to mid, that’s it. It literally could be that meaningful. And that’s why at the beginning of this discussion, we talked about chilling effects on entering the federal government workspace and procurement in general. This one, I see this as certainly having a chilling effect because it is hard to know how the government’s going to interpret this. Illegal participation, whether it violates the DEI itself, what is racially discriminatory DEI activities? And that is really subject to interpretation. The government has done a little bit better job of telling contractors what it believes it would be. But again, there’s a lot of open questions here.

Sam: Yeah. It’s almost purposefully ambiguous. It’s all-encompassing, first of all. At least they did not include sex or gender in it, so you have that clarified. But that whole list that you just read, that’s a lot of activities, and it could include things that if the contractor is participating in both state and federal or local and federal, that they might be required to do under one set of procedures and then prohibited under another set. So what do you choose in that situation?

Scott: I can’t tell you on this podcast because it takes an analysis, right? It depends on the specific state. It depends on your contract. It depends what the activity is that’s in question. Miller & Chevalier has an entire team in our workplace culture practice group that does this and advises companies, and it has to literally meet with a company to understand what the raised activity is, what their concerns are, an analysis of where they practice, and the state laws that are applicable. It’s an issue. It is very complicated for businesses. This is not self-promotion, but if they’re not consulting their in-house counsel or outside counsel to help them interpret this as applied to their activities or what their subcontractors are doing, especially with this new false claim threat that’s tied to this illegal DEI activity, they are endangering their very existence.

Sam: What would be the challenge that the government would run into in trying to bring the False Claims Act case under this? They had the settlement with IBM, seventeen million dollars, so it seems like there’s risk for companies out there. But usually, don’t you need some sort of scienter in a False Claims Act case? You’d have to have some knowing violation. How hard is it to bring this case from the government’s side?

Scott: I think you need to ask a little different question. I think all these cases are going to be hard for the federal government, right? Because you’re going to have a judicial system that is going to help interpret the laws objectively and they’ll apply their own objective judgment to it. It’s whether the DOJ is going to bring cases even though they have not the strongest case in order to encourage those companies to settle. I don’t think this is all about the government punishing anybody. It’s about setting incentives in place that don’t do anything that even looks, smells, or tastes like it’s DEI as it applies to race.

The DOJ, this is personal opinion, is not my firm’s opinion, is probably going to be bringing certain cases, and you mentioned one, and likely bring other cases in fact for the sole purpose of bringing the business to the table. And send messages to others that they shouldn’t even get close to the third rail on this, even if it looks, smells, or anything that could be interpreted as racially discriminatory DEI activities that judges say no to, right? That appears to be the message the administration is taking. That is not from a legal standpoint, I am not talking cultural, moral, or ethical. From a straight-up legal perspective and a risk perspective, companies really need to think twice about doing anything that even comes close to what may be interpreted by the DOJ or even your contracting officer to be racially discriminatory DEI activities.

Sam: Sure. We’ve seen it with universities, we’ve seen it with law firms, and varying outcomes in both of those areas.

Scott: And that’s difficult for businesses because they have codes of conduct and internal policies that for decades have promoted certain socially important policies to implement various aspects, either—I’m not saying curing racial discrimination—but at least providing opportunities, right? This sets a bar that’s pretty darn high as far as the level of scrutiny on those companies now to not even come close to implementing those policies or keeping those policies. So it is back to chilling potentially the process for government contractors. If you are new to the space, you should go in with eyes wide open and have a full review of your internal policies, codes of conduct, HR, everything that you do before you engage in this space so that you’re not setting yourself up or the prime for failure. Because this is a prime and sub-issue.

Understanding CICA Stays at the GAO

Sam: A lot to think about with that, and the DOJ is going to be very busy on the civil rights end and the contracting end. I’m very lucky to have you on the program as probably the most seasoned bid protest attorney potentially of all time. How many bid protests have you done? A thousand at this point?

Scott: Seasoned is the word.

Sam: Yeah. We worked on a few when we were in government together, and then now you’ve gone out and been very successful in private practice. One of the reasons to go and protest is to get a stay of performance, the CICA stay, and there’s been an important case that’s come out recently from the Federal Circuit about CICA stays. So before we get into the case, could you just explain what a CICA stay is and how that comes about when someone goes to protest at the GAO?

Scott: Sure. This is a very complex topic with really arcane timeliness rules, and I’m going to try to simplify it for the audience as much as possible. So when you say CICA stay, we’re talking GAO protests. Protests filed to the GAO. And why we say CICA is it’s a statute, your Competition in Contracting Act. You find it at 31 USC 3551 and on to two and three. But the provisions related to the stay and an override of a stay, which is a new term of art, you’re going to find at 3553.

Here’s what it is. For a GAO protest, as soon as an agency receives notification of the protest from the GAO, that’s different, it’s not the filing, it’s a notification of the protest from the GAO. If the agency has not made an award of that contract yet, full stop by statute, they cannot make an award. That’s a simple rule. That’s the easy one. If it’s an agency protest, there are agency rules in play that also apply that, really by regulation. But when you say CICA stay, it is a pure GAO protest. You can still get a stay if you file at the agency on a protest level via their regulations, but CICA stays are pure GAO.

In a post-award scenario, this is where it gets interesting. It’s a general rule of 10. And the GAO rules to file track with the timeliness to get a CICA stay, except for one small issue. The general rule is a rule of 10 days. You have to protest something within 10 days of when you knew or should have known the basis for protest. That adverse action, right? And so if, in fact, you file your protest and the agency gets notification of that protest within 10 days of the award happening, the statute applies, and the agency now has to stop performance. So you made the award, the contract has been awarded. The awardee may or may not be on the ground running and hustling, who the heck knows at that point, but they have to stop. They actually issue a stop work order by statute that they cannot proceed with work.

And if you’re the awardee at this point, this stinks because you just got awarded a contract, and all of a sudden you’re told to stop work and you’re in limbo a little bit. And one thing that’s important to remember is that a GAO protest, the shelf life is 100 days by statute. From the day it’s filed to the day it must be decided by statute, with some unique exceptions like shutdowns and things like that, you’re going to get a decision. But that stay will apply for that full 100 days or the day that the GAO closes the case and issues the decision. It could be day 90, 80, whatever it is. If a case is dismissed at day 20, the CICA stay goes away. So if in fact the protest is alive at the GAO, it could go to 100 days. The stop on performance is going to continue. Same thing with the pre-award protest. They can’t make an award while the protest is active.

For those sorts of acquisitions that have a required debrief as part of it, not just any debrief. Number one, it has to be the type of procurement that allows for a required debrief if asked for within a certain window of time by the offeror, the interested party. The agency gives that debrief, and then if it’s civilian, you’re going to have five days before you have to file that protest and the GAO gives notification to that agency, right? That has to occur in the five days after the debrief is closed for a CICA stay to apply. You can still file a protest, you’ve got 10 days, but if you want a CICA stay to apply in a post-award scenario in a civilian agency, you’ve got five days.

Sam: So it’s a faster timeline, but potentially not applicable to task orders or GSA schedules because of the required debrief.

Scott: You’ve got to look at it closely. What if the GSA is doing the procurement for them? Technically, the contracting rules apply to the GSA. But yes, it is quicker, but again, you’ve got the debriefing period. It extends it out a little bit, right? It’s not 10 days from award anymore. It’s five days from the date that the debriefing closed that you have to file a protest in a post-award scenario for that CICA stay to apply. If you’re a Department of War agency for certain acquisitions valued at certain levels, and there’s a few, right? You may actually have an enhanced debriefing, meaning that it’s required, and then after you receive the initial debriefing, you have the opportunity to ask follow-on questions. You have to ask for those follow-on questions within a specific period of time, in two days. Then once the agency answers those questions, you have five days to file. So you have that 10/10/5 rule.

And so you’ve got to really know, number one, who’s conducting the procurement. Is it a civilian agency or a Department of War agency? What is the value of the procurement? Is it going to have a required debrief? And does it also have an enhanced debriefing component? But yeah, required debriefs are only for those procurements that are negotiated where you have a comparative evaluation of offers. It gets... This is why bid protest attorneys do this full-time because it is nuanced, right? But yeah, if it’s a GSA schedule contract, you’re not going to have a required debrief technically, unless it’s built into the solicitation.

Sam: Ah.

Scott: Agencies can agree to it and it may be required by that means, right?

CICA Stay Overrides

Sam: So let’s talk overrides. That’s where this case comes out. And you and I both dealt with overrides when we were in government. What is an override and has that changed?

Scott: Okay. So we talked about a CICA stay being in place and remember, the agency can’t make an award or it may have had to order the stop performance via stop work order to the awarded contractor. But stuff’s important. The requirement doesn’t go away. Maybe for troops that need to be fed or transported. It could have literally an urgent and compelling nature to it, or it could be in the best interest of the United States that in fact the agency proceeds or overrides the CICA stay. Again, we’re talking GAO protests, alright?

So again, back to the Competition in Contracting Act, it allows the head of the procurement activity to authorize performance to actually proceed notwithstanding the stay, or for an award to go forward notwithstanding the stay based on really either the best interests of the United States or because there’s an urgent and compelling nature of the requirement that justifies not following the statute. And the agency has to document those reasons and it’s got to do it contemporaneously, right? And then it has to provide notice of that override to the GAO before the override becomes effective. And so that override, the agency can override these CICA stays even though they’re in place by operation of law because again, best interest, urgent compelling reasons, what have you.

That override can be challenged. Okay? And so the override itself is, again, you have a separate D&F. It’s a separate procurement action. It’s a standalone issue. So you’re saying, wait a minute. Scott, you’re telling me I’ve got to fight the protest and spend legal fees on that, and if the agency overrides it, I’ve got to fight that too? Yeah, it’s worse than that.

Challenging CICA Stay Overrides at the Court of Federal Claims

Sam: And do you go back to the GAO?

Scott: No. Yeah. One thing the GAO does not have jurisdiction over is CICA. In fact, they don’t have jurisdiction over CICA stays. If an agency’s not even choosing to apply it illegally, the GAO has no jurisdiction over it, and they’ve said so in their decisions. You have to go to the Court of Federal Claims that has exclusive jurisdiction over CICA stay overrides. So now, yeah, you may have a literally bifurcated fight. The merits of a protest are being fought literally at the GAO, and you’re over at the Court of Federal Claims fighting a different acquisition decision, the reason for the basis to override that stay.

And it used to be, until this case, we’re going to talk about Life Science Logistics which was issued by the Federal Circuit on April 15th of 2026. It used to be that even the underlying merits of a protest as it related to prejudice were important for the court to adjudicate, and you had literally split operations. You had to fight the fight and fight against the agency’s determination of best interest or urgent and compelling basis at the Court of Federal Claims. It’s a little simpler now. Still, you have to do it. You have to go to the court but there’s no obligation anymore under this recent clarification by the Federal Circuit to literally demonstrate the prejudice per se. All you really got to do is identify that the agency’s decision was arbitrary and capricious itself.

Let me stop there for a second. So this case simplified the fight as it relates only to the overrides. Previously, there was a four-factor test that the agencies and Court of Federal Claims followed at times, and the DOJ struggled over what actual four-part test was at play in order to challenge these overrides. But the Federal Circuit took exception to the DOJ, and honestly, the court’s previous interpretation of the four-part test in order to show that the obligation for protesters and plaintiffs in the Court of Federal Claims to demonstrate that the agency’s override was arbitrary and capricious.

There used to be an obligation to demonstrate the likelihood of success on the merits like we just talked about. They also had to show that there was irreparable harm literally staying the procurement to the plaintiff. Then they had to evaluate a balance of equities. In fact, it was in its favor because agencies do get a lot of discretion. If it’s the Department of War and because of the national security requirement in the Tucker Act to give deference to agencies, especially if national security is in play, it was hard to get over. And then there was another aspect of showing the benefit to the public. All those things were necessary to demonstrate to the Court of Federal Claims in previous override decisions, but no longer.

In fact, the Federal Circuit cleaned this up a bit to focus everybody on only that the decision itself was arbitrary and capricious. And that, in fact, this scheme that had been developed by the courts over time was not required by statute. In fact, it was created by the courts and went far beyond what was necessary for a protester that’s litigating something at the GAO to then move over to the Court of Federal Claims and now it’s just a straight-up arbitrary and capricious analysis. You still have standing, you have to be an interested party, but you don’t have to prove the prejudice per se. You don’t have to show, in fact, doing a weighing of the public interest. You don’t have to show irreparable harm. You just go up and attack the decision.

Sam: You don’t have to do a whole protest at court in addition to a GAO.

Scott: Right, which saves costs. They already have businesses that aren’t even going to consider doing this because they can’t wait for the 100 days and that, they could do it for a variety of reasons. We’ll talk about that too. But it makes it a little bit cheaper because the focus is the fight, right? If in fact you want an agency’s CICA stay override to effectively be nullified by the court, you want the status quo from your perspective. The government wants its own status quo. You don’t want the government too far down the lane where, in fact, it becomes almost impossible to undo contract performance. Key personnel are being recruited. It could be that they’re being swapped from literally the incumbent to the new awardee, and these employees are moving. It could be assets, it could be supplies. Whatever the nature, the prejudice does not get better with time, usually for the losing party. It’s going to get worse with time for the losing party if performance is allowed to continue.

Sam: So this case is good for protesters. It makes it somewhat easier for protesters to keep the CICA stay going, and particularly good for incumbents because they can keep their people on if there’s a stay, they can maybe get an extension of performance.

Scott: Yeah. I mean, your viewpoint is going to change if you are literally the incumbent. If you’re the intervener, the awardee, you’re going to likely intervene in the CICA stay override challenge. If you’re a protester, you just don’t want the train to leave the station. You don’t want award to be made, you don’t want performance to continue, because it’s going to get much harder to get back in. And you got to remember also, except for task order procurements, right? If you start a protest at the GAO, you can bring it, after that’s done, if you lose to the Court of Federal Claims. You’re not prohibited from doing so. And so what you don’t want to do is also have the Court of Federal Claims judge the underlying merits of your GAO protest before you even get there.

This also may impact the override, the ability to challenge where you bring a protest initially too, because protests are expensive for a reason. The record can be voluminous at the Court of Federal Claims. It’s more limited at the GAO, but there’s a lot of litigation and pleadings and potential motions getting into the record. And there are other reasons why sometimes companies protest, right? It could be the incumbent. Usually they believe they’re wrong, there was an evaluation challenge or something. But the government believes sometimes protesters will just protest to get a bridge contract extension, and that may be true. But you have to have a good basis and a reasonable basis to even bring a protest to the GAO and not get it dismissed. You’ve got to have evidence.

Procedures at the Court of Federal Claims

Sam: The pleading standard has changed.

Scott: Yeah, it has changed. I wouldn’t say changed. It’s been clarified. It was always there. You always had to present a prima facie case that, in fact, the government violated procurement statute or regulation. You had to bring some sort of evidence, just not your belief, information and belief. You’ve had to present something. But I think what’s clarified is the GAO believes and expects that a protester is going to bring some evidence, declaration, documentation to show in fact that there’s more likely than not an error had occurred even at the beginning stages of a protest.

Sam: Let’s get more into the Court of Federal Claims, because there have been a couple of cases about procedure in front of the Court of Federal Claims, something that I know you first of all know a lot about, but you are passionate about as well, getting the procedure right. There was one case where there was significant criticism of the government, and then another case where there was significant criticism of protester’s counsel, a position that you’ve been in several times. Let’s start with the government criticism. What happened there in the Global Connections case?

Scott: Yeah. So Global Connections to Employment Incorporated, this decision was originally issued on April 2nd, reissued on April 13th, and that’s not uncommon. But it really simply had to do with delay, effectively. What this court, I think Judge Solomson, is the current chief of the Court of Federal Claims. He likes to run a tight ship, doesn’t hide it. And he has set a tone where protester’s counsel and government counsel will sufficiently plead, will not hide facts from the court. Not that that happens, but maybe just through mistake or resources, they don’t have an ability to literally process cases as quickly as possible.

The other thing is, the DOJ is in a tough spot with their more limited resources these days at the attorney level and their support staff. But the records are getting smaller. And why that’s important is at the Court of Federal Claims, its entire administrative record under the Administrative Procedures Act that is arguably produced to the court, and that includes all proposals, all evaluation records, can include drafts, emails, even for a protest. And so the DOJ has to take all of that, process that, package it. It’s not that easy, because first they have to get it from the agency, make sure it’s relevant, talk to the other side about what goes in the administrative record, and file it. And it takes an enormous amount of administrative burden.

And I can’t get behind the reasons or basis for the government in this Global Connections case to what in the judge’s eyes here, and this was Judge Tapp effectively, be dilatory in its processing and not stay on the agreed-upon schedule between the parties. But it did raise to such a level that, in fact, he thought that it was flagrant and it amounted to unapologetic disregard for the court’s order and counsel’s time. In this case, Judge Tapp ordered the DOJ to show cause why it shouldn’t even bear the reasonable costs associated with drafting and submitting the plaintiff’s response in this case to a motion.

Sam: It’ll be interesting to find out what happened. Did the government actually have to pay for plaintiff’s reasonable costs?

Scott: I do not know. A lot of people might be... a lot of these cases, almost all the protests, are sealed.

The Role of Intervenor’s Counsel in Bid Protests

Scott: I think that does... Maybe it’s a good segue to talk just about intervention for a second. One thing we understand as attorneys is companies do not want to pay unnecessary legal fees, right? It’s a huge expense, and normally it is unrecoverable. But if you just won a contract and it’s a significant value, the one thing you don’t want to do is have a protest be filed against the government’s decision. It’s not technically your win they’re protesting. It’s the government’s decision to award you the contract and the underlying record and the judgments that are made that are usually being attacked. It could be some aspect of your proposal, but it’s that the government didn’t catch it or that their judgment related to it is arbitrary and capricious or unreasonable.

So all of that analysis and criticism relates to proprietary and source selection information. You’re talking proposals, evaluation records, source selection decisions, all that. You’re not going to get access as a company, okay? You’re going to get a debriefing, and hopefully it’s helpful. But when a protest is filed, those records become relevant all of a sudden, and you’re still not going to get access because what happens at the GAO and the court is a protective order is issued. And the protective order covers all records that are filed in the court or the GAO, and only those parties, the counsel usually, are admitted for access to see those records. In-house counsel, I wouldn’t say they never get admitted to protective orders, but there’s another layer of scrutiny for them.

Sam: Participating in competitive decision-making.

Scott: Yeah. There’s a case called US Steel that effectively scrutinizes the access to proprietary and source selection information for those that are involved in the competitive decision-making process. So that’s why in-house counsel, unless literally the structure allows for them to be somewhat insulated, will not get access. And so you have to basically hire outside counsel.

And if you are the awardee, again your award is potentially being attacked, you want to protect your interest. And what that really means, it really means you want to defend and protect the government’s decision because that’s what’s getting attacked. And so it’s important to have counsel know, number one, you won the award if you have counsel already, but two, to plan ahead for this. The one thing that’s really interesting, we’ve had a few massive size protests at the Court of Federal Claims recently with 20, 30 different parties, is each one of those has to have their own counsel. Counsel has to be admitted to the protective order. That counsel had to have been vetted via conflicts, meaning that their existing clients don’t have existing conflicts with representing you as a company.

That process is not quick, and so if you are a company going into a competition you think is going to be pretty litigious, and if you think you’re going to potentially win, otherwise you wouldn’t bid anyway, you probably want to line up outside counsel in advance. It doesn’t mean you’re going to have substantial litigation fees. It means you’ve done the administrative processing and they have them ready to go basically, your assault team. And that takes a little bit of time in processing. You get the conflict review, getting the attorney knowledgeable about the procurement so they can hit the ground running.

Why is this quick? We just talked about a CICA stay, okay? If it’s pre-award, it’s instant, and again, if the agency gets notice from the GAO in a certain window of time, they have to automatically stop performance. So when that happens, the agency’s getting attacked, their acquisition record’s getting scrutinized, and they’re starting to make decisions. And sometimes agencies will hit the easy button, right? What is the easy button?

So there’s something called corrective action in protests. An agency, if in fact has a reasonable basis to do so, believes it can cure an administrative defect in the source selection paperwork, the evaluation, some aspect of the procurement violated procurement statute or regulation, or was inconsistent with the terms of the solicitation. So they can fix it, and they get basically a do-over. Corrective action. And again, agencies are under extreme stress these days with limited resources.

So setting that stage and talking about how quick it is and why you want your interests represented immediately: as an intervenor, you may not get notification of the protest the same day. Things are already going down the track. You’ve got to monitor it. The agency is supposed to provide you notification of the protest within one day, it should, pursuant to the FAR, but that doesn’t always happen. And so this is why having counsel already locked in, conflict-free, ready to proceed in order to jump into an active protest once you find out about it, is critical, because the agency’s starting to make judgment calls, evaluating its own record, looking at the easy button.

And if you can come in there and help them, because that’s the goal, help them see if their decision is defensible, and sometimes it’s not. But you can also help them shape the corrective action to fix it if you can engage with the agency right away. An intervenor’s counsel, that’s what it’s called, a counsel that’s representing the awardee, can come in, not only represent their client’s interests, but help the agency evaluate the protest grounds in almost like a common interest type scenario. So you can assist the agency.

Sam: So you can have a seat at the table through this intervenor’s counsel to potentially shape corrective action or decide whether to take corrective action.

Scott: Absolutely. And you can also pressure test certain arguments. You can help them draft or at least identify potential motions. You can point out where we think you’re going to lose, even if the agency believes they’re going to win. You come in subjectively objective, but a seasoned protest counsel will come in and know likely what the GAO is going to see and how they’re going to react and how they’re going to evaluate a certain issue once you’ve looked at the record real quick.

So you want to basically get those interests projected immediately so you can help shape a little bit, influence, but also help the agency make the right call. Because again, you come in too late, those decisions are made, you’re reactive. You may turn into the protester instead of the intervenor. And that is not only at the GAO, it’s actually even more important for protests filed to the Court of Federal Claims. They go faster.

And here’s why. Under the rules of the court—and those rules may be adapting over the next year a little bit—protesters have to provide pre-filing notice to the DOJ that in fact they’re considering protests. They also have to identify likely intervenors, interested parties. The DOJ should reach out to those parties if they know who their counsel are, so should the agency, but it doesn’t always happen. But what does happen is the DOJ getting involved right away, they’re evaluating the case from a third-party neutral stance.

They represent the government, they assist the agency. And again, conclusions are being drawn. It could be that voluntary stays are being decided. It could be that corrective action is being advised even before you get a seat at the table. And this, again, 24-hour pre-filing notice, you’re going to have the calls between the DOJ in that window between the agency, and then you have a complaint filed, and things are rolling down the track, judges are asking for status conferences right away. And if you’re not even going to have a seat at the table, you get no say.

And so my advice for businesses that are in a procurement, you’ve invested lots of BD money, your capture teams really think they’re right, they win an award from the intervener standpoint and it’s defensible, you’ve got to have somebody with a seat at the table. Same thing on the protest side. If you’re going to protest, you’ve got to have somebody with a seat and knowledgeable and educated because the timeliness rules for protests can be very dicey, and having a relationship with a firm is extremely important, whoever that firm is.

Sam: And it doesn’t hurt to have the experience as a government counsel, because on the protest side, you’re dealing with government counsel, and you want to have those good relationships with the counsel that’s facing you.

Scott: Absolutely. Sam, you have keen insight into the Small Business Administration and all the agencies that you dealt with. My experience with the Army, I think, is very valuable to my clients. Another good thing about my past job is I worked with a lot of Department of War agencies, not just the Army. And so we did training for a lot of attorneys within the federal government on bid protests and appeals and all that. So yeah, our insight, I think, into how agencies think, who the right person is to contact, how to contact them is not usually readily accessible. But knowing how agencies may react, and some of that stuff changes with time.

Being seasoned is an asset and a detriment because you’re not there at the agency, but you keep tabs on things at the agency to benefit your clients. And honestly, again, if you’re an intervenor’s counsel, you’re helping the agency. My experience since leaving the government is every time I’ve been an intervenor’s counsel, it was a huge collaborative effort with agency counsel, DOJ counsel working together to help defend the decision. And yeah, that costs your client money, but it’s going to save them money in the end.

Sam: From the agency counsel, it’s probably old times for them working with Scott Flesch again.

Scott: It is rewarding professionally and personally to know both sides of it and the people I work with.

The Noblis Case and Pleading for Injunctive Relief

Sam: Terrific. You mentioned Judge Solomson a moment ago, and Judge Solomson issued this Noblis case that came out that made a big splash. It was about a $100 million contract for systems engineering issued by the Navy. And Noblis showed that the Navy committed prejudicial error, but then it looks like they ultimately lost the case. What did Judge Solomson decide in that case?

Scott: In the Noblis case, it was a Navy procurement. Noblis came in and made various counts. They call them counts in a complaint at the Court of Federal Claims. And all were dispensed by the judge except for one. Judge Solomson did find that the Navy’s evaluation on past performance was arbitrary and capricious. Judge Solomson has a knack for writing and likes to instruct both practitioners and companies on the nuances of the federal procurement rules and regulations. His decisions are very entertaining.

However, even though he found this error, he points out the defects in the process. And although the error was found, he found that Noblis itself waived any entitlement to injunctive relief, and that’s what the court gives, is Court of Federal Claims gives injunctions. The GAO gives recommendations. That’s another story why, because they’re not a court. They’re part of the legislative branch, but it has teeth. But the court issues federal court injunctions, and it prevents an agency from acting in a certain way. They’re not going to direct awards. They’re not going to flip an award. They’re going to basically send it back to the agency to redo their judgment.

And here they found Noblis was not entitled to any injunctive relief because first, Noblis’ original complaint did not ask the court to enjoin the government or Solis’ performance of the awarded contract. Noblis only asked this court to declare the award to Solis be unlawful pursuant to APA standards. Noblis repeated the prayer for relief almost verbatim in the MJAR in a perfunctory conclusion. And Noblis did not brief any of their prerequisite injunctive relief factors, and those are exhaustive.

The pleading requirements at the Court of Federal Claims are actually pretty onerous. It is a federal court which comes with not only pleading requirements but necessary standing, prejudice, injunctive relief factors at every stage. It could be a preliminary injunctive relief, a TRO fight, as well as the permanent injunctive relief that’s always sought in the end, that’s the merits. But yeah, he found effectively that the way Noblis had pled its arguments and what it had asked for as far as the remedy was nothing the court could really provide. And effectively, even though they found error, he denied a number of things, but most importantly, their motion for judgment on the administrative record, in fact, because of these defects.

Choosing Between the GAO and the Court of Federal Claims

Sam: So this points out a difference between practicing at the Court of Federal Claims and at the GAO. You have to check more boxes, it sounds like.

Scott: Yeah. The Court of Federal Claims is a heavier lift. It’s definitely more expensive. The pleading requirements are more onerous. The processing, the record, the procedures, it is all record-based. There is, in some cases, potential for discovery, but very limited discovery. But it’s administratively burdensome, which means extra cost for clients. And so that’s why the GAO has historically—not only because of the CICA stay, that’s reason number one, but number two, the GAO has been the first stop you normally go to because the cost disparity has been so great. That disparity has been narrowed, though.

Sam: Oh, interesting. What’s the reason for that?

Scott: A number of reasons. Part of it’s resource-based. So the DOJ, whether you fault it or you pat them on the back for doing so, is doing an excellent job at vetting cases upon pre-filing.

Sam: Oh, okay.

Scott: And so what used to be, I think more than 10 years ago, the cases would just develop and the DOJ would not get into the record too deeply at the outset. Now, what you’re having and you’re finding is the DOJ is getting a limited record, engaging with counsel right away, getting into the weeds within the first twenty-four hours, and making calls on, number one, whether there’s a voluntary stay, because again, there’s no CICA stay anymore, it doesn’t apply to the Court of Federal Claims. Two, what is potentially defective in the agency’s record and what the protester is likely to bring in the complaint, because you don’t have a complaint most times, and they’re making judgment calls earlier.

And so cases seem to be actually being adjudicated earlier. They’re getting to, in some cases, more limited records pursuant to agreement of the parties on what’s relevant, and they’re getting resolved. In fact, there was a stat I heard a couple of weeks ago I can’t repeat, but a significant percentage of cases never even make it out of the pre-filing stage because the DOJ is coming in and evaluating, talking to the agency, and in a lot of cases, fixing things.

So the DOJ is not involved in GAO protests. It’s the agency counsel, and a lot of times that counsel has been involved in actually the acquisition. They take on a little more ownership. It’s a little more personal. I think there’s a little less objectivity in some agencies because, again, that attorney advised the procurement, and now there’s a defect that’s alleged. Yeah, and that’s human nature, right? But when you add a third-party objective body like the DOJ in a protest setting until they decide to defend it, it definitely helps sort out those cases that should go forward and those that are not, and a huge portion are not even going forward.

Sam: So that may be one reason to go to the court, that now you have this third party, the DOJ, that gets involved, might be able to solve the case early in pre-filing. Another consideration is, do I have a better chance of winning at the Court of Federal Claims? And some of these statistics that we’ve seen out of the GAO indicate that they are not sustaining as many protests. Have you seen that in your practice?

Scott: Yeah. We’ll see what the end of the year numbers bring. They come in surges; we have seen a number of sustains from the GAO over the last couple of months. I don’t think there’s a trend yet. It’s too early to tell. But again, the key difference is only 2%, roughly, of GAO protests are ever going to have a hearing where parties can argue. Okay? There are written submissions, there are no witnesses interviewed normally. There are on occasion a hearing at the GAO where the GAO will adjudicate an adversarial proceeding, and witnesses will be asked questions by the GAO, possibly the attorneys, depending upon what the GAO attorney will allow. But that’s just infrequent, so there’s less room to advocate. You just do it on paper.

You’re going to have an oral hearing at the Court of Federal Claims to help draw the attention of the judge to specific aspects of the record that are in line with your party’s interests. You’re going to have numerous pleadings and motions and development. There could be supplementation of the record. And again, that record is extremely broad already, the entire acquisition. By default, it can be shaped down, but if you are truly litigating a protest at the Court of Federal Claims, you’re going to see the entire record and potentially even identify additional errors and defects.

At the GAO, the difference is the agency is only required to produce relevant records, and relevancy is usually defined by the issues raised in the protest. For instance, if you’re going to be attacking the evaluation of your proposal, that’s your protest. You’re more likely not going to get access to the proposals or evaluation records related to the other offerors. It’s going to be redacted out or you’re not even going to get it. And so your ability to look at other records and find other defects is very limited at the GAO.

At the court, everything’s in the record, you’re going to find it. The question is whether you’re an interested party to allege it, right? But if you see your entire record and you see other things that are, again, a violation of procurement statute or regulation, you can ask to amend your complaint. In fact, you can amend your complaint by rights within a certain window of time. So you have more ability and opportunities to advocate. You have access to more records. And again, you have an objective body, at least at the outset, the DOJ, that’s coming in and looking at the agency’s decision.

And a lot of this is also practical, right? The DOJ will come in and just tell the agency, “Okay, this is this widget that you want. How important is it? And do you really want to go six, nine, 12 months for a Court of Federal Claims protest when I think you’re going to lose and not be able to get that widget, or do you want to fix it now?”

Sam: Yeah.

Scott: And in some cases, they’ll even settle and create a creative solution through the consent of the parties where everybody’s happy. It happens from time to time. Because if a federal court has the case, blesses off on that action, and it’s adopted via court order, what’s the violation? Okay? You had litigation. No one’s going to come in absent an appeal to the Federal Circuit and tell the court it was wrong. But somebody’s got to appeal that. So there are a lot of reasons, those are some of them, to go to the Court of Federal Claims first these days.

But back to a comment we made earlier, the type of procurement, it may limit you in where you can go. A task order procurement, meaning the award or anything in relation to the issuance of a task order, by statute can only go to the Government Accountability Office (GAO).

Only over certain values. Yeah, which is raised year by year. In fact, the last threshold was raised a bit for the Department of Defense. Civil agencies are a little bit less. Talk to your counsel about your specific circumstances. If it’s pre-award, what is the value? Again, the record may help you through independent government assessments, if you have that, or maybe the value of the proposal. All these little pieces may actually have an impact on your ability to protest the jurisdiction and whether you can even protest a task order.

Sam: Okay. And that came up a lot when we were working on the Rule of Two, whether you could protest the Rule of Two at the task order level. And the FAR overhaul says you cannot do it. You cannot protest the Rule of Two at the task order.

The Revelations Case and Limitations on Subcontracting

Sam: I don’t want to let you go without asking you about a couple of small business cases that have come out recently. There’s one called Revelations out of the Court of Federal Claims. It’s about the limitations on subcontracting. This was a good case for companies that work at the VA, Veterans Affairs, because there’s a special VA requirement that companies certify to the limitations on subcontracting with their offer. It’s a particular statute for the VA. We’ve talked about limitations on subcontracting on this show several times. And in this case, the SDVOSB went after a VA set-aside, and in the VA’s view, did not comply with that special certification. They tried to argue that it had been considered to be certified. What happened in that case? Why did the business end up losing in that decision?

Scott: In the end, it is pretty simple, right? We talked about, and I think in reference to, ground rules for a competition. What does that mean? It means when an agency issues a solicitation and it talks about what it expects in a solicitation—the requirements, right? And I mean the proposal requirements: what goes in a proposal, the content, the forms, the information you are required to put in. It also specifies how an agency says it’s going to evaluate offers; it sets up that scheme. That together becomes the ground rules for the competition, okay? Not only is the agency bound by that, but offerors are bound by that. That is the ground rules for that competition. And if an offeror does not comply 100% with a solicitation requirement—and by the way, if they didn’t agree with it, what they should have done, Sam, if they didn’t...

Sam: So it’s going back to what you said before. There are pre-award protests. You could have looked at that as a patent ambiguity.

Complying with Solicitation Ground Rules

Scott: Patent ambiguity, latent ambiguity... again, protest when you knew about it. But if you don’t believe that it is necessary—this is where businesses get in trouble, right? Small and big, by the way. “We know better, okay? We know better because the agency doesn’t really want that. The requirements don’t really say that, but we know what they want. We’re the incumbent. We’ve been doing this for 20 years. I don’t care that this solicitation requirement says X, we’re going to do Y. We’re not going to comply 100% with that solicitation requirement.” They don’t fill out a form. That’s where you get in trouble because the ground rules for the competition—that box, right? You need to stay within the four corners of that box. It’s an artificial box, but it is there for a reason.

So, back to what we first started this discussion with: offerors want to know they’re going to get a fair shake. Things are transparent, right? The agency is going to apply the rules, be fair and equal to everybody. If you don’t stay in that box and apply the ground rules for the competition—both the agency and the offerors—that’s when the system fails. That’s where people feel aggrieved. That’s where they think they’ve been disparately treated.

In this one case, in Revelations, they didn’t do the certification right. At least in Judge Solomon’s eyes, they did not comply with the ground rules for the competition. In fact, Judge Solomon says, “Because Revelations did not comply with the solicitation’s explicit instructions, including FAR clause 852.219-75 certification requirements, the VA did not act arbitrarily and capriciously in eliminating Revelations‘ proposal from consideration.”

Again, this decision is 27 pages. You could say this in two sentences: Read the ground rules and comply with the ground rules. And if you don’t want to do it, you better protest because you’re going to get excluded. Or here, you’re going to spend thousands of dollars and hear from the judge exactly what you could have known going in. If you think you know better, you’ve already started on the wrong foot. Just play in the box.

Sam: There were a couple of cases that came out from the Court of Federal Claims at the same time—I was looking to see if it was in here—that said exactly what you just said, which is, “You have to turn square corners.” That was the phrase. Absolutely. You have to check every box. You’ve got to make sure that you know what the ground rules are, and if it tells you to sign on this dotted line, you need to sign on that dotted line.

Scott: Yeah. It is artificial. You know better, and a lot of times businesses do. They know better than the government. But you’ve got to play along. You want to win the contract. If you want to talk to the agency about in-scope changes later on, fine. But play in the box now, or else those thousands, sometimes millions of dollars that your capture teams are spending on proposals, and the employees you’re recruiting because you “know better”—that is a false premise. It’s a waste of money and resources, and you’re setting your company up for failure.

The Certificate of Competency (COC) Process

Sam: One more case I wanted to bring up with you. This one is out of GAO, and this is a case that hits close to home because it involves the Small Business Administration. The SBA comes in to represent its position from the Office of General Counsel. They’re actually listed in the representative box on the decision. And this is a case about the Certificate of Competency requirement. This trips up agencies all the time. They probably haven’t even heard about it. But the rule is, if you eliminate a small business for responsibility reasons, you must send that elimination to the SBA for consideration under the COC procedure.

So, if a small business company has been eliminated for responsibility, the SBA has the chance to allow that company to appeal, and it used to be that the SBA would tell the agency that it has to make an award to that company. SBA OGC said, “Yes, we agree with the small business that it should have been referred to the SBA for a COC,” but GAO does not agree with the SBA. What happened in that case?

Scott: Yeah, so the Certificate of Competency issue is one that has actually raised some of the most substantial legal quandaries, especially for the Department of Defense, over the years. In fact, I think I first met you when we were debating whether or not that was extraterritorial, meaning that the COC and responsibility issues applied worldwide, because the Department of Defense is just not a US-based business. They operate in the strangest and most remote of locations. And if you’re dealing with a US small business, you have to start with that premise, right? Otherwise, the SBA is not going to play here.

But if you take an action which can be interpreted as an objective decision that they’re not responsible, that kicks in the requirements where the SBA’s judgment, by statute—and even the FAR references it—is reserved for the SBA. Contracting Officers cannot declare a small business not responsible without referring to the SBA. Now, KOs can advocate to the SBA and actually be a party to the SBA on why they should agree they’re not responsible, and the SBA will give them deference. But it’s that processing piece that KOs trip up all the time.

But here, when you say “responsibility determination,” what do you mean? It’s not usually a piece of paper saying they’re not responsible. It can be criteria in the evaluation scheme which looks and smells like they’re evaluating their capacity to perform, right? That is responsibility if it’s a pass/fail type evaluation criteria. But in this case, this had an evaluative nature. They were comparing. They had ratings; there were subjective calls. And that does not amount to a responsibility determination in GAO’s eyes because it was not check-the-box. It was not pass/fail. You’re responsible or not responsible.

It could even be past performance, right? Where it’s “Five years or you’re out.” Technically, that could be a pass/fail, right?

Sam: Sure.

Scott: But here the agency actually had ratings in their evaluation scheme where they objectively applied criteria and evaluated and rated the company under what appears to be responsibility, but allowed the agency some discretion in evaluatively rating and evaluating this proposal under that evaluation factor. Not pass/fail. So, not responsibility.

And even though the SBA, I understand, wanted to broaden—I wouldn’t say broaden their authority, but they have a much more global look at responsibility—it’s not a surprise that the SBA came down this way. I’ve had that happen before where GAO and the SBA have disagreed. Sometimes the agencies and the SBA will disagree; that has happened too. GAO applied its historic rules of, if in fact it’s an evaluative process...

Sam: So in CSlope, the SBA comes in and says the COC process should apply, but GAO and the agency ultimately win out. What happens there? What’s the reason for that?

Scott: Facts sometimes get in the way, right? In CSlope, the past performance evaluation of the protester got a satisfactory rating. They wanted higher, but the facts alone demonstrate it wasn’t pass/fail; it was gradations of ratings, which does not amount to a responsibility analysis. And if it was pass/fail or go/no-go, that would potentially amount to a responsibility determination where a KO must refer to the Small Business Administration before excluding them from the competition.

You know, simply wanting more is not enough. The agency complied with the evaluation criteria, it was reasonable, and it didn’t violate the SBA’s Certificate of Competency requirements.

Conclusion and Contact Information

Sam: I feel bad for the SBA, but I lost a lot of cases when I was there too, so it’s somebody else’s turn to come in and lose at GAO. COC, the Rule of Two—those things come up a lot for the SBA at GAO. Scott Flesch, how do people find you?

Scott: Easy. They can find me on the website. My email address is SFlesch@milchev.com (C-H-E-V). Also, feel free to contact me via LinkedIn. I have prospective clients contacting me all the time. I’m the only Scott Flesch out there practicing contract law; type Scott, Army, government contracts, and you’re bound to find me. I am more than happy to help businesses. My clients are all over the map, which is exciting with my new entry into private practice.

Two and a half years now. It has been a fun ride, especially when I come in to help businesses reach their goals and understand what’s important to them, how they’re structured, and interpret this pretty volatile time in government contracts that continues to change by the day. I look forward to working with you, and of course, on small business issues, Sam is an expert. I think the world of him, so definitely reach out to Sam as well. Look out for our podcasts. Absolutely. There’s a lot to discuss in this space. Look out for client alerts from Miller & Chevalier; we issue them all the time. You can get on our distro list pretty easily. But I appreciate the time and consideration being here on this podcast. It is one that’s very thoughtful. I think it’s helpful for both small and large businesses, and it provides great content.

Sam: Best bid protest lawyer out there. Thanks, appreciate it.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

8(a) firms dip below 3,400--plus an important SBIR case

Sam Le — Fri, 01 May 2026 20:11:51 GMT

Links discussed

8(a) participants in 2026

EO on Promoting Efficiency, Accountability, and Performance in Federal Contracting

White House Budget Request FY27

Appropriations Committee Draft Report on FY27 Government Appropriation Bill

SBA Office of Advocacy Leadership

GAO decision in KriaaNet, Inc., B-422717.4, B-422717.5, April 23, 2026

GAO decision in Threat Tec, LLC, B-424221, April 23, 2026

Public Law 119-82, Small Business Innovation and Economic Security Act

OHA decision in Size Appeal of Nisou Enterprises, Inc., SBA No. SIZ-6380 (2026)

Jason Miller: “Is SBA Moving the small business contracting goal posts?” (Federal News Network)

Draft SBA FY26 Scorecard factors (Federal News Network)

FAR Council Memorandum on Agency Implementation of Executive Order 14398, Addressing DEI Discrimination of Federal Contractors (April 17, 2026)

David Fahrenthold, Luke Broadwater, and Andrea Fuller: “Firm Building Trump’s Ballroom Got a Secret No-Bid Contract for a Nearby Job” (New York Times gift link)

Correction: When I was referring to 8(a) firms being terminated, that was in April, not August.

Available for iOS and Android

Timestamps

00:00 – 8(a) Program Data: Shrinking Participation and Audit Impacts

02:54 – SBA Budget Proposals: White House Cuts vs. House Appropriations

06:23 – WOSB Program: Addressing Backlogs and Recertification Surges

07:46 – Congressional Spotlight: The Decline in New Entrants and 8(a) Removals

11:09 – Regulatory Update: Delay of Dodd-Frank Section 1071 Reporting

12:34 – GAO Case Law: Reprocurement and Certificate of Competency (Creanet Case)

18:36 – SBIR Protests: Timeliness and Successor in Interest (ThreatTech Case)

24:41 – SBIR Reauthorization: Program Extension to 2031 and New Security Rules

25:44 – SBIR Program Extension and Security Denials

26:16 – OHA Suspension Appeals and the 8(a) Data Call

28:52 – OHA Case Law: Nisu and Identity of Interest Affiliation

31:12 – The SBA Scorecard and Category Goals

34:50 – Regulatory Developments: FAR Council and DEI Executive Order

36:20 – Q&A: AI in Source Selection and Bid Protests

39:13 – Q&A: 8(a) Sole Source Trends for Native-Owned Firms

43:03 – Q&A: White House Procurements and Sole Source Contracts

45:06 – Q&A: 8(a) Certifications and OHA Remand Timelines

Transcript

8(a) Program Data & Trends

So let’s start with the 8(a) data. I found just yesterday that the number of 8(a) participants actively in the program is now below 3,400. Let me see, for people who are on the live stream, you can see it there in the screen share. We started the year at over 4,300 8(a) participants. To give this kind of historical context, the number of 8(a) participants used to be around 5,000. So it’s dipped significantly now to less than 3,500.

The reason for this, of course, is SBA’s continued audit of the 8(a) program. Most of the firms that have left the program have done so because they either withdrew or they were terminated for not replying to the data call. At first, these firms were suspended for not replying to the data call, and then they were terminated. That happened around the middle of August [Correction: April].

Then there were a number of firms that just decided, “Look, it’s really not worth it for me to stay in the 8(a) program,” particularly with what the agency is doing in terms of sole sources and cutting back on the “once 8(a), always 8(a)” rule. You can see here that you had almost 500 firms that were eliminated from the program between August 8 and August 13 [Correction: April]. That’s because of firms leaving or firms that were terminated for not replying to the data call.

There are still 114 firms that got unsuspended today. It seems to be a Friday thing to try to go and unsuspend firms. That number may have dipped since I created this graph, but right now we’re at fewer than 3,400. You can probably expect for that number to continue to go down. There haven’t been new applications that have been granted—at least in what I’ve seen—since August of 2025. Additionally, you have these firms that are graduating naturally after their nine- or 10-year period, but also firms finding that the 8(a) program isn’t giving them the return that they expected. I’ll be going through some of that data as well in response to one of your questions that came up when I brought up this data before.

SBA Budget Request & House Appropriations

Let me go now to SBA’s budget request. This is really interesting. When it first came out, the White House issued a proposed budget from the Office of Management and Budget. But it’s really the House that sets the budget. The White House proposal is just a signal to people of what the White House priorities are. The White House budget this year cut SBA by 67%. It says the budget requests $330 million for the SBA, a $670 million or 67% decrease from the 2026 enacted level.

The White House would have cut the entrepreneurial development programs and completely cut the SCORE program. It would have cut salaries and expenses by a third. It would have cut the business loan programs by $160 million. People watching that kind of figure said, “Look, you’re not going to cut SBA by two-thirds. It’s a really bad signal to say we’re not supporting small businesses through SBA support anymore”.

Lo and behold, the House Appropriations Committee issued a draft budget for consideration, and it does not cut the SBA by 67%. It keeps most of the programs at the same level as they have been before. The SBA salaries and expenses go down by about $25 million. That’s far less than what the White House had proposed—it’s less than a 10% cut for salaries and expenses. It also keeps the entrepreneurial development programs at a bit less than what they had before, maybe a bit more than a 10% cut. But still, they keep SCORE around in some of those programs, and keep the Office of Inspector General at the same level. The Office of Advocacy, interestingly, gets a boost. The Office of Advocacy gets an additional $4 million in this budget from the House Appropriations Committee.

The budget states that the Office of Advocacy was established by Congress in 1976 to serve as the independent voice for small business within the federal government. Interesting timing for that statement, because the prior chief counsel for SBA recently switched jobs. The chief counsel was Casey Mulligan. He’s a renowned economist from the University of Chicago, and he was a Senate-confirmed chief counsel. There hadn’t been a Senate-confirmed chief counsel at SBA since President Trump was first elected. So there’s not a permanent chief counsel in that position, making it kind of questionable whether the advocacy is acting as an independent voice established by Congress when there’s not a Senate-confirmed head of that office.

WOSB Program Backlog

There are some good statements in the House Appropriations budget report for SBA. One of them is about the WOSB program. The committee states in its report that it’s concerned about the WOSB program having a month-long backlog of applications. The increased number of certified firms in the program, as well as the recent surge of participants undergoing an in-depth recertification process as they enter their third year, has added an additional strain on the program’s resources. The committee directs SBA to ensure that eligible applicants obtain the required initial certification and continued certification to meet SBA’s goal of supporting WOSBs.

That’s a significant development, with the House Appropriations Committee putting a spotlight on a backlog in the WOSB program. We’ve seen recently that SBA is pushing through applications on the WOSB program. One day they had approved over 250 applications, and I’ve seen it myself as well—WOSB applications getting approved. So they may be heeding this guidance from the Appropriations Committee to get through this backlog of applications.

8(a) Program New Entrants & Terminations

The Appropriations Committee is also interested in the 8(a) program. Number one, they’ve taken on this mantle of looking at new entrants. This has been a sticking point for SBA and policymakers for quite some time, and the Appropriations Committee notes that the number of new small business entrants entering new contracts declined 80% during the period between 2005 to 2019. You see this issue come up again and again. SBA highlighted it in its scorecard changes—we’ll be talking about that in a bit—and is looking to add that as a factor to the scorecard.

Here it is: the House Appropriations Committee is also paying attention to the decline in new entrants. The committee links that with actions we’ve already talked about in the 8(a) program, stating that recent actions undertaken by the SBA are exacerbating the decline in new entrants, particularly in the 8(a) contracting program. 8(a) is a way for companies to get into government contracting for the first time. They’re able to get sole source contracts, so they don’t necessarily have to compete and face that deficit in past performance because they’re new. They have limited competition against other 8(a) firms when they do have to get into a competitive atmosphere.

But the committee is directing SBA to look closely at the 8(a) program and report to the committee on appropriations on the statutory and legal justifications for terminating 622 small businesses on March 4th. They must also include the statutory and legal justification for initiating SBA’s June 2025 audit of the program. The report should include the results of the June 2025 audit and evidence of fraud and/or improper payments in the 8(a) program supporting the removal of these small businesses from the program.

That’s language I hadn’t heard before—that there could be improper payments in the 8(a) program. I suppose SBA is really looking at eligibility. Are companies meeting the disadvantage requirements of the program? Maybe they’re thinking that if the company is not eligible, it could potentially be an improper payment to have paid a company that’s not qualified for the program. I think that’d be a bit of a stretch when looking at firms that might be a few thousand dollars over the economic disadvantage threshold. That’s a lot of the firms that have been suspended or considered for termination. As for those 628 small businesses that were removed, that was that big jump in the red line that I showed on the graph. That’s primarily firms that didn’t reply to the data call.

Remember, I had this conversation with Matt Schoonover a while back. It was very expensive for firms to reply to the data call—thousands of dollars, tens of thousands of dollars—and firms may not have seen the return on investment in replying. But now Congress, through the House Appropriations Committee, is first of all not cutting SBA by 67% as the White House had proposed, but also putting a spotlight on the WOSB program and the 8(a) suspensions and terminations.

Section 1071 Loan Reporting Delay

One other note in this is there’s a provision here, Section 520, that is drafted to prohibit small businesses from having to comply with Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That’s loan reporting. Section 1071 was passed in 2010. So it’s 15 years old and has just been running around regulatory procedures for a while and hasn’t gone into effect. We have a further delay in the enactment of Section 1071 from this committee report here.

Case Law Update: KriaaNet & Reprocurement

Let’s get into some case law. I’m going to have a podcast next week with Scott Flesch, who is one of the best protest lawyers out there right now. We’re going to go over a lot of court cases and protest decisions coming out, and we’ll also talk about the executive order on fixed-price contracting that just came out. I’m going to save some of those until next week when I talk with Scott. But I couldn’t stop from highlighting this decision that came out from GAO just this week called KriaaNet.

This is about a reprocurement case. This is an 8(a) contract that was reprocured by the agency. It’s interesting because honestly, I’ve been around federal procurement now for almost 20 years and I have not seen a reprocurement in the flesh. I think I’ve talked about it and thought about it, but these do not come up very often. So it’s interesting to see this area of law arise.

KriaaNet is protesting a task order awarded to LBO Technology. There was an RFQ under the GSA Schedule set aside for 8(a) firms. KriaaNet and LBO were two of the firms that submitted quotes on that. KriaaNet actually won the initial competition in February of 2025. There were some protests, and KriaaNet had some personnel changes during the course of that time that they were waiting to perform on the contract. The agency had concerns regarding KriaaNet’s failure to provide proposed key personnel in a timely manner, issued a cure notice, and ultimately terminated KriaaNet’s task order for default. The agency did eventually convert that termination to a no-cost termination for convenience.

The SBA issue comes up after the agency goes to issue a task order to LBO. Back off the original competition in 2024, the agency goes back and asks LBO for a revised quotation, and then issues the task order to LBO after terminating KriaaNet’s task order for a lack of those key employees. The area of law that comes up is the process under reprocurements. The FAR Section 49.402-6 covers reprocurements. It says an agency has considerable discretion to repurchase goods and services for a substitute contract where the agency needs to repurchase goods or services in a quantity not exceeding the undelivered quantity. It may use any acquisition method, provided that it preserves competition to the maximum extent practicable. GAO has said it will not review an agency decision to exclude a defaulted contractor from a reprocurement for the remaining work under the defaulted contract.

KriaaNet brings up a number of arguments. The one I paid most attention to was an argument about the SBA Certificate of Competency (COC) procedures. The COC is rarely seen but often discussed. It comes up in GAO cases and Court of Federal Claims cases from time to time, and it’s kind of a historic process. There used to not be as many set-asides, and a lot more contracts used to be lowest price or sealed bidding. A small business would bid against larger businesses and might have the lowest bid. But the agency would deny the small business the contract because the small business didn’t have the capacity to do the work. It was too small, basically, or didn’t have the past performance to do the work. So Congress and SBA created the COC process, where that small business that is excluded from a contract—even though it has the top-rated proposal or the lowest price—can appeal to SBA for a COC. If SBA grants that certificate, the agency would need to award the contract to the small business under the COC.

That’s the way historically it was designed. It doesn’t quite work that way anymore because of two-step procurements and go/no-go decisions on past performance, but KriaaNet here is trying to use the COC procedures to make the case that the agency needed to allow it the opportunity to appeal to SBA to be considered for the follow-up task order. Now remember, KriaaNet is the company that just got terminated. So it has a number of other arguments, but on this argument, GAO says, “We’re not even going to consider that”. Under the procedures for reprocurements, when a company is defaulted and the agency reprocures, GAO has said the statutes and regulations governing federal procurements do not apply, and the COC process does not apply because of that.

That’s another reason agencies can avoid using the COC appeal process. We saw another one with the CSlope case—which I may be talking about with Scott Flesch—where the agency was able to make the case that it did not use a go/no-go procedure, that it was a comparative evaluation, and the agency was able to avoid the COC procedure. Here in KriaaNet, the agency is able to avoid it because the award to LBO is conducted under a reprocurement in FAR Part 49. So I will keep this case in mind in case I ever run into a reprocurement. Very interesting set of facts.

Case Law Update: Threat Tec & SBIR Protests

Then another GAO case, which is significant for anybody who works on SBIR, came out recently. It’s called Threat Tec. That name may sound familiar in the context of SBIR cases because there was a Court of Federal Claims decision about CICA stay procedures involving Threat Tec that came out just a few weeks ago. We’ll be talking more about stays in the next episode with Scott Flesch, but what eventually happened in that Court of Federal Claims case was that Threat Tec was denied the challenge to the override of the stay. So the agency was able to override the stay during the GAO case.

Now we see the GAO decision coming out in Threat Tec regarding SBIR. The outcome of this case is that you have to pay really close attention to who wins and who loses an SBIR award. Threat Tec had its protest dismissed not on the substance, but on timeliness. It got dismissed on timeliness because the agency had selected a company, Chitra Productions LLC out of Virginia Beach, that was awarded under SBIR Phase III, and Threat Tec did not know that when it brought the protest. Threat Tec actually protested in part because the agency did not give an explanation as to why Chitra was able to receive the award.

Very quickly in the protest response—just five days after the protest was filed—the agency told Threat Tec that the award was made to Chitra under Phase III. Eventually, on February 17th, Threat Tec filed a supplemental protest at GAO stating that Chitra hadn’t received an SBIR Phase I or Phase II. So how can it possibly receive a Phase III? That’s what Phase III is—it’s a follow-on to an SBIR Phase I or Phase II award. You can’t get a Phase III unless you’ve got an SBIR Phase I or Phase II.

Now, the agency has an explanation for it. You don’t see this in GAO cases very often, so it’s interesting that it’s even discussed. The agency is claiming that Chitra is a successor-in-interest to another company’s Phase II contract. Chitra had purchased IP and technology from a company called Architecture Technology Corporation (ATC) that had won a Phase II. That technology is what led to this Phase III acquisition. The agency said the technology it’s going to use in this Phase III contract is the same technology that ATC had designed under the Phase II contract.

Threat Tec tries to challenge that. There’s stuff about the DEC standard—derives from, extends, or completes. Maybe it’s arguing it’s not actually a successor-in-interest, but they don’t even get there. If you pay attention to the dates, the agency had told Threat Tec very early on, within five days of filing a protest, that Chitra was the company and had gotten the award under Phase III. At that point, GAO says, the clock starts to challenge Chitra’s SBIR Phase III. You can’t wait until you get more information from the agency in a request for dismissal or further filing.

The reason is you can look up all of this stuff on SBIR.gov. You can look up who’s won an SBIR Phase III award. GAO quotes the SBIR.gov website as having every SBIR award since the program’s inception. It says this is a publicly available government source—the same source the agency used when it conducted its search. So there’s an expectation that Threat Tec can’t wait to find out that Chitra is the successor-in-interest to this architecture firm. Instead, Threat Tec had the information at the time it knew the identity of the company to go search the SBIR.gov database and find out that the company’s not in the database.

GAO also goes through some of the discussion about the successor-in-interest argument and notes that they considered the argument that it’s not a successor-in-interest, determining Threat Tec had not given a reason to question the agency’s judgment. So it’s interesting there that once you know what the company is, you’ve got to go and find out what your challenges are to that company right away. You can’t wait until you get further explanation from the agency. GAO says a protester may not passively await information providing a basis for protest. Threat Tec did not file a timely supplemental protest challenging Chitra’s eligibility, and therefore its second supplemental protest was untimely.

SBIR Program Reauthorization

On that note, with SBIR, most people probably heard this, but the SBIR program was reauthorized through the Small Business Innovation and Economic Security Act that became law on April 13th. It was signed by the president, and it creates a new program: strategic breakthrough allocations for critical technology areas. That’s higher value SBIR awards that have to have a match to them.

It also requires agencies to set a maximum number of proposals per fiscal year that a company can submit in response to a Phase I or Phase II solicitation. That had been a big issue with multiple award winners—are we going to try to cap the number of awards? Here it’s a cap on the maximum number of proposals, and that’s set by the agency. There’s no specific cap in the legislation. It also expands requirements for federal agencies to evaluate security risks for small businesses that apply.

And if the agency denies an application for security reasons, the agency must provide the small business with a basis for such determination. We’ve heard from companies that are getting denied, and they don’t get a reason. The legislation requires the agency to provide the basis for that. So that’s the new Public Law 119-83 extending the SBIR program. It gets five years, so it’s now authorized through 2031—through Fiscal Year 2031. Hopefully, we don’t have to deal with all this stress and back and forth on the SBIR program when it gets to 2031.

OHA Suspension Appeals and the 8(a) Data Call

On the OHA front, OHA has been busy with the suspension appeals. Let’s see, 714 is the last one I saw. These are numbered sequentially, so you can kind of see how many they’ve done. Let me see, 714 is still the last one. They number all these cases, and at the beginning of this, they were at 638. They’re now at 714, which means they’ve done upwards of 80 suspension cases. All of these are dismissed. We have not seen a substantive suspension decision. For the most part, they’re dismissed because SBA has told the OHA judge that they’ve let the company back into the program.

I think a lot of what happened here is companies got suspended because they didn’t reply to the 8(a) data call, and they filed an appeal at OHA. They also filed the response to the data call with SBA at the same time. Now that they filed the response to the data call, SBA can take them off the suspension list. That means SBA can let them back into the program, and OHA, even if that happens—even if there’s really not a long period of suspension—still issues the decision. For firms that are suspended, they get the time they were suspended back on their 8(a) term. So if you’re suspended for 30 days, you get an extra 30 days at the end of your 8(a) term. You still get the full nine or 10 years in the program, even if you’re suspended from the program because of not replying to the data call.

Now, there are a number of companies that have been suspended because of concerns with their economic disadvantage. They may be over—or at least from SBA’s view, they may be over—some of the thresholds for economic disadvantage: $400,000 for income, $850,000 net worth, $6.5 million for assets. Some of those suspensions are coming through in these decisions as well. All told, there are probably well over 100 cases that have reached OHA, but many of them have been dismissed, and for the most part, it is because the company has gotten back in. I’m sure there are companies in here that have withdrawn from the program as well during the course of time and just seek not to continue to push their suspension.

OHA Case Law: Nisu and Identity of Interest Affiliation

There are a couple of substantive cases out of OHA. Let me see if there are any good ones here. We do have a case called Nisu. I may be trying to set up something about Nisu in the future, so I won’t go too far into it, but it’s an interesting identity of interest case. You don’t see identity of interest come up in these OHA cases as an affiliation ground very often. I think there was a point in time where identity of interest was a much bigger deal, but in the last few years, it seems to have waned in importance. This is potentially because of the way economic dependence has changed; they kind of made a big exception that follows the economic dependence rule.

But identity of interest comes up a lot with familial relationships. People who are related can have this identity of interest ground for affiliation, and those were the facts here. This happened in multiple stages. SBA finds a firm to be affiliated or not affiliated, and OHA reviews it. At the SBA stage, the SBA had found the firms to be affiliated because I believe it was a father-daughter relationship. The father was an executive at one firm, and the daughter was the head of an 8(a) company, and they were doing business together, including through a mentor-protégé relationship. The area office found affiliation, which would cause them to lose the contract that they were going after. Let’s see if I can find out what the contract was. It was an Air Force contract for sustainment, restoration, and modernization. So they’re affiliated, they lose the contract, but OHA actually granted the appeal and vacated the decision—not reversed it, but vacated it—and remanded it to the area office. I’ll be tracking that and seeing if we can have more discussion about it in the future.

The SBA Scorecard and Category Goals

The SBA Scorecard has made it into the news lately. There’s an article by Jason Miller in the Federal News Network about changes to the SBA Scorecard, and I was actually quoted in it. I know a bit about the SBA Scorecard; I used to run it. I was quoted in the article saying it’s probably time to change the SBA Scorecard because it’s been about the same for nine to 10 years, and the administrator has the ability to change it within some statutory confines. I pointed out in an earlier article that the numbers put out online didn’t actually add up to 100%. It was 110%. Apparently, SBA heard a little bit about that from Congress. There was a letter, summarized in the Jason Miller article, that went from the ranking member on the House Small Business Committee to SBA, pointing out that these numbers don’t add to 100—they add up to 110.

I think the biggest impact, as I noted when I first looked at the scorecard, is on the trade-off between the 8(a) program and veterans. The 8(a) program used to be a big emphasis for the scorecard in the Biden administration because that administration raised the goal for small disadvantaged businesses to 15%. In federal contracting, the only way you can target small disadvantaged businesses is through the 8(a) program. So, that was a bigger use of the 8(a) program encouraged by the scorecard under the Biden administration. Here, this administration is seeking to emphasize veterans. They’ve added veterans into the disadvantaged business category. They’ve created this economic disadvantage category and say veterans are presumptively economically disadvantaged. Veterans also have another category, the SDVOSB category. So it’s not clear whether that overlaps. Are you only counting veterans that are not service-disabled for that? Are you going to double-count service-disabled veterans for that?

There are additional elements in the scorecard that consider veterans. There’s actually a standalone category called “Serving Our Veterans” that is worth 15% of the scorecard. It says that increasing award dollars in outreach to SDVOSBs and veteran-owned small businesses could earn agencies that 15% of the scorecard, although I’m not sure if it’s going to stay 15% if it all adds up to 110. I told Jason Miller this in the article: my general view on the scorecard is that it can be effective for a bit. It leads to a letter grade. It’s good for agencies to get A’s; they want to get A’s, and people expect them to get A’s. But I think it’s more important to hold agencies to the actual numerical goal. There’s a 5% SDVOSB goal. The Department of Defense does not meet that 5% goal. Many agencies do. The VA is at over 25%, so they meet that goal. But a lot of agencies don’t meet that goal. I think it’s more important to hold agencies to those goals than it necessarily is to get them an A. Because you can see here, okay, you get 15% for increasing outreach. What does that really mean? How do you get that 15%? These things can go back and forth on the grade. Sometimes you can work the grade a little bit, just like you can in high school and college, but you can’t work the numbers. The numbers are what they are, and agencies that don’t meet their numerical goals should be held to account. I would focus more on those than I would on the grades.

Regulatory Developments: FAR Council and DEI Executive Order

Going over to other regulatory developments, there was the executive order that I discussed in my last podcast on addressing DEI discrimination. The FAR Council came out very quickly with its deviations for that executive order. They had a 30-day deadline, and they did it ahead of that deadline, which is pretty incredible. I think they actually did it the day before I filmed the podcast; I would have talked about it otherwise. The deviations are very similar to what you saw in the executive order. I’ll be talking about that a bit with my next podcast guest, Scott Flesch. The timelines are very aggressive on these deviations, and they also include incorporation into existing contracts. By July, agencies should look at incorporating the deviations into existing contracts through a bilateral modification. It says if a contractor refuses to agree to a bilateral modification, the CO should consider whether, absent the modification, the contract no longer meets the agency’s needs and should therefore be terminated for convenience. That’s a good reason for contractors to strongly consider allowing the modification to the contract, because otherwise, the CO will strongly consider whether it might be terminated for convenience. We’ll be talking about that in the future.

Q&A: AI in Source Selection and Bid Protests

Okay, I’m going to go to questions that I’ve received online, first in the articles, and then if there are any in the chat, I’ll go over those questions too. On the last podcast that I had in North Carolina, I talked about AI legal risks and what law firms were doing with AI, and what the government was doing with AI. There was a GSA clause on AI. There’s a good question in the comments about the government using AI as part of source selection. If the RFP states that the government is using AI to help in source selection, is that protestable, particularly since there aren’t any bumpers or guardrails for AI? I think that’s happening; I’ve seen it out there. Lufield Consulting is putting out some information about AI and source selection and how to deal with that.

I think we’ve seen it with SBA already with the terminations and suspensions. It looks like a lot of these suspension letters are at least combed through by AI, if not written by AI. And yes, is that protestable? If it’s unreasonable, then certainly it is. I think that’s why you see so many suspension appeals at OHA, and seeing that OHA is dismissing those because SBA is lifting those suspensions. A few of those suspensions might be lifted because AI got it wrong when it was going through and looking through all these files.

I think you could look at the same with AI in source selection. I always thought of it as having inherently governmental tasks, and source selection is inherently governmental. You’re not supposed to have contractors rating proposals. Shouldn’t it be the same way for AI? Could we use the inherently governmental guidance to say there has to be a human looking at this as well, because an AI is conducted through a contract? I suppose, unless you have an AI government employee, you’d have to develop the AI yourself within the government. I don’t think that’s happening. So I’d want to have some sort of explanation as to why the government is doing inherently governmental tasks under the OMB memo using AI. I’m sure it’s happening, though, especially with government employees leaving because of RIFs. There’s this Article II decision that came out recently, and government employees are leaving because of that. There are just fewer government employees around, so whether they’re directed to by their agency or not, I’m sure there’s AI being used in procurement. But yes, is it protestable? The AI is going to make mistakes. It’s probably going to make a lot more mistakes than humans will. We talked about that with Jackson Moore as to how many mistakes judges are pointing out during protests and such. So those mistakes are certainly protestable, no question.

Q&A: 8(a) Sole Source Trends for Native-Owned Firms

Then I got a question, and I have some data for this, so I’m excited to talk about it. Major Clark, who used to be the acting chief counsel for advocacy, asked: what’s the impact of the transition away from 8(a) sole source contracts on Alaskan and Native American businesses? And then, what are the characteristics of the small businesses that are winning sole source contracts? Let me share my screen on this, but I went back and looked at the data and updated it for 8(a) sole source awards. This is in the context of my article that said 8(a) sole source contracts have cratered. They were 50% more in previous years. In 2024, they were about 870, and then in 2026 they fell to 590. So a pretty big decrease—about a 40% decrease in 8(a) sole sources. Who’s getting those? Well, at this point in the year—so we’re about a month after I published that article—we’re now at 772 8(a) sole sources. This is still considerably down when you consider there were almost 900 the previous year.

Of those 772 as of the end of April, a little bit more than half are individual. There are 450 sole source contracts to individually owned firms, and 323 to Native-owned firms, which includes Tribal, ANC, and Native Hawaiian. Of those, 235 are to Alaska Native Corporation-owned firms. Individually owned firms still make up the large number of 8(a) firms, so they’re still getting a large number of 8(a) sole sources. There is a very considerable number going to ANCs, and then a smaller number to the tribes and Native Hawaiians. If you look at the number of sole sources by firms, though, it is dominated by Native-owned firms. I looked up all the sole source 8(a) contracts in Fiscal Year 2026 and the number to each individual firm. The top one is Chenega Government Mission Solutions. It has won nineteen 8(a) sole source contracts in Fiscal Year 2026, and of course, that’s a Native firm.

The top three are actually all Native firms. You have to go all the way to number four to find the first individually owned firm. That’s a firm called Aleto, out of Arlington. They got eight 8(a) sole sources. If you go all the way to the top 16, that’s the only one that’s individually owned. So the bulk of the multiple 8(a) sole source award winners are Native-owned firms, especially when you’re above five awards. The top individual ones are Aleto with eight, and then the next ones have four. So they’re being spread very evenly across individually owned firms, maybe just because there are so many more of those. Thank you, Major Clark, for that question.

Q&A: White House Procurements and Sole Source Contracts

I got another question on that post about 8(a) sole sources from Bill Elmore. He used to be at SBA in the Veterans Office. He said he’d be interested in the White House’s procurements and how those have progressed. Just in time, The New York Times did an investigative story to answer Bill’s question about how the White House’s procurements are going. There’s an article published by David Farenthold, Luke Broadwater, and Andrea Fuller titled, “The Firm Building Trump’s Ballroom Got a Secret No-Bid Contract for a Nearby Job.” The National Park Service increased the value of the contract several times over and then awarded it to Maryland-based Clark Construction in a process that experts said was highly unusual.

The circumstances involved Lafayette Park across from the White House. The Biden administration estimated the contract at $3 million. It was awarded to Clark for about $12 million, and then it got increased to $17 million. So it ended up well above the estimate and even above the original award amount. Because this same firm is building the ballroom, the suggestion in the article is that they’re getting extra money for the park because they’re working on the ballroom. It’s not said in those exact terms, but that seems to be the suggestion. They quote Steve Schooner and others about how this is really unusual to see. First of all, a sole source contract for the repair of a park is highly unusual because it’s not like somebody’s going to die because the park is in that shape. And also, it is highly unusual that there’d be such a large financial increase for the park project. I’ll put a link to that very well-researched story into the show notes.

Q&A: 8(a) Certifications and OHA Remand Timelines

We have a question from the chat now from the people on the live stream. Michael Mataccio asked: what are your thoughts on when SBA will return to proceeding with sending out approvals and denials for 8(a) certifications? Did I check this week? It’s been August 15, 2025, for so long that I don’t always check because it’s kind of boring if it’s the same every time. Let me go in and check. It’s been a really long time since SBA has sent approvals, but it’s also interesting to hear that maybe they haven’t been sending denials as well. I’ve heard from some firms—people contact me and say they’re in the last step of the 8(a) process, but they still haven’t gotten anything on their 8(a) application. It seems like if there are enough people experiencing this, they should bring some sort of request to SBA. There is a regulation that says SBA will decide applications within 90 days. So if there are companies out there that have been waiting for years in some of these cases, they’re definitely past that 90-day period.

Let me go in and check the database to see what the last firm is. Let’s see... no prediction on my part, certainly. I can’t tell you what SBA is going to do. I guess I can say that the staff doing the applications is probably the same staff doing the suspensions and terminations that may be wrapping up. So to the extent that the application processing shifted to the suspension processing, maybe those people can shift back to applications. Looking at the database, yes, the most recent firm still remains a firm that was certified on August 15, 2025, at least according to the SBA search website.

Then we have a comment or question from David Timm: how quickly do you expect SBA to issue a new size determination after an OHA remand? It varies a lot. There was a case about six months ago where OHA had remanded a size case to the area office. I think it was to find the firm other than small, but it had been nine months, and the firm still hadn’t gotten the remand decision from the area office. So OHA, in a very rare type of case—I’ve never seen one like it—just declared the firm to be small or other than small; I’d have to go back and find that case. But in that instance, it took nine months. There was another remand case recently involving JP Morgan, finding that JP Morgan was an investor with negative control in a company, and that was a remand as well. You can check to see how long SBA took to decide the remand in that case.

All right, that’s all I have. Thanks for joining me for data and case law updates, legislative updates, and tracking the SBA budget goings-on within the SBA Office of Advocacy. Keep your questions coming. I’ll have another podcast next week with Scott Flesch, where we’ll be going over recent bid protests and the executive order. Feel free to take a look at that, comment on it, and we’ll see you again soon. Thanks for joining, everybody.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

AI Legal Risks and the Anti-DEI Executive Order

Sam Le — Tue, 21 Apr 2026 09:01:08 GMT

Jackson Moore and I recorded a GovCon Intelligence episode on location in Wilmington, North Carolina. We were on a panel there last week, moderated by Sue Kranes at the North Carolina Military Business Center Construction Summit. Jackson is a partner at Smith Anderson in Raleigh and recently has been writing about AI-related developments in GovCon. We talked about AI hallucinations and more broadly about how using AI can come back to haunt parties in litigation. Then we went back to the topic of our panel: the recent executive order on racially discrimination DEI and IBM’s $17 million settlement.

Links

Jackson Moore at SmithLaw.com

NCMBC Summit

Turning Chats Into Trial Exhibits: Litigation Risks of Generative AI Use (smithlaw.com)

You Can’t Spell Sanction without “A” and “I”: When Unchecked AI Hallucinations Result in Court Sanctions (smithlaw.com)

Whitting v. City of Athens (6th Cir. 2026)

AI Hallucinations database (damiencharlotin.com)

Appeals of Huffman Construction LLC (ASBCA Oct. 23, 2025)

U.S. v. Heppner (S.D.N.Y. Feb. 17, 2026).

Steve Koprince: What aspects of federal contracting AI is most likely to get wrong

Proposed GSA clause 552.239-7001, Basic Safeguarding of Artificial Intelligence Systems

Executive Order on Addressing DEI Discrimination by Federal Contractors

IBM Pays $17 Million to Resolve Allegations of Discrimination Through Illegal DEI Practices (justice.gov)

A transcript follows.

Introduction and Guest Background

Sam: All right. Well, for GovCon Intelligence, we’re reporting live from the North Carolina Military Business Center Summit here in Wilmington, North Carolina. And my guest today is Jackson Moore. Jackson, welcome to GovCon Intelligence.

Jackson: Welcome. It’s a beautiful day here in Wilmington, North Carolina. It’s been a great conference. Glad to be here.

Sam: Thanks very much for being on the show. Wahoowa, by the way. Jackson Moore is a graduate of the University of Virginia undergrad, but graduated from Duke Law School, another ACC school rival, in ‘95. He’s been an attorney at Smith Anderson in Raleigh, North Carolina since 2001, focusing on government contracting and business dispute resolution. Smith Anderson has about 170 attorneys in Raleigh. Just moved into a new building, I hear.

Jackson: Or renovated some existing space, so it’s great.

Sam: That’s terrific. So, a growing firm. Your GovCon practice includes compliance and bid protests before the GAO, the SBA Office of Hearings and Appeals. We work on REAs, so here working with construction contractors, a lot of REAs are involved in that. You also likely have claims in front of the Armed Services Board of Contract Appeals and CBCA. Drafting agreements, subcontracts, joint ventures, and teaming arrangements to comply with the FAR and North Carolina laws. Are you primarily working on federal laws with North Carolina or state?

Jackson: We also work on public-private projects and infrastructure in the state of North Carolina and the Southeast.

Sam: How’s it look here?

Jackson: There’s a lot of stuff being built. There’s a lot of need. There’s a hospital that is going to be built in the Triangle area to deal with mental health. That’s a first for the state, and that’s very exciting. We hope to be able to work on those opportunities, for sure.

Sam: That’s great. That’s kind of fun to walk around and see a building that’s built or a hospital and say, “Oh, I had a little part in that.”

Jackson: Yeah, absolutely.

The Use of AI in Government Contracting Law

Sam: That’s very interesting. Well, I wanted to have you on because you published an article recently about the use of AI, artificial intelligence, in government contracting, and specifically with the practice of law in government contracting. I see these things on LinkedIn every once in a while; AI is going to get rid of these jobs. Coding is one of them. Another one is lawyers. And I see this sometimes with my clients. They look things up on AI ahead of time and they come to us and they say, “Oh, well, this is what Claude told me, or this is what ChatGPT told me,” and I think, “What is my role here now? Am I the lawyer or is ChatGPT the lawyer?” So tell me a bit about how AI is being used in government contracting and specifically in the practice of government contracting legal services.

Jackson: It’s interesting, and I’m a big fan of these AI tools, if you know their limitations and what they can do. I think the primary challenge, Sam, with respect to these AI tools is they’re not searching databases necessarily for information. They’re language completion models, and they’re not thinking the way that you and I are thinking. So if you go ahead and ask a legal question to your AI tool, it will give you an answer and it may look like a very good answer. But it may be spectacularly wrong. One of the things that has come up in a lot of published decisions is where you have parties, whether they’re representing themselves or whether they’re represented by lawyers, presenting cases and arguments to the courts that are fictional. They’re hallucinations, and parties are getting sanctioned; lawyers are getting sanctioned.

There’s a decision recently from the Sixth Circuit Court of Appeals that sanctioned a party tens of thousands of dollars because multiple fake cases were presented as real cases to the court. So there are risks there, and parties who are especially thinking about presenting information or arguments in bid protests or claims to the federal government really need to scrub their information and make sure that they are citing accurate stuff to the court. Otherwise, you may wind up in the same position as those parties in the Sixth Circuit of being sanctioned by the court or the tribunal.

Sam: So is this primarily companies that are representing themselves in front of the court pro se, or are they represented by attorneys as well?

Jackson: It’s a mix. Part of the reason why lawyers are getting sanctioned representing parties is they don’t understand what the tool is doing. It will give you an answer, and you just need to go back and check and make sure that the answer is accurate, that the case exists, and that the argument presented by the AI tool exists. So it’s a mix of people who are pro se with no lawyers and people who are represented by barred attorneys. You just need to be careful about that. There’s a professor in France, of all places, who’s been gathering and keeping track of all these instances where a court has pointed out or sanctioned somebody for citing to a hallucinated case. I think he’s up to 1,200 published decisions.

Sam: Oh, wow.

Jackson: Mostly in the US.

Sam: I think I saw the Armed Services Board of Contract Appeals was very harsh against one of these representations and briefs in front of the ASBCA.

Jackson: Yeah, and it’s the kind of blocking and tackling that you would expect a party, and especially an attorney, to be checking. Because if you’re going to go ahead and present something to the board, or the court, or the agency, or the GAO, you’ve got to make sure that it is accurate. If not, you’re making a misrepresentation to the court. If you’re not checking it, then you’re just not doing the baseline work that you need to be doing.

Sam: That’s interesting because contractors use case law in front of the BCAs. They use it in front of SBA OHA and GAO, but they also sometimes use case law when they’re just corresponding with agencies and contracting officers. They say, “Well, let’s give an example regarding limitations on subcontracting. You may be interpreting limitations on subcontracting this way, but there’s also this case at the GAO or OHA that says this.” And if the contractor is using AI for that, they may be getting those cases completely wrong, and that really kills their credibility as well. So you need this verification at multiple stages in the process.

Jackson: I think anytime you’re going to tell a governmental agency, “I should win because of X, or this case says X,” you need to go back to the case and just make sure that the case exists. A lot of these cases are instances where the AI tool is designed to give you an answer. It’s going to come up with an answer. It may give you a beautifully looking answer as far as cases and citations, but it doesn’t exist. You just need to go back and make sure it exists, make sure it’s correct, and then you can go ahead and proceed and present it to whoever you’re speaking to. Because you lose credibility and you could be sanctioned.

Sam: Yeah, I saw that all the time when I was counsel at the SBA. People presented arguments to me to try to intervene on a case and they presented cases, but it’s not before a forum. It’s not like I can sanction them, but it does hurt your credibility and I think, “Oh, well, you’re not serious about this, or you haven’t really looked into this.”

Confidentiality and Data Privacy with AI Tools

Sam: On the other side of it, there may be contractors that are using AI for preparing their proposals or preparing for some side of negotiation or litigation, and they’re putting information into AI tools. It could be specialized AI tools, or it could be Claude or ChatGPT consumer-based tools that everybody has access to. What are you advising clients about putting their information into AI tools?

Jackson: Well, let’s start with their own information because they can do whatever they want with it, theoretically. If they’re taking somebody else’s information, then there may be additional problems. But let’s talk first about clients taking their own data and sharing it with an AI tool. I think the first thing that clients need to be looking at before they share anything with the AI tool is, “If this gets publicly released or is used by the AI tool, do I care?” And if you’re taking confidential pricing data and you’re sharing it with a third-party tool, what does my agreement say with the tool? Are they going to be able to use Claude or ChatGPT to use my data for purposes of training the model? Or are there disclosure rights that the party receiving your data has? If you do, then you just need to understand that you’re potentially waiving confidentiality that would otherwise apply to this information.

There was a case that is not necessarily exactly on point, but as a warning, there’s a criminal matter pending up in the Southern District of New York, an important federal court, where the judge issued an order that required the criminal defendant’s chats with Claude to be turned over to the Department of Justice in his criminal matter. Now, the questions that he was asking Claude related directly to his lawsuit: “What defense can I raise in connection to this securities fraud matter?” So, you lose confidentiality potentially regarding that information. One thing that we’re cautioning clients is if they’re taking trade secrets or attorney-client information, be very careful about sharing that information with these tools because you may no longer have attorney-client privilege or work product protection that might apply to that data.

As far as thinking about third-party information, what if an agency gives an agency record in connection with a bid protest? Same problems, probably even more so. You’ve got protective orders that are going to vary by court and jurisdiction, and that’s going to vary by court, judge, and the sophistication of the agency or tribunal. If you go ahead and put that kind of information up in a publicly facing open-source generative AI model, you may have breached the protective order that applies to that material because you now have given that information to a third party.

Sam: I wonder if courts are going to start mentioning that in their protective orders, that this does not just apply to your organization, but also to the use of AI tools.

Jackson: There are some cases that are coming out after this. The decision from the Southern District of New York is called Heppner. One of the other two cases that we talked about in our alert that we issued last week was another decision that actually disagreed with parts of Heppner, but also issued a protective order that essentially said, if you have a generative AI model that has certain protections—that does not use the data that you upload to train the model or otherwise disclose the information to the generative AI tool—then you can use generative AI for that purpose.

Sam: Oh, you can? Okay.

Jackson: So they authorize that.

Sam: If you look at the terms and conditions to figure out whether they’re using it for training.

Jackson: That’s right. But this is an evolving area, Sam. Courts are really dealing with this case by case, and you can’t rely on that one instance to say, “Well, I can therefore use my enterprise-grade ChatGPT for purposes that may otherwise violate the rules.” There’s not really any clarity about how courts are going to rule in this space. So really the ideal situation from the client perspective is don’t share information that you’re not willing to have disclosed to everybody with these tools. The protective order issue is fairly new, it’s evolving, and parties just need to be very careful about making sure they understand what the rule is that applies to their case, their protest, their appeal, and so on.

Sam: I know in litigation there was a time when you and I had been practicing law long enough that we realized, “Oh, we should start asking in discovery for text messages.” And asking for social media posts, you know, “What have you put on LinkedIn?” Is it now at the point that people are asking, “What have you put into ChatGPT?”

Jackson: I think the short answer is yes. And if you’re in a lawsuit where that kind of discovery is going to be exchanged, courts and parties are going to have to figure out if there is any line drawing. The court in Heppner, that criminal case I talked about earlier, talked about the fact that the criminal defendant had to turn over all his Claude exchanges. His lawyer did not advise him to do this; he just did it on his own. Whether or not that means that if your attorney is advising you regarding these tools that’s going to protect things and become work product under those circumstances, is again, not very clear. I don’t think I would rely on that line of reasoning if you’re using a publicly facing, open-source generative AI product.

Sam: That would be an odd move for a lawyer to make, saying, “Don’t call me with your question, instead put it into ChatGPT in my direction.”

Jackson: Putting aside the hallucinations, I understand why people would want to use these tools. It summarizes a lot of data very quickly. It’s like me, before I go to the doctor, I Google my symptoms and see what ailments I may have, and then talk with the expert about those things and try to get feedback. The challenge with “My lawyer said that I could” is your privacy policy or terms and conditions with that generative AI model, which is also a problem that the Heppner court raised. Claude can take the inputs that you send Claude, and then Claude can take the outputs that it gives you, and it could disclose them to third parties if it wished. It could disclose to a government agency, and it could use them to train its models.

The Heppner court said you didn’t have any expectation of confidentiality over this information because your terms and conditions said Claude could pretty much do whatever it wished with the information. That’s a slight overstatement, but you didn’t have any confidentiality expectation over the info, and a lot of people will get going with these tools and they’re not reading the terms and conditions. They’re not considering second and third-order risks that flow out from use. One reason why we wanted to alert clients is that just like I might ask Google or ChatGPT to tell me what ails me, clients are going to want to ask these tools questions to try to get legal answers. And you can expect that in discovery, if there is a later dispute, those searches are at risk of being disclosed.

Sam: It is a bit higher stakes than asking, “Oh, what’s a strange thing on my hand?” Which sometimes you get wrong as well. It’s going to tell you that you might have a 0.1% chance of having cancer, and then you go to the doctor who says, “No, it’s nothing. It’s just a blemish. Don’t worry about it.”

Jackson: That’s true. And one distinguishing feature, if you’re going to use these models, is you should take them to your attorney and get advice from somebody who is an expert in the jurisdiction and in the area of law where you’re practicing. The challenge with a lot of these models is it’s searching an extremely broad area of data to try to assemble an answer. It is not looking at a legal library. If you’re in North Carolina, where we’re sitting, it’s not looking at North Carolina law. So you’re not really sure exactly what it’s using to assemble the answer. Again, it’s not really researching because that’s not really what these tools do.

Sam: Yeah. It’s like, as you mentioned, Googling something; it doesn’t have the specialized knowledge. Steve Koprince put something out on Substack and LinkedIn this week regarding the areas that ChatGPT or Claude would be most likely to get wrong in government contracting. It’s those sorts of things. It’s in the detail. The other part of it is, because it’s searching on a broad base of information, it doesn’t necessarily know what the most recent information is.

Jackson: That’s right.

Sam: So thresholds change all the time. We were just talking in our session about the SBA’s new recertification rule or the FAR overhaul. It’s probably not going to give you great information on the FAR overhaul because the information has just come out in the last six months. Whereas it might have lots of information about the legacy FAR, it’s not going to have the most up-to-date information, so that may be a reason as well to be suspicious of what you’re getting from AI.

Jackson: Because it’s a language prediction machine. Again, that’s an oversimplification, but it’s trying to figure out and build an answer on what the most likely next word would be. And if you have, say, 20 years of decisions or FAR clauses to rely upon, there is a risk that the model is going to look at the stuff that it has more volume of, as opposed to things that are most accurate because they’re more recent. Like you say, if the SAT changes, it may be looking at an old SAT threshold because there’s just more data for it to look at. It’s going to give you the lower number, or an inaccurate number instead of the most recent one, because there’s simply less stuff for it to be looking at to try to build its prediction.

Sam: Maybe they solved this by now, but around January, everybody was asking, “Who won the last Super Bowl?” And then it would go back and say, “The New England Patriots,” which I guess they were the Super Bowl champions then, but they did not win the last Super Bowl if you were following that.

The Proposed GSA AI Acquisition Clause

Sam: I wanted to ask you about the GSA’s proposal of an AI clause. It’s GSAR clause 552.239-7001 about the acquisition of AI. This is for companies that may be using AI in their systems that they’re proposing to the government or in their deliverables. The GSA initially had a very quick turnaround for comments on this clause. They put it online for something like 10 days, and afterward, they extended those comments, but the comment period is closed now. The clause would give broad IP rights to the government over custom developments. It prohibits the use of government data to train models—you mentioned training—and mandates the exclusive use of American AI systems.

It also has a term on unbiased AI principles, which has provisions allowing the government to conduct assessments and suspend or terminate systems that include ideological or partisan judgments. So a question for you first on the IP terms. This would prohibit contractors from using government data to train their commercial models and grant the government full ownership over custom developments. Was that surprising to you as far as IP terms go, and what do you foresee? Do you foresee companies trying to push back on that? Is that going to push companies out of the market because they’re uncomfortable giving up so much IP to the government for that GSA clause?

Jackson: You know, I guess on the one hand, if the government data that’s being utilized is already what we’ll call public information, right? Because there’s plenty of data that’s published or issued by the Census, for example. Are there no boundaries on what is considered to be use of government data for purposes of training under this clause or not? I don’t know if we have good boundaries for that. I do think as it relates to the government’s ownership on custom developments, if you think about some of the data rights that exist benefiting the government in connection with work that is being performed that is paid for by government money. You have certain data rights, and you need to start making declarations and markings if you want to have a contract with the government and you don’t want the government to have unlimited rights in the data. You’ve got to start making markings and this sort of thing, at least in the DoD space. I certainly can see these AI companies being very cautious about how they provide anything to the government other than, “This is our commercial product.” This is our commercial off-the-shelf product. We’re not going to give you any customization because we’re worried about the government perhaps taking more than what the company may wish to have.

Sam: Any other comments on that clause in terms of what might be surprising to companies that are usually working in the commercial market and are now trying to transition to government? What should they be looking for if that clause does eventually end up in contracts?

Jackson: I think there’s the mention of American AI systems, and that’s defined in the draft clause as systems that are developed and produced in the United States, but it doesn’t say what produced in the United States means. And if you think about how technology companies may be using global data, they may be using foreign employees, they may be using open-source models where you’re not really able to easily discern what is considered to be domestic and international. I think for companies that are trying to offer AI to the government, that’s going to create uncertainty. Companies may say, “We’re just not going to operate in this space because of the uncertainty that surrounds it.”

The other thing that you mentioned, and we had our program earlier with a lot of small businesses here at this conference talking about the DEI executive order—sitting here in April 2026—that was issued last month. The GSA clause talks about AI systems being neutral and nonpartisan and prohibiting the encoding of ideological dogmas such as Diversity, Equity, and Inclusion. I think there’s some uncertainty about what all that means and how you address that from a compliance standpoint. Are you going to present principles to the government in advance? Because the government has the ability to run an automated audit under this clause as well to see whether your output is actually following these requirements. How’s that going to work?

Sam: I think a lot of that comes out of the experience when Google first issued Gemini, and it would output images that would always have people of color in them; Google, for whatever reason, had ingrained that into their AI system initially. So there was a big uproar after that, saying, “Oh, this is woke AI.” But in some ways, I think AI development has gone the other direction, where there have also been notable instances of other AI systems that do things that probably are outside of the norm of what you would really see in responses from AI companies.

Jackson: I think that’s a challenge with the AI products generally. We kind of talked a little bit earlier about how the AI model may return an inaccurate response because it has more of a certain type of data. As I understand it, the AI challenges as it relates to imaging is that if it has more of a certain race, gender, or creed of a person, it’s going to be more likely to give an output that follows that issue. So how do you deal with that? I’m not sure the technology experts can really address that fully, and I’m not sure how the government will properly regulate it. It’s unclear to me how that’s going to work.

Sam: That’s interesting because there’s some thought that an AI can be completely neutral, but because it’s training on prior data or prior images in this case, that may not be completely neutral. So that neutrality in whatever concept this is, the non-woke AI, is probably impossible because it’s all based on the prior training data.

Jackson: You mentioned impossible. People have different perspectives on these issues, of course. I expect there’s going to be litigation surrounding all this because if there’s an unresolved dispute, or if there is a statement that it’s going to be X, someone’s going to say, “I don’t think X is legal.” And now the courts are going to have to understand these models a lot better than they do overall to try to provide decisions on whether this clause is going to be enforceable as is. What does it mean to have a neutral AI model? Is that somehow implicating the First Amendment? Because now you’re essentially telling people their content has to be this. The government is paying for it, so that’s a little bit different as well. There are a lot of interesting and unsolved questions, and I don’t know what’s going to happen. It’s going to be interesting.

Implementation of the New DEI Executive Order

Sam: Another part that will be interesting, and we talked a lot about it in this morning’s session, is the implementation of the racially discriminatory DEI executive order. We are at April 15th or April 16th, and that means we’re about a week or two weeks away from that 30-day point.

Jackson: It was issued March 26th. Right.

Sam: Yeah. So we’re about 10 days away from the 30-day point of that executive order. What’s going to happen in 30 days? What does that executive order say? Is anything going to happen in 30 days, do you think?

Jackson: I think the executive order speaks to there being a FAR clause that agencies are going to have to start including in existing and new contracts regarding certifying effectively that there is no illegal discriminatory DEI within the company. And then that requirement is going to need to be flowed down by a prime contractor to the subs, all the way down to the last tier.

Sam: Right. There are so many aspects of this executive order. First of all, you mentioned it in there, “racially discriminatory” puts it outside of looking at sex, gender, and veteran status you mentioned. And then this flow-down concept of not only do you have to flow down the clause, but you also have to report up. The prime contractor has a responsibility to report a subcontractor that violates or may violate this prohibition against racially discriminatory DEI. How do you think that’s going to work?

Jackson: Wouldn’t it also obligate the subcontractor to notify if they believe their higher tier prime is in violation too? There are a couple of challenges with it. How are you going to ensure that you’re properly monitoring if you’re a higher tier, say a large prime with a lot of subcontractors? The executive order speaks about knowing or knowable violations of this clause. Knowing is a standard of intent under the False Claims Act.

Sam: What does reasonably knowable mean?

Jackson: Right. On the one hand, I think the courts have said that you can’t hide your head in the sand and say, “Well, I didn’t know.” But the “reasonably knowable” standard seems a little bit more opaque. I don’t think you have quite as much case authority around it compared to the False Claims Act. I think part of the issues that have come up with respect to the executive order is that it’s using the False Claims Act as an enforcement mechanism. Admittedly, you could do that with a wide variety of provisions that are in the FAR, but the direct statement that the Department of Justice is going to have this almost as a point of emphasis—we’ll have to see what that looks like.

Sam: That opens up a number of different avenues. One is treble damages. When you’re talking about the values of multiple contracts, that could be a lot of money. You’re talking about millions or billions of dollars. And then the other is qui tam cases, too. You can file as a whistleblower or a qui tam case. As a federal contractor, you may be looking at all your former disgruntled employees that may be raising their hands and saying, “Hey, you had a DEI program while I was there, and you should have to pay for that.” It could be a big industry soon.

Jackson: And then attorney’s fees possibly. And then you have an administrative penalty that’s per violation. Is that going to be for every invoice that winds up getting submitted when allegedly this clause had been violated? Who knows? We’ll have to see what that looks like. I think one way that we can get some indication of where the Department of Justice might be heading is a recent settlement that was issued between the Department of Justice and IBM. IBM agreed that it was going to pay $17 million. Of course, it admitted no liability, which is very common in these agreements, and denied any wrongdoing. But the government stated in some of the provisions of the settlement agreement what it believed was wrong, and there may be some guidance in that settlement agreement to try to get some understanding of where the Department of Justice might be heading when they’re interpreting this DEI clause when it ultimately gets issued.

Sam: When the EO first came out, there was talk in the legal community that this materiality would be difficult to prove in court, even though it says it in the executive order. But really, if you performed on the contract, how material was the so-called racially discriminatory DEI to really performing on the contract? But then, of course, you have IBM settling for $17 million. That’s not a small sum.

The quote from the Acting Attorney General Todd Blanche was, “Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI. The department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good.” There’s another quote in there that says, “When a company accepts federal funding while engaging in practices that sort preferred disadvantaged employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them, and we will hold them accountable.” So you see the DOJ making this explicit link to payment on the contract with these DEI programs, and that puts prime contractors, even small businesses, at a lot of risk if they had some of the programs that were in the IBM case.

Jackson: I think that’s right. If I remember the settlement agreement correctly, and I don’t have it in front of me, I think the government was asserting wrongdoing going back to the beginning of 2019, which of course long predates the executive order anyway. How that’s going to interact is going to depend upon the provision of a FAR clause that we haven’t seen yet and how it’s going to be interpreted and enforced in cases that haven’t been filed yet.

Sam: I want to mention that FAR clause too, because we just went through this whole experience with the FAR overhaul where that was all issued through class deviations. The FAR Council would put it out on a website, and the GSA would adopt it immediately. And then other agencies would come in sometimes 30 days after, sometimes even longer after, with deviations on their own right for the agency. And that was the first time that I can recall that being done—that a whole new FAR, in this case, had been rolled out through class deviation before notice and comment. And now you have it in rolling out this executive order. The executive order specifically tells the FAR Council to implement this within 60 days through a class deviation. So you don’t usually see class deviations coming up in an executive order, but this seems like this is going to be the new normal. If you can get a FAR clause done in 60 days, why wouldn’t you try and do that? But that does put pressure on your clients, on industry, to shift very quickly.

Jackson: Yeah, no, I think that’s right. And we’ll have to see the additional background that was submitted in connection with the clause itself when it winds up getting issued. I mean, do you think that kind of flows out from the UNC/Harvard admissions case? They’re essentially saying, “Well, this is now Supreme Court authority, and we’re simply enforcing it.” Is that sort of the support, do you think?

Sam: I’m sure that’s part of it. There are also elements in that case that are not recognized in this Civil Rights Fraud Initiative. At the end of that case, it says there are instances where affirmative action could be accepted. And they give the example in a footnote of the military academies. And I haven’t seen that come up in new cases. It might come up in one of these cases of the defense, saying, “Well, the Supreme Court said it’s not always illegal. There are some cases where it’s acceptable.” So I could see that footnote having a big importance in the next few years if the Civil Rights Fraud Initiative finds more companies under investigation, potentially even going to court under the False Claims Act.

Jackson: Yeah, and you would imagine, as you mentioned, there probably will be whistleblowers that are going to step forward and blow the whistle. There’s a significant financial reward for those who successfully do that. So we’ll just have to see. The challenge always with executive orders is, as you know, every time you have a new administration, you have a certain set of policies. Executive orders that were in place get reversed, other executive orders are put in their place, and the pendulum just kind of swings from one direction to the other.

Sam: And you mentioned earlier today the potential for litigation. Were you referring to litigation specifically about the executive order, or this litigation that might come in from the Justice Department through a False Claims Act case?

Jackson: I guess I was thinking primarily about the language of the FAR clause and the enforceability of the executive order. And the downstream effects when either the DOJ pursues matters or agencies are supposed to be terminating contracts if there are violations. There are going to be claims perhaps saying, “Well, we either complied, or the FAR clause was not enforceable or illegal, or I wasn’t given an opportunity to address matters.” If you can tighten up in the clause some of the language about, for example, program participation, maybe some of the uncertainties can be lessened so that the parties can at least know, “Well, we’re really only fighting about this narrow band of conduct instead of something broader.” But I would expect by the time the FAR clause gets issued, that there will be some parties who are not going to be happy about it and that they’re going to try to take court action of some kind.

Sam: Okay. Well, that’ll kick off in a matter of 70 or so days now.

Jackson: Indeed.

Sam: Alright, 60. So yeah, we’re talking about 40 days actually. That’ll be coming up with this new FAR clause. Jackson, how do people find you?

Jackson: Oh, you find me at smithlaw.com. That’s the name of our website for our firm, Smith Anderson. We’re in Raleigh. 170 or so lawyers are representing clients around the country and around the world.

Sam: Well, thanks so much for joining us. Thanks for presenting at this conference with me again. It’s great to see you.

Jackson: Thank you.

Sam: Thanks everybody.

Jackson: Bye now.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

8(a) sole sources have cratered

Sam Le — Thu, 09 Apr 2026 14:44:48 GMT

The number of 8(a) sole-source awards has cratered, according to the most recent federal contracting data. Halfway through the fiscal year, agencies have awarded just 591 new 8(a) sole sources.1 Two years ago, that figure was almost 50% higher—873. If you go back to 2018, agencies had issued over 900 sole-source 8(a) awards by midyear.

You might think that agencies instead are turning to service-disabled veteran-owned firms. That’s where SBA has been putting its resources. But that’s not the case. The number of SDVO set-asides is basically where it was in 2023 and 2024, before DOGE cuts at VA.

Instead, the shift is to small business set-asides. The data shows a 25% increase in the use of small business set-asides. These are the ordinary set-asides that don’t require an SBA certification. Businesses simply self-certify as small in SAM.gov when they register to do business with the Federal government. The 25% increase in small business set-asides is the largest jump in my data set, which goes back to 2011.

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If this data holds up, it means government contracting is undergoing a big shift. For years, agencies have concentrated on awarding set-asides on SBA’s certification programs. The 8(a) program reached all-time highs in dollars awarded in each of the last four years. The SDVO program grew so much that Congress increased the government-wide goal from 3% to 5%. And the government still met that higher goal.

But this early data indicates that certifications are taking a back seat to small business set-asides. That’s now where the growth is.

Is this the end of 8(a) sole source?

This halfway data isn’t surprising. The 8(a) program is the target of SBA, which launched a program-wide comprehensive audit and hasn’t approved an 8(a) application since August 15, 2025. As of the last count, SBA has suspended—at one point or another—over 1,400 firms in the program. Hundreds of those have regained their 8(a) status, but 715 remain suspended.

SBA hasn’t told agencies to stop using 8(a) sole-source awards. But it didn’t need to. Senator Joni Ernst, as the chair of the Senate Small Business Committee, did it herself. She sent letters to 22 agencies, seeking their action to pause sole-source awards until 8(a) had undergone a full-scale audit.

Some agencies have cut back. The request was temporary, but it’s hard to see how sole-source 8(a) bounces back to prior levels. I don’t anticipate that SBA will announce a clear end of the audit; instead, the agency likely will shift to a longer-term skepticism of 8(a) participants. And sole-source as a contracting method is disfavored publicly, making it an easy target for bad press.

Here’s a list of agencies and how many new 8(a) sole-source contracts they have awarded through mid-year. Half are in the single digits:

At this point, if agencies really want to use sole source, other routes don’t attract as much scrutiny. These include OTAs, CSOs, and SBIR Phase III. Those sole-source methods weren’t as prominent when 8(a) sole-source was at a higher level 15 years ago.

Also, new policies are making it harder to use 8(a) sole-source. The FAR Overhaul directs contracting officers that they “must first try” to compete the requirement using 8(a) multiple-award contracts before using an 8(a) sole source. I don’t know what trying means there—do you actually have to hold a competition? Plus, the “must first try” conflicts with SBA’s existing rules, which require an SBA waiver to use 8(a) competitions below $5.5 million.

SBA might change that waiver rule in the upcoming, yet-to-be-published proposed rule on “Fraud, Waste, and Abuse.” At the very least—given the proposed rule’s title and SBA’s linkage of the program to “rampant abuse and fraud”—SBA will probably propose some policies to limit 8(a) sole sources. The agency already added a scorecard element on “providing competitive value to the taxpayer.” So moving away from sole sources—and toward that “competitive value”—is right up their alley. The agency can’t get rid of sole-sources entirely. But it can make them much more painful to award.

It seems the tide has turned against 8(a) sole source, despite very good arguments for it. So what takes its place?

The new winner: small business set-asides

Not 8(a) competitive. The number of 8(a) competitive awards is down over 30% from 2024. That’s not quite as much as sole source, but 8(a) competitions aren’t picking up the slack for the 8(a) program overall.

You might think that agencies would switch to service-disabled veteran-owned, but so far that doesn’t seem to be the case. DoW and VA might adjust in the second half to increase their veteran-owned awards. But at this point, SDVOSB awards are level with where they were in 2024. Similarly, women-owned and HUBZone awards haven’t changed much from historical norms.

The big winner looks to be small business set-asides. That is to say that everybody wins. You don’t need SBA approval or a certification to qualify for a small business set-aside. It’s a self-designation on SAM.gov. You still could be protested on your size status if you win. And if that’s the case, then you’d have to open up your books to SBA during the protest process, both for size—either in revenue or employees—as well as for issues of affiliation. But, unlike the other programs, small-business qualification doesn’t require a prior review by SBA.

Why are agencies increasing the use of small business set-asides? I heard a good theory from an IDIQ expert this week. Agencies are under pressure to consolidate their contracts, so they end up with fewer contracts overall. When they combine contracts, they could be consolidating contracts that were previously separately held by companies with different certifications. So you could be consolidating an 8(a) contract with a women-owned contract and a HUBZone contract. The way to allow all those incumbents to compete for the new contract is a consolidated small business set-aside.

And, indeed, the level of consolidation is off the charts. SAM.gov shows consolidation increasing 100-fold in just this first half of FY26 alone.2

Why 8(a) is still valuable—for now

The steep decline in the use of the 8(a) program doesn’t mean that participants should head for the exits. There’s still value in the program. That’s because, although the pie might be shrinking, the number of pie eaters also is going down. After all those suspensions, there are now fewer than 3,500 active 8(a) firms. And there still will be about $20 billion going through the program this year. That’s mostly because there were a lot of 8(a) awards over the past years that will continue to receive obligations through 2026.

In fact, in comparing the 8(a) program to the service-disabled veteran-owned program, the 8(a) program doesn’t look all that bad. There are 35,000 certified SDVO firms, almost 10 times the number of 8(a) firms. But the number of SDVO awards at mid-year is only about 50% more than the total number of 8(a) awards. So that’s 10 times as many SDVO firms going after just 1.5 times the awards.

With those odds, I’d rather be 8(a). That’s not to say that the odds won’t change. Agencies might continue to shift away from sole source. Or SBA might tighten the screws on sole-source approvals through policy.

Regardless, the action is now in small business set-asides. That’s a much more competitive market. There are 60,000 small businesses that have Federal contracts. And over 400,000 small businesses are registered in SAM.gov. The bright side of that market is that eligibility comes with far fewer requirements. No annual reports to SBA, like in 8(a). And no reporting on employees’ residences, as in HUBZone. You still need to understand the risks of affiliation and have basic knowledge of how size standards work. But that was the case for the other programs too.

Is it time to focus more on small business set-asides and less on maintaining SBA certifications? The data suggests the tide is turning. In a future post, I’ll look more closely at what these new small business set-asides are for and where they’re coming from.

This article is for informational purposes only and does not constitute legal advice.

All the data in this article is based only on awards exceeding $250,000.

The FY26 number of $317 trillion is hard to believe. Global GDP is only $100 trillion, so this might be a data-entry issue. But nevertheless, here’s the proof—a screenshot from the SAM.gov Databank report.

The Anti-DEI Executive Order collides with Virginia's SWaM bill

Sam Le — Mon, 30 Mar 2026 17:34:28 GMT

Image: Martin Kraft (photo.martinkraft.com). License: CC BY-SA 3.0 via Wikimedia Commons

Federal contractors across the country face harsh consequences from the White House executive order published Thursday, “Addressing DEI Discrimination by Federal Contractors.” The Federal requirements may go into effect as early as April 25. For contractors that work both on Federal projects and Virginia state contracts, the timing puts the Executive Order on a collision course with Virginia Governor Abigail Spanberger’s April 13 deadline to sign into law HB 61 and its new SWaM contracting targets.

The White House’s order makes anti-DEI requirements “material” to the Government’s payment on contracts. This escalates the penalties available to the Federal government as compared to the certification required by the Day One anti-DEI executive order. That January 21, 2025 Executive Order required a contractor certification about not promoting DEI.

And, if Governor Spanberger signs HB 61, prime contractors in Virginia may face 50% subcontracting targets for small women-owned and minority-owned contractors at the exact moment that they risk heavy penalties for “racially discriminatory” DEI practices—including subcontracting and vendor agreements—at the Federal level.

The Federal mandate requires agencies to adopt it within 30 days. Then the FAR Council is ordered to issue a FAR clause by deviation after another 30 days. Violating the requirements will be punishable by contract cancellation and termination. Agencies will “take appropriate action to suspend and debar” contractors found in violation. And the Department of Justice would consider bringing actions under the False Claims Act, while conducting prompt review of qui tam actions brought by whistleblowers.

A significant escalation in both directions

The White House Executive Order last week escalates the framework from the January 2025 order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The earlier order directed agencies to include a contract term requiring a contractor to “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” That Certification Provision has been caught up in litigation, including a case decided last month at the Fourth Circuit Court of Appeals. The Fourth Circuit lifted an injunction, which partially explains how the White House felt empowered to publish this order now. With the court’s decision coming so recently, though, few—if any—agencies have implemented the Certification Provision.

Last week’s order now mandates a uniform, enforceable clause specifically for Federal contracts that explicitly carries False Claims Act liability. It also attempts to address a common question about the January 2025 order: What exactly is illegal DEI? The latest order limits coverage to “racially discriminatory DEI”—thus leaving sex-based programs unaddressed. And it includes lengthy definitions for an “activity”—to include recruitment, employment, contracting, program participation, and allocation of resources—and “program participation.” Programs include training, mentoring, leadership development programs, educational opportunities, clubs, associations, and similar opportunities that are sponsored or established by the contractor.

Meanwhile, Virginia’s HB 61 seeks to solidify the Commonwealth’s SWaM (Small, Women-owned and Minority-Owned) program. The state has fallen short of the 42% SWaM goal put in place by then-Governor Terry McAuliffe in 2014. So the bill makes that 42% a statutory goal and requires SWaM set-asides between $10,000 and $200,000. Virginia agencies and covered institutions would be required to increase their SWaM utilization rates by 3% each year until attaining the 42% target. Agencies can use set-asides and price preferences to increase work with certified firms. Then, for non-SWaM primes, the bill would set a 50% SWaM subcontracting target. Governor Spanberger has until April 13 to take action on the House- and Senate-passed bill.

All this happens at the same time that anti-DEI sentiment is focusing intense scrutiny on SBA’s 8(a) program, halting 8(a) program approvals, and fueling a court challenge to the NMSDC supplier certification program; I discussed those issues in last week’s livestream.

The EO promises more audits, sector focus

In addition to making compliance “material,” the new executive order heightens contractor risk in four important ways.

First, through a clause providing for broad investigatory authority, the order will lead to more audits. The clause would require contractors to furnish “all information and reports, including providing access to books, records, and accounts” to demonstrate compliance.

Second, contractors in certain industries will face more structured reviews. The order states that OMB, DOJ, the White House DPC, and EEOC will identify “economic sectors” that have engaged in racially discriminatory DEI in the past. Those agencies will issue guidance to agencies on best practices to ensure compliance within those sectors. “Economic sectors” doesn’t usually mean what the order suggests; it’s likely that the order has specific industries in mind, like construction. This “economic sectors” language might even lead to reverse disparity studies, where the government uses data like EEO-1 reports to target audits.

Third, the clause has a snitch rule. Not only are primes required to flow down the clause to subcontractors and lower-tier subcontractors, but they also would report on subcontractors’ “known or reasonably knowable conduct” that “may violate” the clause. That puts into play not just confirmed violations, but also suspicion of violation.

And, finally, the order directs the FAR Council to use class deviations to fast-track the clause into the FAR within 60 days. The FAR Council used mass class deviations for the FAR Overhaul, a method that bypasses the notice-and-comment process required by the Administrative Procedure Act and the OFPP Act. The order also directs the FAR Council to remove FAR provisions that “conflict or are inconsistent with” the clause created by the order. This could affect Small Disadvantaged Business goals in subcontracting plans. That’s a complex issue. But because of the requirement for a class deviation process, the FAR Council will need to put out initial guidance before getting public comments that could help explain the complexity.

What happens in the next 30 days

The order tells agencies to implement within 30 days. But, as with the January 2025 Certification Provision, that might be delayed by litigation. Given the expedited timeline, though, contractors should review their programs to ascertain their risk. Some companies already went through this last year after the January 2025 order. Now they know how the Federal government is defining important terms.

Under the new definitions, areas to review include

employee-resource/affinity groups and mentoring programs;
subcontractor selection processes and documentation;
training curricula; and
sponsorships of external programs.

Then there’s the snitch rule. Not only do contractors need to certify their own conduct, but they also will report on the “reasonably knowable” conduct of subcontractors that “may violate” the clause. The FAR Council’s class deviations—due in 60 days—would presumably include specific steps on what those reports would look like and what contractors would need to do in advance to “reasonably know” what its subcontractors do. Or at least that's what public comments would say, if the FAR Council were able to review them.

By the end of those periods, we should know whether the new Virginia SWaM program has been enacted into law. The answer makes a big difference to firms that want to do business both in Virginia and with Federal agencies. And it could change the direction of these anti-DEI actions for the foreseeable future.

This article is for informational purposes only and does not constitute legal advice.

Update on 8(a) suspensions, new cases on disadvantage, and policy predictions

Sam Le — Thu, 26 Mar 2026 19:36:12 GMT

On today’s GovCon Intelligence live stream, I covered the current state of the 8(a) Business Development Program and the latest suspension numbers, significant OHA and Federal Court decisions, and SBA administrative changes. I also addressed the impact of the Washington District Office’s move to Herndon and previewed the OIG’s 2026 audit priorities.

Links and a full transcript follow.

Links

SBA’s 8(a) suspensions (Jan 22 - Mar 26, 2026)

Recent OHA decisions

Matter of ACC International Inc (OHA)

ThreatTec v. United States (Ct. of Fed. Cl.)

Stephen Bacon on the GAO’s decision in iAdeptive (LinkedIn)

iAdeptive Technologies (GAO)

VSBC Protest of Crosstown Courier Services (OHA)

News release: SBA Relocates Washington Metro Area District Office to Herndon, Virginia

Mid-America Milling Co. LLC v. US DOT (E.D. Ky.)

News release: American Alliance for Equal Rights Files Federal Lawsuit Challenging Race-Based Minority Supplier Certification Program

Ultima Services Docket (courtlistener)

S. 3971, SBIR Reauthorization

SBA OIG Audit Division 2026 Oversight Plan

SBA OIG Evaluation of SBA’s All Small Mentor-Protege Program

New York Times: The Small Business Administration lent $378 billion to keep businesses afloat. Getting paid back is proving difficult.

Pending EO 12866 Regulatory Review on Fraud, Waste, and Abuse Reforms

EO 12866 Meeting on Fraud, Waste, and Abuse Reforms

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Introduction & 8(a) Suspensions Update

Welcome to a GovCon Intelligence live stream. I’m live on Substack, so if anybody has the app, you can put comments into the chat, and I can answer any questions that you have.

I’m going to go through an update on 8(a) suspensions. There’s been a lot going on there. I’ll talk a bit about new cases that have come out. There was a major case about disadvantaged status that came out from a federal court. And then we’ll look at some developments within SBA, SBA news, actions by the Inspector General, as well as some progress on that proposed rule that I’ve been tracking.

So first, on 8(a) suspensions, I was running through the numbers today. Altogether, SBA has suspended over 1,300 businesses over the course of time in 2026. It looks to be almost 1,400, actually. Of those almost 1,400 businesses, 500 of them have gotten back into the program. Specifically, 498 have gotten back into the program. Ninety-seven are now listed as previously certified, so likely that means they withdrew or they have graduated from the program. And then 792 8(a) firms remain suspended. It just dipped down under 800 just a couple of days ago.

The pattern, it seems, is that SBA is pushing a lot of these changes in status on Fridays. The last couple of Fridays, there’s been a big chunk of firms that have either shown up as withdrawn or previously certified, and then another chunk that gets their suspensions lifted.

Now, I’ve had the experience of looking at this list every day and reaching out to firms and saying, “Oh, congratulations on getting off the suspension list”. And I’ve had the experience of the firms coming back and saying, “Oh, I didn’t know I was taken off the suspension list. You’re the first person to have told me this”. So evidently, when SBA lifts the 8(a) suspension—there are still 792 of them—SBA does not necessarily alert the firm that they’re now unsuspended. It just shows up on the SBA search website. You look for that firm one day, and they show up as suspended. The next day, they’re not suspended anymore.

So if you’re one of those 792 firms that is still suspended, I would recommend checking the SBA search website (search.certifications.sba.gov) every day, just in case your status changes. It looks like just today there were four firms taken off the suspension list. Three of them are now listed as previously certified, so likely that means they withdrew from the program. When these almost 1,400 firms altogether received their packages, they had the opportunity to withdraw from the program, and a number have done that.

So we still have 792 firms out there. Five hundred have gotten back. Maybe about 300 to 400 of those were in the first wave where SBA suspended firms for not replying to the data call. So there are maybe about 100 firms that have gone through the full reply process where SBA suspended firms for suspicion that they weren’t economically disadvantaged. The firms responded to that, and now SBA has lifted those suspensions.

All in all, if you look at these numbers, over a third of the firms that have been suspended at some point in 2026 are now back in the program. So there may be this suspicion that firms have done something wrong or that they’re somehow ineligible, but in a third of these cases, SBA has put the firms back in the program.

What that indicates to me, first of all, is that there were a lot of firms that didn’t reply to the data call, and a lot of those firms are back in because they’ve submitted their information. And then there’s also a large group of firms that were misidentified as being ineligible for other reasons, most likely economic disadvantage. SBA has now gone through, it appears, the responses of those firms to the suspicion of not being economically disadvantaged and allowed the compliant firms back into the program.

Just because you see a firm is suspended doesn’t mean they’re actually noncompliant or that they’ve actually done something wrong. Very likely, they’re going through a more manual review process from SBA, whereas before, it appears to have been computer-generated. The graphs tracking these firms are on GovCon Intelligence in the notes section, updated every few days. I try to take a look at the list every day so I can break the good news to people who have been unsuspended.

SBA Terminations and the Data Call

SBA did publish earlier this month that it has now moved to terminate 628 firms specifically for not replying to the data call. There may have been a lot of reasons for firms not to reply to the data call. There are a number of firms that have not even gotten 8(a) contracts. Over half of those firms did not get 8(a) contracts, and it was expensive to get all the documentation together. So they may not have seen the return on investment in replying to the data call and staying in the program.

There’s a suggestion in the press release that these firms have something to hide. Maybe there are cases where a firm has something to hide. I don’t think that’s true for 628 cases. I think a lot of these firms were not getting the value they expected out of the 8(a) program, or they’re seeing the pressure and scrutiny on the 8(a) program and think it’s no longer worthwhile for them to continue. It’s just a matter of, look, it’s a busy time of year. This data call came out around the holidays. You have proposals due, and it was just not something that was at the top of their priority list.

So I think it’s a bit disingenuous for an agency that should understand how small businesses operate—that they get busy, that compliance with these data calls is not necessarily at the top of their list when they’re trying to get proposals done, manage their employees, and find work—to say, “Oh, they must be hiding something”. I don’t think that’s the case for the vast majority of these businesses.

Office of Hearings and Appeals (OHA) Update

The suspensions, now numbering nearly 1,400, allow the firms to appeal to SBA’s Office of Hearings and Appeals (OHA). And OHA has been busy over the last few days. Just the other day, OHA published a large group of cases—27 cases that were decided on March 19th. That’s probably a one-day record for OHA officials publishing cases, 27 at a time. And then there are maybe about 10 cases that came out on March 18th, and a smattering of cases in the days before that.

All of these cases are dismissals. They’re all cases where a firm was suspended, appealed that suspension to OHA, and then OHA found—likely through SBA telling them—that the firm was no longer suspended. Sometimes the firm tells OHA, but more likely it’s SBA. And so OHA dismisses the case because it has become moot. There’s no additional relief that OHA can grant to a firm appealing a suspension if they are no longer suspended. So when we look at these 27 plus 10 plus a smattering of cases, all of those cases are dismissals of OHA suspension appeals.

There’s an important deadline that comes up on Monday for companies to appeal their suspension from that second wave, which was enacted on February 11th. You have 45 days to appeal a suspension. Forty-five days, I think, falls over the weekend, and under OHA rules, you get until the next Monday to file your appeal. So there’s a deadline on Monday for a lot of those firms that had been suspended in the February 11th and 12th timeframe to submit their appeals to OHA.

It looks like the appeals are being heard not necessarily by the longtime SBA judge, Christopher Holleman, but by a number of other judges who have been leased by SBA from other agencies. There’s one named Brian Haring; I wrote about him a few weeks ago. And then there’s another one named James Plott that appears on a number of these cases. Judge Holleman is still doing a number of the cases, but as these dozens and dozens—maybe even hundreds—of appeals come in, OHA has leased judges through an interagency agreement with another agency, such as HHS. It appears at least one of these judges is from CMS.

Understanding Economic Disadvantage: The ACC International Case

Speaking of OHA cases, there was a substantive decision that came out on this very issue of 8(a) eligibility earlier this month. It’s called the Matter of ACC International Incorporated, and it came out on March 9th. This is a really good case for companies that have economic disadvantage issues to read. Economic disadvantage is coming up in a lot of these letters of intent to terminate and these suspensions. Even companies that are going in for their annual review need to be aware of the economic disadvantage criteria for SBA.

Just to backtrack a bit, to be in the 8(a) program, as well as in the EDWOSB program, you need to be economically disadvantaged. There are three objective criteria for economic disadvantage. I think at one point SBA used percentiles, but they don’t use percentiles anymore. Now it’s numbers. You have to be below $400,000 in three-year average income. You have to be below $850,000 in net worth. And you have to be below $6.5 million in total assets. So those are the three objective criteria that firms have to comply with.

This ACC International case involved the income threshold, which is $400,000. SBA found that the individual in this case, Mr. Lopez, had a three-year average income of $493,475.50. So it was a very exact calculation by SBA. He was about $93,000 above the limit.

To address that, Mr. Lopez used an exception in the income rule at SBA. The income rule says that SBA will not consider income that the individual reinvested into the firm. Mr. Lopez was about $100,000 over the three-year average limit, so he reinvested $100,000 into the firm, trying to bring down that average so that it gets below $400,000.

There are two interesting things about this case. One is that SBA accepted that process. These three years have come and gone a long time ago—in this case, it was 2021, 2022, and 2023. The cutoff point for this three-year average was 2023, and Mr. Lopez came in in 2025 to reinvest this $100,000. And SBA said, “We will accept that. We will allow you to reinvest this and reapply the calculation of your income”. So that’s the first interesting thing, that SBA accepted that and recalculated the income.

The second interesting thing is that SBA recalculated the income to be $460,000. How do you get to $460,000? This is my absolute favorite thing, which is the combination of simple math and law. The reason you get from $493,000 to $460,000 is because it’s a three-year average. So if Mr. Lopez reinvests $100,000, he doesn’t get $100,000 off of a three-year average. He gets about $33,000 off of a three-year average because you have to divide it by three. So his three-year average goes from $493,000 to $460,000.

This case might have turned out differently if he had reinvested $300,000, where you bring down that average by $300,000 divided by three, which is $100,000. Maybe then he gets below $400,000, SBA recalculates it to be $390,000-something, and he wins the case. So it involves really interesting circumstances, and potentially, there could have been a way for this individual who was identified as not economically disadvantaged to get out of that situation by reinvesting money into the firm. That’s the ACC International case.

SBIR Phase III Bridge Contracts and the ThreatTec Case

Moving on with some relevant cases that have come out recently, there is a good case out of the Court of Federal Claims in a decision called ThreatTec about the SBIR program, specifically SBIR Phase III. This was a case where the agency (the Army) awarded an SBIR Phase III bridge contract to a company called Chitra Productions. ThreatTec protested that bridge contract at GAO. At GAO, there is usually a stay while they decide the case, but the Army overrode that stay so that they could go ahead with the bridge contract.

Then ThreatTec protested to the Court of Federal Claims, and the Court of Federal Claims threw out the case. The reason the Court threw out the case is that it said ThreatTech did not show that it was eligible for an SBIR Phase III award. To be eligible for an SBIR Phase III award, you have to have had a Phase I or Phase II contract previously, and it has to derive from, extend, or complete the SBIR Phase I or Phase II contract. ThreatTec could not show that. Probably they had never had an SBIR contract before; the case isn’t clear.

ThreatTec argued that the Army could have used something other than SBIR Phase III. Nothing forces an agency to use SBIR Phase III. Maybe the Army could have gone out and used a competition or a socioeconomic set-aside. But the court came back and said that’s not the issue right now. The issue is whether you have standing under SBIR Phase III and under the Percipient.ai case, which is a very important case that came out from the Federal Circuit and potentially could have been heard by the Supreme Court (though the Supreme Court did not grant cert). You no longer have standing because you are not capable of winning the vehicle that the Army chose, which is SBIR Phase III.

So you see now the application of Percipient.ai. When the case first came out, my biggest worry was about the Rule of Two application on orders—the Tolliver issue, if you’re familiar with that. Maybe that’s off the table now because of the FAR overhaul. I always thought no one’s ever going to bring a Tolliver case again because of Percipient.ai, and maybe now because of the FAR overhaul, nobody really is going to try to bring a Rule of Two order case. But now you see another application of Percipient.ai, which is this ability for agencies to award bridge contracts through SBIR Phase III and have protesters be unable to challenge a stay at GAO. Now, it will be interesting to see what this GAO protest comes up with. I don’t have any information about the GAO protest, but at least the Army was able to go ahead with performance and override the GAO stay.

Mentor-Protégé Past Performance and the iAdaptive Technologies Case

Speaking of GAO, I really recommend everybody look at Steve Bacon’s summary of iAdeptive Technologies, the GAO case that came out about the Mentor-Protégé Program. The case makes the point that SBA issued new mentor-protégé rules in January 2025. They address this issue that had been litigated over and over: how much past performance is required from the protégé in a mentor-protégé joint venture.

This was the issue that sank some really big GWACs, and they had to go back to the drawing board to figure out how to balance the past performance from the mentor and past performance from the protégé. SBA came out in January 2025 to basically say the agency has discretion. You decide, agency, do you want to take past performance from the protégé or do you not? Nothing requires you to take past performance from the protégé. Also, you have to make sure that the protégé is not subject to the same criteria as a non-joint venture offeror. Protégés are in the program because they’re trying to get business development; they probably don’t have as much past performance. So you’re not allowed to put the protégé under the same level of scrutiny as a company that’s coming in outside of a joint venture.

Those were not the facts here. The agency was upheld, even though it was accused of not considering the protégé’s past performance. Under SBA’s regulation, that’s okay. SBA says you do not necessarily have to take into account the past performance of the protégé.

Now, agencies reasonably could say, “Hey, the protégé is going to do 40% of the work of the joint venture; maybe the protégé should have some past performance”. For example, if there are five past performance examples required, it would be reasonable to have 40% of those come from the protégé since they’re doing 40% of the work. So that would be two out of five examples. But take a look at iAdeptive and take a look at Bacon’s summary of it on LinkedIn, which I’ll link to.

Corporate Transactions and SDVOSB Status: The Crosstown Courier Service Case

Let’s see. There is also a good case that came out of OHA. It’s a series of cases about corporate transactions under the title of Crosstown Courier Service. They deal with a two-step ownership transfer transaction.

Essentially, the veteran initially had ownership. Then he transferred the ownership to the company—that was step one. And then the ownership went to a service-disabled veteran—that’s step two. At the beginning, you have a service-disabled veteran owning the firm. At the end, you have a service-disabled veteran owning it. But in the middle, the company owns it. It seems like there might have been some issues about getting paperwork signed, but it was a two-step transaction.

OHA said that at the end, the company is still eligible as an SDVOSB. There was a 12- or 13-day gap between those two steps, and the protester argued that the company was ineligible because of that gap. They argued it did not keep its SDVOSB status during the whole process. I think this was a VA case because the VA has that special rule now that you have to be in the database both at offer and at award.

Regardless, I think OHA was looking at this at the time of offer. At the time of offer, this firm had already gone through the two steps, so it was eligible under the SDVOSB criteria. It was important in the second case—the petition for reconsideration—that these two steps were linked. OHA said there was a clear intent for the firm to be owned by a service-disabled veteran at the end of the process, and you can see the steps leading to that outcome across the 13-day window. Because of that intent and the fact that the changes were really part of one big transaction, OHA said this firm still qualifies as an SDVOSB for the contract.

That’s a good practice tip for companies that are looking at mergers and acquisitions. If you don’t have that intent between the two stages, or if you have a gap much longer than 13 days, you may not be able to work under the criteria set in this case. But if you need to have multiple steps to your transaction for whatever reason, I think it is important to take a look at this Crosstown Courier Service decision to see how the parties were able to connect the dots to end up with the SBA certification at the end of the day. I’ll link to those as well.

SBA Office Relocation

Some news out of SBA headquarters: SBA announced this week that it is relocating its Washington metro area district office to Herndon, Virginia. Herndon is in Fairfax County, where I live, so I know a little bit about Herndon. I don’t go there all that often. Parking in D.C., where the Washington District Office is currently located, costs as much as $25. Because of that, the office in D.C. didn’t host as many in-office events as other district offices might have. Herndon is far from Washington, D.C.; it is where Dulles Airport is located. It is right outside of Dulles Airport, so you are talking about a 25 to 30-mile distance. You are also talking about paying tolls each way—I think $3 tolls each way—to get to Herndon and back.

The Washington, D.C. District Office is not just responsible for D.C. firms; it also handles Virginia firms. There may be some firms that are actually closer to this Herndon office, particularly those out in the tech corridor around Chantilly and Dulles Airport. However, there are also firms in Maryland, such as those in Montgomery County and Prince George’s County, for whom it is going to be much farther to get out to Herndon. I think there is a Metro stop a few miles away, or perhaps less than a mile away, where you then take a bus to the SBA office. But it is not the same as taking the Metro straight into the Washington, D.C. headquarters.

I think the significant effect of this change is not necessarily on the firms. Firms are probably going to be willing to drive if they need to have a meeting or an in-person event. There are already many in-person events held there because of the proximity to the airport. The bigger effect is going to be on the employees who work for the D.C. District Office. The D.C. District Office has the largest number of 8(a) firms that it services; it represents probably about 10% of the portfolio. We are talking about maybe 200 to 300 firms, perhaps a little more or less. It is a lot of firms—all the firms in D.C., Northern Virginia, and Metropolitan Maryland.

Maryland also has a Baltimore office, and Virginia has a Richmond office, so they split the workload between those two states. But D.C. has the largest number of firms and does not have a commensurate number of Business Opportunity Specialists (BOSs) to conduct annual reviews and provide servicing to that large number of firms. If you are moving the office almost 30 miles away, you are going to experience some employee attrition. There are likely employees who live in Maryland or far away from the new office, particularly those who do not want to pay that toll each way. You are going to lose some BOSs, and that will put even more pressure on the remaining BOSs to service hundreds of 8(a) firms within the metropolitan D.C. area.

Challenges in 8(a) Program Servicing and Application Approvals

We are already seeing a decline in the amount of service for 8(a) firms. We have seen that with the application numbers. I’ll say it again: I just checked today, and there has not been an application approved by the SBA in the 8(a) program since August 15th. On August 15th, the SBA approved the application of a firm out of Vienna, Virginia, and they have not approved one since.

You are already seeing a decline in service regarding applications, and I fear that because of this move, you will see a decline in service on the participation side. This affects firms getting their annual reviews completed and getting their contracts approved, because the BOSs have a role in approving new contracts coming in from agencies. That is the offer and acceptance process, as well as the process of approving the specific company that receives the contract. While this relocation may be a good thing for some firms who can drive out there for in-person events, I do think it will have a negative impact on the employees working there.

The Mid-America Milling Decision and DBE Program Presumptions

Speaking of the 8(a) program, a related decision recently came out regarding the DBE program. Remember, at one point we had cases proceeding regarding both the 8(a) and DBE programs and entity-owned participation. We now have the final decision in the DBE case, the Mid-America Milling case, which originated in the Eastern District of Kentucky.

The litigant, Mid-America Milling, challenged the Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program for using race and gender-based presumptions. At the time, this was a significant matter because it was the first case to focus specifically on Women-Owned Small Businesses (WOSBs), as women-owned businesses were presumed to be disadvantaged in the DBE program. That was not the case in the 8(a) program, nor is it the case for the Small Disadvantaged Business (SDB) definition.

This firm sued the DOT in Kentucky, arguing that these presumptions violated the Constitution. About ten months later, the court granted a request for a preliminary injunction. It was a limited injunction, geographically restricted to not allow the use of the presumption in the states covered by the plaintiffs.

This recent decision moots the case, and the judge dismissed it as moot. The reason is that at the beginning of this fiscal year, October 1, 2025, the Department of Transportation administratively removed the presumption from the DBE program. The DOT issued an interim final rule stating that the presumption would no longer apply to the DBE program. Consequently, there is no longer a presumption based on race or gender. As a result, tens of thousands of DBE participants across the country were required to submit narratives to their state certifiers to determine whether they are disadvantaged under that state’s review for the DOT DBE program.

For the purposes of this case, the narrative is not as important as the administrative action to remove the presumption. There is no longer a presumption because of this decision from the DOT, not from a judge. The court dismissed the case because it stated this was essentially what Mid-America Milling wanted. The government has removed the presumption, and the court noted that even if the litigation continued, it could not grant the plaintiffs any additional relief beyond what they have already received via the regulatory change.

There were arguments regarding what might happen if a future administration changes it back or if the new interim final rule is challenged in court. The court’s response was that those issues are not currently before them. There is a good metaphor in the ruling: “To salvage jurisdiction under such speculative bases would be akin to declaring a yet unborn racehorse as the betting favorite to win the 2029 Kentucky Derby.” It is a great line coming from a court in Kentucky. Essentially, they are saying they cannot rule based on what a future administration might do. So, the bottom line is that Mid-America Milling is off the table. The interim final rule is the document that governs the presumption; it says no presumption in the DBE program, and as a result, DBE firms are submitting their narratives.

New Legal Challenges to Private Sector Diversity Programs

Additionally, these lawsuits are coming in “hot and heavy” regarding preference programs. There is now a lawsuit in Kansas against the National Minority Supplier Development Council. This was filed by the American Alliance for Equal Rights, led by Edward Blum, who also filed the Students for Fair Admissions case.

This lawsuit challenges a program that certifies companies for private contracting—not for government contracting, but for corporate supplier diversity programs. It was filed in the District of Kansas about two weeks ago. It alleges that the program violates the Civil Rights Act, 42 U.S.C. § 1981, by denying businesses the opportunity to contract on equal terms based solely on the race or ethnicity of their owners. I will keep an eye on that.

Updates on the Ultima Services Case and SBA Regulations

I also wanted to check on the Ultima Services case. Remember, Ultima Services is what struck down the SBA presumption back in 2023. It was released just a month after the Supreme Court issued its affirmative action case. Essentially, nothing has happened in the Ultima Services case since 2023. There have been a few filings, but there has been no final decision. I know people were waiting to see if a final decision was forthcoming, but literally nothing has happened since August 20, 2025. If you check PACER, that is the date of the last filing.

I do not know if the court is still going to issue a decision. They may look at the Mid-America Milling case and say this is moot because the SBA is not using the presumption. The interesting distinction there, however, is that the SBA has not actually removed the presumption from its regulations. It is not quite the same as what the DOT did. The DOT issued an interim final rule, whereas the SBA has only issued guidance and messages to firms and the workforce. The SBA has not yet removed the presumption from its regulations, but that could be happening soon.

Status of SBIR/STTR Program Reauthorization

I have also been tracking the progress of the SBIR legislation. SBIR has been suspended—at least Phase I and Phase II—since the start of the fiscal year because it is a limited-term program and the last term ended. There is a bill, S.3971, that has passed the Senate and the House. It passed the Senate on March 3rd and the House on March 17th.

However, it does not show as having been presented to the President yet. It seems to be taking a long time. I am not well-versed enough in the legislative process to know exactly when something is presented for signing. There is some thought that because the President said he would not sign anything until the Save America Act is enacted, he may not be open to signing this SBIR reauthorization. We could be waiting a long time to get SBIR back, even though it has already passed both chambers.

The SBA OIG 2026 Oversight Plan: Audit Priorities

Another item from the SBA: the Office of Inspector General (OIG) published its 2026 oversight plan. In the past few years, there have not been many government contracting audits from the SBA OIG, as they have been focusing on COVID-era loans, disaster assistance, and Economic Injury Disaster Loans (EIDL).

However, there is a significant amount of government contracting in this 2026 oversight plan. There will be an audit of the VetCert program. There is going to be an audit of entity-owned 8(a) firms, specifically regarding community benefits reporting. That is a new audit; I don’t believe they have looked at community benefits reporting before. There is also going to be an audit on the process for certifying firms’ initial 8(a) program eligibility. This may be an opportunity to look at the social disadvantage criteria and the narratives created by the Ultima Services case.

Additionally, there will be a follow-up audit on the Women-Owned Small Business (WOSB) program. Their last report was in September 2022. I am also looking forward to the results of the evaluation of the Mentor-Protégé Program. It has been a while since the OIG looked at it; their last report was in 2019. That report found concerns regarding lack of controls to prevent unqualified mentors and stated the program was not effective in ensuring small businesses developed as intended. It also noted that the SBA did not adequately measure the benefits of what was then called the All Small Mentor-Protégé Program. The OIG is going to look back at it now that it is simply called the SBA Mentor-Protégé Program.

It looks like the only major program not being audited is the HUBZone program. You have VetCert, 8(a) twice (entity-owned community benefits and initial eligibility), WOSB, and the Mentor-Protégé Program. Perhaps HUBZone will be on next year’s list; they get off easy on this one, though likely not forever.

SBA COVID Relief Loans and EIDL Collections

I mentioned the OIG has been looking at loans. I don’t do much with loans, but I was interested in an article from the New York Times regarding SBA COVID relief loans. It states there is $378 billion in Economic Injury Disaster Loans (EIDL) awaiting payment. Many of those are being referred to the Treasury for collections, and some borrowers are receiving notices that they must pay back their full loan amount at once.

There are some very sad stories in the article, along with quotes from lawyers who are helping borrowers negotiate with the SBA. The SBA is quoted saying the agency has accepted “offers in compromise,” which are deals for the debtor to make a partial lump payment while the creditor forgives the remainder. However, the lawyers in the article say they have had little success negotiating these on behalf of their clients. It appears many businesses are being targeted by the SBA and the Treasury Department for repayment of these disaster loans.

Upcoming SBA Regulatory Reforms: Fraud, Waste, and Abuse

Finally, I’ve been tracking a potential proposed rule from the SBA on fraud, waste, and abuse reforms. This rule was already presented to the Office of Information and Regulatory Affairs (OIRA). OIRA usually has 90 days to review a rule, and they can hold meetings about it.

There was a meeting regarding this rule just two days ago, on March 24th. A group called the Capitol Hill Policy Group met with OIRA on behalf of Calista, an Alaska Native firm, to discuss these fraud, waste, and abuse reforms. This suggests there may be something in the rule regarding tribally-owned firms. Also, the community benefits audit from the OIG may indicate that the SBA is looking closely at tribally-owned firms.

Given the focus on economic disadvantage in recent suspensions, I think the SBA may make changes to clarify exactly how they calculate compliance with economic disadvantage thresholds. The SBA has the ability to change those thresholds; at one time they were percentile-based, and now they are specific numbers.

The SBA is almost certainly going to look at the racial presumption, especially after the Mid-America Milling case. The racial presumption in the 8(a) program hasn’t been used for three years, so it doesn’t make sense to keep it in the regulations.

Finally, whenever you discuss fraud, waste, and abuse in contracting programs, limitations on subcontracting always come up. That has been a target in recent videos from James O’Keefe. I hope to dive into that on my podcast at some point, but I imagine the SBA is looking to clarify the application of limitations on subcontracting within these reforms.

All right, that is all I have for today. I don’t see any messages in the chat. As a quick summary, we still have 792 8(a) firms suspended. Please visit my website, GovCon Intelligence, where you can see the progress of these suspensions under the notes tab. It is updated every few days. If you know a suspended firm, keep looking them up; the SBA doesn’t necessarily notify you directly, so you have to go online to find the information. Keep tracking me on GovCon Intelligence. Thanks very much for joining, everyone. Have a good afternoon.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

How the Supreme Court changed GovCon (with Jayna Rust)

Sam Le — Thu, 19 Mar 2026 23:10:38 GMT

Today on GovCon Intelligence, I’m joined by Jayna Rust, a partner at Thompson Coburn and an adjunct professor at The George Washington University Law School. We break down the long-term impact of the 2023 Supreme Court affirmative action ruling on government contracting, including a look at whether there is a flood of DEI-driven discrimination claims. Because she also works on wills and trusts, we rounded out the conversation by covering what GovCon owners need to think about when preparing their estate plans.

Links

Jayna Rust bio at Thompson Coburn

Students for Fair Admissions decision

Ultima Services v. USDA

The Democratic Brand Is Toxic in Too Many States by Matthew Yglesias (The New York Times)

Should Moving to the Middle Win Candidates Votes? It Depends Where Voters Are by David Broockman and Joshua Kalla

VSBC Appeal of American Defense Builders Trust, SBA No. VSBC-395-A (2024)

VSBC Appeal of Vialytix, LLC, SBA No. VSBC-462-A (2026)

A transcript follows.

Introduction and Guest Background

Sam: Welcome to GovCon Intelligence. My guest today is Jayna Rust. Jayna, thanks so much for joining us.

Jayna: Yeah, thanks for having me. It’s great to be out here.

Sam: Terrific. Jayna is a partner at Thompson Coburn in Washington, DC. She advises recipients and awardees of federal contracts, grants, loans, and other financial assistance, and represents them in litigation involving claims and bid protests. She’s a graduate of the George Washington University Law School, and she’s also an adjunct professor there.

The Impact of Students for Fair Admissions on Government Contracting

Sam: I wanted to get started with how we got to know each other. You organized a panel, it seems three years ago at this point, for the American Bar Association at their public procurement conference. It was about the Supreme Court’s Students for Fair Admissions case. We’re about three years out from that. That was in 2023. It’s 2026, and it’s had a huge impact, I think, across the whole country, but particularly in our industry of government contracting. Could you take us back to that case? What did the case say? What were your first impressions of it when it first came out?

Jayna: It’s funny that you mentioned that case because when I’ve been dealing with a number of things this year with anti-DEI issues, that panel comes to my mind a lot. Our panel was in November of that year, but we were planning it as early as the spring of that year, getting ideas for what we would do for that conference. When we first started planning, the Supreme Court had not issued the decision yet, but we knew it would come out sometime before the conference and we thought there might be something to that. Part of why I was pushing the conference to think about it was because I remember my third year of law school. By that point, I already knew I wanted to do government contracts. Because I was a nerd—who else knows by the third year of law school they want to do government contracts law?

Sam: You did go to GW, and they have a great program.

Jayna: That is true. That was what led me down that path. But I remember being in my constitutional law course, reading the affirmative action decisions about Michigan, and thinking, “All of the cases they’re citing are government contracts cases.”

Sam: Adarand?

Jayna: Yep, and Croson. And those decisions about how federal money should be spent. That’s what the Supreme Court was thinking about when they permitted the Michigan schools to do certain things. Once the challenges came up for Students for Fair Admissions, I remember pinging that in the back of my head: “This is a case I need to watch.” Because however this decision comes out, it’s going to affect government contracts. I had that case on my radar, waiting to see how that would play out. We started to get a pretty good idea of how that case was going to come out even before the decision was issued in June. I remember that was right around the time when I contacted you and a few others to see if you’d be interested to be on the panel. We wanted a broad swath of folks because we weren’t sure how quickly the decision would roll down to government contracts. The decision was focused on college admissions, right? Specifically on the admissions programs for Harvard and the University of North Carolina, and whether or not their admissions programs violated the equal protection provisions of the 14th Amendment of the Constitution. I think a lot of folks viewed that case as, “Oh, this only applies to affirmative action in college admissions.” But when I was thinking back to my constitutional law class from law school, I thought, “Okay, yes, that’s all the Supreme Court said, but when we look at what was behind all of those earlier decisions, we know it’s going to come out in government contracts.” Sure enough, we had just started planning when the district court in Tennessee issued a decision involving the 8(a) program.

Sam: It’s the Ultima Services case.

Jayna: Exactly. That was less than a month after the Supreme Court’s decision in Students for Fair Admissions. The judge in that case basically said that there can’t be the rebuttable presumption based on race that the 8(a) program had been built around for quite a while. So by the time we had our panel, it was rolling very quickly.

Sam: It was a very well-attended panel from what I remember.

Jayna: Yeah. It was great because you were able to speak about the federal small business side of things and how it may impact that side. We had another speaker that was able to talk about how state and local governments had implemented various Supreme Court cases that had been cited throughout the Michigan cases, and how those may be impacted by the decision. We had a labor and employment attorney to talk about affirmative action from the hiring and employment standpoint, and someone to talk about it from a finance standpoint. To me, it was just a great way to talk about all of these things that were going to impact government contractors—from state and local government contractors to people who employ persons as government contractors to the federal side. I really liked that panel.

Labor, Employment, and DOJ Enforcement

Sam: I don’t do labor and employment. That’s not an area that I practice in, so I was really interested in what the labor and employment lawyer said on that panel. I remember this dramatic moment where he said companies need to stop giving preferences for race or for gender because that’s illegal. I guess he’s right, that probably is illegal. It turns out that has been a very big focus of this administration and the Justice Department—not just looking at programs like the 8(a) program, but also at individual companies and their previously called DEI programs, diversity programs, or HR hiring practices. Have you seen that in your practice as well?

Jayna: Definitely. Part of that is my practice does cross over into the government contracts labor and employment side of things. Because of Executive Order 11246 requirements, a lot of contractors would have affirmative action programs related to minorities and women. After the president’s executive order last year in 2025 revoking Executive Order 11246, I was brought in by a number of companies and universities to look at their affirmative action programs and see what they had done. It was a bit surprising how many programs had policies that I think would not withstand true scrutiny and challenges.

Sam: That’s so interesting. Another contemporaneous thought about that case was the footnote, which was a big deal. It was about the military academies, saying this is improper for universities like Harvard and UNC, but maybe military academies—like the Naval Academy or West Point—might be able to make a case for continuing affirmative action practices because of either the diversity of the military or the diversity of their student bodies. Has anything happened with that footnote? Does that come up anymore?

Jayna: I’ll be honest, I haven’t seen that, but that doesn’t mean it hasn’t come up.

Sam: Yeah, I just wonder if anybody’s tried to take advantage of that footnote, but I haven’t seen it either.

Reverberations in Grants and Financial Assistance

Sam: Okay, let’s turn to you. We mentioned in your bio that you work on grant programs, financial assistance, and contracts. What have the reverberations of the Supreme Court’s decision been in all of the areas that you work, including grants and financial assistance?

Jayna: After that decision came out, contractors and federal grant recipients started to question whether or not they may have litigation liability for some of their preferential programs, whether it be hiring, vendors, or just any of their programs. They started to reach out slowly after Students for Fair Admissions. A number of those entities made changes during that time period. But when President Trump issued the executive order that revoked 11246, to me, that’s what really hit the accelerator.

Sam: Yeah, they’re really paying attention to it now.

Jayna: Yeah. A lot of people like to say that executive order was a sea change and completely changed the landscape. I think it did, but I think it was already moving that way. Companies were already starting to review things in light of Students for Fair Admissions and the other cases coming up, taking a closer look at programs. There was already that litigation liability they might have from class actions from students, depending if they were universities. The executive order just increased the potential for liability and increased the focus on it. But I’ll be honest, I don’t know that the executive order changed things that dramatically given what I think we were already going to see from Students for Fair Admissions. It would’ve come out just through case law decisions and been a slower point of where we were going to get.

Sam: Has that prep after the case been worthwhile? Have you seen actions from, say, the Civil Rights Division at the DOJ against private companies or contractors for things that maybe were in their programs before and they haven’t taken out?

Jayna: The Department of Justice has said they’ve started those investigations, and there are rumors out there about which companies have gotten those notices. So I do think there are companies getting hit, and they’re certainly getting questions from their contracting agencies or funding agencies at the very least. I think that is the first step toward potential enforcement down the line from the Department of Justice as well.

The 8(a) Program Under Scrutiny

Sam: There’s probably no bigger issue in government contracting—at least in small business government contracting—than this anti-DEI push that’s been very impactful and probably detrimental to the 8(a) program. You have the sledgehammer memo from the Hill, these 8(a) investigations, and there will probably be some sort of rule that comes out from the SBA soon. What are your thoughts about that? Based on what you know about the case and what has happened at the Justice Department, do you think what’s happening in 8(a) was expected as a natural consequence of that case, or is there something else going on there?

Jayna: I think it’s a little bit of both. I say that because I do think we were going to see challenges to the 8(a) program after Students for Fair Admissions. I would’ve been floored if we had gotten a decade in and there had been no challenges to the program. The Ultima case is a perfect example of something that had been a challenge even before Students for Fair Admissions had been decided, and that case started to have ripple effects. Obviously, the SBA had to start conducting some kind of review at that point. To me, it seemed somewhat inevitable that there would be changes to the program. I don’t know that people thought there would be the scale of the sledgehammer kind of review. I think people thought it was going to be more of a change in regulation and how small business concerns may be eligible to be 8(a) entities, but not a mass attempt to terminate 8(a) contractors within a month.

Sam: Yeah, they seem to be moving quickly against 8(a). It’s a good point about 8(a) and Ultima. Two thoughts on that: One is, in some ways, I think the 8(a) program was lucky they had the Ultima case, that they made these changes before the administration changed. Many of the things that the administration would have done, the SBA already did in terms of reviewing everybody’s social disadvantage and clearing them based on the removal of the presumption. The second is I’ve been surprised that it’s bled outside of 8(a). The sledgehammer video was just about 8(a), but when the memo comes out, it’s about all small business set-asides. You have SDVOSBs getting these notices from defense agencies to show their limitations on subcontracting. There’s a hearing in the Senate where the witness says we should just end set-asides altogether, that there’s no reason to have these at all. What’s your reaction to that? Is that something you anticipated, and what’s really behind that?

Jayna: I think part of it, maybe I wouldn’t have anticipated back in January 2025, but maybe if you had asked me in October 2025, I think it was more foreseeable. The administration has made a lot of changes to government contracts and grants with a hammer rather than a scalpel. They are looking at things as broadly as possible to trim down and forcing the industry to come back and say, “These are the parts we really need to keep,” as opposed to somebody in the administration going through and figuring out what parts to keep.

Sam: So what do you think is going to happen in the end with the 8(a) program? I’ll just bring up before you answer: I saw an interesting research article this week, discussed somewhat in The New York Times, about the biggest issues the political parties could shift on in order to win more voters. On the Republican side, I think it was gay rights. On the Democratic side, the second most important issue to voters where the Democratic Party is farthest away is small business preferences for minority-owned businesses. Which is a strange issue to be the second most important to median voters. If Democrats are reading that, they’re going to say that seems to be an area we should shift away from. So now you have Republicans who are running the government saying we want to diminish the 8(a) program, and you have Democrats reading surveys showing there’s not really a whole lot of support for preferences for minority-owned or disadvantaged businesses. Where do we go from here with 8(a) in light of that and Students for Fair Admissions?

Jayna: I think one of the things we might see—and it came up on the panel you were on in 2023—is messaging. If Democrats want to keep some of those programs, they can, but they just haven’t provided the public the information about why these programs are good. They just assume everybody is going to believe in them without confirming that. I remember on the panels, you all talked about the fact that this phrase “affirmative action” is used to encompass a number of different things. It was used in the Students for Fair Admissions case to describe what was happening in college admissions. Affirmative action is very different in the labor and employment context, where it was really intended to mean non-discrimination in employment practices. I think it is also different in the government contracts space from the perspective of the 8(a) program and how things were awarded. Most lawyers don’t understand preference programs. If we were to go pick out any lawyer from any other practice area to describe how the government has preferences for socially and economically disadvantaged individuals, they’re probably not going to be able to provide a good explanation for that. If they can’t explain it, how is somebody in rural Missouri, where I’m from, going to understand the value and the lack of harm to them? I just don’t think they are unless there’s better messaging around it.

Sam: That’s a really good point. If people aren’t understanding it—or even if they do understand it, maybe it’s not something they support—what’s the point of understanding all of it? One item I wanted to get clarity on: the SBA issued this memo saying we’re going to try to open up the 8(a) program to job creators. They said white men specifically have been discriminated against, potentially victims of DEI, and were going to review their social disadvantage. Just to be clear, you can’t also create a presumption for white men, right? If you had a presumption for Black Americans, Asian Americans, Hispanic Americans, and that’s unconstitutional, you can’t have a presumption on the other side, right?

Jayna: Yes. What’s interesting is we’ve seen, even in the labor and employment context, a move away from certain types of bias in what cases the labor and employment world is concerned about. Some of the changes from the administration are going to make those claims harder to bring. But also, folks thought there might be a flood of cases from white males alleging discrimination, and there has not been. We are more than a year into this administration with these significant executive orders attempting to lead white men into bringing certain types of discrimination claims, and we have not seen a flood of them by any means. It’ll be interesting to see how all of that plays out.

Updates on University Admissions Post-Decision

Sam: That is interesting. Just on the university side, going back to the original point of the case in college admissions, what’s happened there in the last three years?

Jayna: I think it depends on the university. Some universities have seen a decrease in the diversity of their incoming students, and other universities have seen an increase. What is it that you’ve been seeing from your side of things?

Sam: I just saw something that in the really selective universities, as expected, minority enrollment has decreased. I think there’s a challenge against Duke because that has not happened at Duke for whatever reason, but in the next tier of state universities, it has actually increased. Maybe the thought is that those students are just moving down a tier, so they’ve seen more diversity at the state colleges, for example.

Jayna: Yeah, and what’s going to be interesting is to see how people interpret the impact of Students for Fair Admissions when universities have been struggling with enrollment for a while. Universities wholesale have been having struggles with enrollment and looking at ways to increase recruitment generally. Even if there are impacts that seem chronologically tied to Students for Fair Admissions, I don’t know that we’d be able to say this is a cause and effect, given the changing landscape of who’s applying to college generally, and who’s taking the route of more trade and technical schools. Even with the advent of AI now, that’s going to impact who’s choosing certain colleges and career paths right now. Who’s to say that’s not the impact on college admissions, versus Students for Fair Admissions? People are going to consistently look at the statistics to say this is happening or has not happened, but I think it’s going to be so hard to look at it in a black box.

Sam: As my teenagers say, “Dad, is college a scam? You pay a lot of money. Is it actually worth it?” We’ll see.

Estate Planning and Ownership Issues for Government Contractors

Sam: Just switching gears entirely: I know Thompson Coburn is an active law firm for estate planning. I took a couple of estate planning courses in law school, but I’ve only written a handful of wills, mostly just from books. What kind of clients do you have in estate planning? Outside of government contracting, what is the typical advice a lawyer would give to someone coming in for a will or a trust and estate?

Jayna: I did not even take any estate planning classes. The only trust and estate coursework I did was studying for the bar, because I think trusts and estates decisions are closely tied to taxation and an individual’s tax situation. I also did not take federal income tax and only learned that for the bar. I say that because there are a lot of trusts and estates decisions made based on understandings that don’t necessarily tie in with the rest of a person’s life. Sometimes, you go to a trusts and estates lawyer, tell them what you want, and that person isn’t somebody you call up every single day for problems. Whereas, Sam, you have small business clients who call you pretty consistently when they run into issues with the operation of their business. My husband and I use an attorney ourselves for our estate planning, and it’s fairly common for people to reach out to estate planning attorneys to get advice on what’s best for their situation. We could go online, pull down some kind of will, sign it, and say, “Okay, we’ve got a document that says what we want to happen to our assets and our child, we’re done.” A trusts and estates attorney is going to walk you through what’s best for your situation, what you truly want, and how you can get there in a way that gives you and anyone receiving your assets the least tax impact. That’s usually where that advice is looking.

Sam: Okay, so you’re looking at it to try to lessen taxation. You want the assets to go to your heirs without them getting a big tax hit. What happens for government contractors? How do you get involved, and what are the big pitfalls there?

Jayna: I’ve become involved through early-stage planning for government contractor owners when they are working with their trusts and estates planners or an accountant. Sometimes they’ll bring me in to help with corporate documents, and these issues come up. Unfortunately, we’ve also seen situations where an owner of a small business passes away during the time period when they have active contracts. That’s another situation where we become involved and help them address these issues because the SBA has regulations on what happens to contracts and certifications when someone dies. Or how much ownership somebody must have for the entity to be deemed a WOSB, an 8(a), an SDVOSB, or any of the other similar types of programs.

Sam: We have a lot of cases in the veteran-owned space on these sort of issues, trusts in particular. There’s a case about tenants by the entirety that came out recently. I want to clarify that the reason they’re in the veteran-owned program is that you can appeal a decline straight to the Office of Hearings and Appeals. You can’t do that for WOSB or HUBZone. You can do it for 8(a), but that happens less often because people spend a lot more time on their 8(a) applications, whereas with veteran-owned, it’s hard to do that. What have you been seeing in these cases on the veteran-owned side?

Jayna: It’s interesting you point that out, because oftentimes we’ll look at what decisions are out there when counseling clients on ownership questions, regardless of the program type, to see how the SBA is going to look at things. Because the SBA regulations require contractors to be owned directly by an individual, how ownership is set up becomes really relevant. What we see is how the SBA has interpreted whether or not a trust is an acceptable way to have direct ownership, because a trust is not direct ownership. If a trust owns Small Biz Co., it’s not directly owned by Jayna Rust; it’s owned by my trust. The SBA has said they will accept a trust, but there are really three essential requirements for it to meet that element of direct ownership. The grantor, the trustee, and the beneficiary all have to be the same individual, and it needs to be a revocable trust. That is something a lot of trusts and estates planners can’t wrap their head around because it doesn’t make as much sense from an estate planning perspective.

Sam: That probably has tax consequences as well.

The Complexities of Government Contract Claims

Sam: Before we wrap up, I wanted to ask you about your course at GW. You teach a course on claims. What are your biggest practice points for students in the course, and what’s the difference between getting into government contracting on the claims side versus, say, bid protests or small business? What makes a good claims lawyer?

Jayna: I think one of the things that makes a good claims lawyer is someone who loves digging into the facts and really digging into the documents. Something that surprises students—even though the class I teach has a lot of JD students, it also has a lot of LLM students who are practicing lawyers getting a degree in government contracts—is how fact-heavy claims are compared to protests. Protests are very document-heavy, mostly based on what the solicitation or evaluation documents said, and whether there is support for the agency’s decision. On the claims side, it’s a lot of what people really knew, what was happening on the ground, and having to maybe even go out and take a look at the hole on the ground to see if that was truly a differing site condition. The students who really dig into the facts, enjoy them, and enjoy getting to know what’s happening tend to do really well. But there’s also the need to have a broader ability to issue-spot on the claims side, because the client is coming to you with all these problems. There’s a bigger pool of arguments about whether things are right, but also knowing what you get even if you are right. Okay, I win on this argument legally, but do I get more money? Do I get more time? If all I get is more time, is that really going to be enough for my goals?

Sam: That sounds more like being a real lawyer instead of what we do. Jayna, how do people find you?

Jayna: They can find me online. I’m on LinkedIn if they want to reach out—just let me know how you found me. They can also find my information on the firm’s bio.

Sam: Wonderful. Jayna, thanks so much for joining us. Thanks everybody.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

When the numbers don't add up

Sam Le — Tue, 10 Mar 2026 12:03:30 GMT

Photo by Aaron Lefler on Unsplash

Posted on LinkedIn by the former State Department OSDBU Director, George Price, SBA has a new Scorecard methodology. SBA reportedly shared the methodology with other agencies to show how the new Scorecard will assign grades, starting with FY26:

High Level FY26 Scorecard Factors
• Prime Contract awards to Small Businesses – 50%
• Subcontracts Awards to Small Businesses – 25%
• Serving our Veterans – 15%
• Providing Competitive Value to the Taxpayer – 10%
• Partners with SBA to reduce fraud – 10%

Take a second look at those numbers. They don’t add to 100. Maybe SBA is echoing Don Zimmer and telling agencies to “give 110%” for small businesses. Never mind that, the math isn’t actually important here. I’ll get to where math matters a lot more —errors in 8(a) suspensions.

But first, the Scorecard: The changes are not likely to make a big difference.1 GAO found that prior changes to the Scorecard methodology had “little impact on small business procurement opportunities.” More significant, GAO wrote, are Category Management policies that result in fewer opportunities for small businesses. And these numbers aren’t contracting goals themselves. They are a formula that SBA uses to weight those goals and, in the end, assign a letter grade to agencies’ efforts to prioritize small-business contracting.

The new formula centers small-business GovCon around veterans. Veterans already are counted in the first two categories—prime contracts and subcontracts. Now they have their own category, “Serving our Veterans,” that evaluates growth in spending with veteran-owned businesses. SBA might be overcorrecting on the close call on the 5% service-disabled veteran-owned goal—more on that below. The new math makes veterans, all told, about 25% of the Scorecard (that’s the new 15% category, plus 5% from prime, 2.5% from subcontracting, and an unknown amount from the competitive-value category). Will it matter? The much bigger mover of veteran-owned contracting is the VA. The reason veteran-owned spending dipped in 2025 wasn’t the Scorecard. It was because DOGE cut so many veteran-owned contracts at the VA.

The new competitive-value metric discourages agencies from using 8(a) sole-source contracts. That’s consistent with what the FAR Overhaul has done in 8(a). SBA might go further in the forthcoming “Fraud, Waste, and Abuse Reforms” proposed rule. SBA’s publicly stated rationale is that taxpayers get the most value when agencies hold competitions, instead of going straight to sole-source contracts.

Let’s be clear: what SBA is doing won’t make a dent in the use of sole-source contracts. Most sole-source contracts are awarded outside of the 8(a) program. Even if you got rid of 8(a) sole sources entirely, the government would still have awarded $266 billion in sole-source contracts in 2025:

Of course, the publicly stated rationale isn’t really what’s going on. SBA is trying to shrink the 8(a) program. That’s why the agency still hasn’t approved an 8(a) application since last August. But, in changing the Scorecard methodology, the agency is assuming those 8(a) sole-source dollars will go to other small businesses, preferably veteran-owned small businesses.

I don’t see why that would happen. Agencies aren’t using 8(a) sole source because of DEI or the Scorecard. They want to finalize contracts quickly, and 8(a) allows them to do that. But 8(a) isn’t the only way to do that. There’s also OTAs, CSOs, SBIR Phase III, and plain old limited-source justifications. Take a look at the top recipients of sole-source contracts; there aren’t any 8(a) firms on there:

So, as SBA narrows the path to 8(a) sole source—whether by the Scorecard or through regulatory changes—agencies are not likely to respond by using veteran-owned small businesses. Instead, they may bypass small businesses altogether.

Where bad math does damage

While math on the SBA Scorecard is not a big deal, it is elsewhere. In SBA’s fraud enforcement, the SBA’s AI is failing at math.

SBA sent suspension notices to hundreds of 8(a) firms, accusing their owners of not being economically disadvantaged. But most of them are. The concept of economic disadvantage would seem to be an area where AI enforcement could work. Economic disadvantage uses three objective thresholds—$850,000 for net worth, $400,000 for three-year average personal income, and $6.5 million for assets. The information to determine economic disadvantage comes from tax returns and financial statements.

And yet. The companies receiving these letters say that the calculations are wildly off. The AI doesn’t split joint assets. It doesn’t apply regulatory exceptions.

In some cases, the companies had been investigated previously and received notices from SBA in 2025 that they were, in fact, economically disadvantaged. But then the AI ignored that past decision. It went ahead with no new facts. And it suspended the companies despite the work that SBA staff—human beings, mind you—had already completed.

This wouldn’t be a problem if SBA used safeguards. Sometimes AI counts to 110 instead of 100. That’s what hallucinations are. But a human checks the math. Or the human looks at the company’s history to see that it’s already been cleared based on the same facts.

The way SBA is deploying its AI is doing immense damage. Because the 8(a) suspension takes immediate effect, companies are losing contract awards. They are in danger of being pulled off of big GWACs, like OASIS+ and 8(a) STARS III.

Meanwhile, press releases are smearing each company as a “fraudulent participant that took opportunity away from legitimate and eligible small business owners at taxpayers’ expense.” But it’s the AI that’s finding totally legitimate companies and inventing fraud where there isn’t any.

This problem is only going to get worse. The new SBA Inspector General is looking closely at pandemic loans, of which there are millions. The Senate-passed SBIR reauthorization bill lets agencies deny an SBIR award because of a “security risk for any reason.” AI tools are very likely to be used for both purposes.

What needs to happen is more human oversight of these tools. We’ve already seen they aren’t so great at counting. I’d rather not see what else they can get wrong.

A correction on disabled-veteran contracting

Speaking of math, I have to correct some of my own. A few months ago, I predicted that the Federal government would miss the 5% goal for disabled veteran-owned contracting for FY 2025. But I called it too early. Since my prediction, the data has changed. New data added about $60 million in disabled veteran contracts and removed a lot of other contracts. That raised the disabled veteran-owned contracting percentage from 4.71% to 4.87%.

That’s still not 5%. But 4.87% is close enough that, with more data that gets added every year, the government will probably surpass that 5% goal for 2025. I don’t know where that $60 million came from. But I think it’s more likely that it is late-arriving data instead of anything nefarious.

The women-owned and HUBZone percentages—at 4.3% and 2.55%, respectively—are still way too low to have a shot of meeting the 5% women-owned and 3% HUBZone goals.

One other thing is for certain: The number of small businesses participating in contracting went down again in 2025. This should be no surprise: 2025 was the year of DOGE, USAID’s contraction, and consolidation memos. Small businesses continued to leave contracting.

Whether they come back is uncertain. SBA isn’t helping matters with its roughshod enforcement push. But the agency can still turn things around.

All it takes is giving 110%.

This article is for informational purposes only and does not constitute legal advice.

In comments on George’s post, some people asked why they couldn’t find this on the SBA website. SBA doesn’t typically publish the Scorecard methodology until the Scorecard itself is released. So this one wouldn’t come out until mid-2027. The current version on the SBA website is 2024’s methodology.

What's next for GovCon M&A (with Damien Specht)

Sam Le — Fri, 06 Mar 2026 15:38:25 GMT

Damien Specht, a partner at the Morrison Foerster law firm, joined me yesterday on GovCon Intelligence, just a few days after the Senate passed a bill to reauthorize the SBIR program. We got into the details of the reauthorization bill. Then we talked about his specialty—mergers and acquisitions of government contractors. After working on hundreds of M&A deals, Damien shared his tips for companies in dealing with the recent small-business M&A cliff, plus what small businesses need to take care of before selling.

And, with SBA’s most recent announcement on an additional 620 proposed terminations, we discussed the 8(a) audits. How do SBA’s actions affect firms on OASIS+ and the GSA Schedule?

Links

Damien Specht bio at Morrison Foerster

Venture Capital Investment and Small Business Affiliation Rules: Why a Limited Exception is Crucial to Economic Recovery Efforts by Jessica Tillipman and Damien Specht

S. 3971, Small Business Innovation and Economic Security Act.

The Building People, B-423896, Nov. 20, 2025.

A transcript follows.

Subscribe now

Introduction

Sam: Welcome to GovCon Intelligence. My guest today is Damien Specht. Thanks so much for being on the show. Damien.

Damien: Glad to be here. This is awesome. You’ve had a number of really great people on this thing, and I am a regular consumer of the content, so thanks, so glad to help you make some.

Sam: That’s very nice. Damian Specht is a partner at the Morrison and Foerster law firm. He’s in the firm’s government contracts and public procurement practice, and he does a little bit of everything. Regulatory counseling, subcontracting arrangement negotiations, contract disputes, size protests, M&A, a lot of M&A. According to your bio, you’ve done over 200 transactions, probably more than that now.

Damien: More than that now.

Sam: At the, at that point. And then a long list of GAO decisions. Court of Federal Claims decisions. I want to start with some breaking news this week in the small business world, which is the Small Business Innovation Research program, or SBIR program. It has been lapsed for quite some time, but it seems to be looking on the way up because the Senate has passed reauthorization. For SBIR, I know you and I last saw each other in person at a hearing with the American Bar Association about SBIR, and there was some question about whether it was going to happen this year. It looks like it’s right around the corner. So what are your thoughts about what’s happened with SBIR and how this reauthorization looks?

SBIR Reauthorization and Program Evolution

Damien: I’ve been working on SBIR-related things for almost 20 years now, which is pretty incredible to think about. And it’s a great program. And I, we had never lapsed before. We had always had these sort of short extensions. This is the first lapse. But I’ve been an evangelist for the program, and that has made the last few months really hard because you’re out there in the market talking about how great this program is, how it’s a great opportunity, et cetera, and everybody says, but isn’t it dead? And it’s very hard to get people moving again when you’re moving forward and making more awards and all that sort of thing.

I think in terms of the debate that was ongoing: There’s a fight between the folks that want to cap the Phase I and Phase II awards. And my view of the world is that if businesses are doing good research and they’re accomplishing the goals in Phase I and Phase II, and it’s useful to the government, then we should let them do that. But I think there’s a counter view. Which is essentially that the idea is to commercialize, to finish out those technologies. And if you’re not taking it from one and two to phase three, that’s a failure in the program. Fine. This is a compromise. And there, there, there may well be agency caps on phase one and phase two awards, and there’s this new portion of the program that will allow for larger awards.

Sam: Oh, okay.

Damien: My question on the larger awards is that going to, as you may know. The SBIR program is funded through a particular allocation of research and development dollars from all of these agencies. And one of my concerns is if we’re going to make larger and larger awards, is that going to mean fewer awards overall, or is that just going to mean that there’s maybe going to be more money in the program to pay for it? And I don’t know, I don’t know how that is going to develop. But the other point on SBIR is that you have a focus right now in our industry on technology, on IP, and whether that’s hardware or software or AI-enabled, this and the rest. If the focus is going to be on technology, the early-stage program that makes the most sense is SBIR.

And we need to be out educating people on the program, driving more proposals. The way that you’re going to disrupt the folks that win all the phase ones and twos is to have somebody else win phase ones and twos, right? And getting more new entrances, more new entrants, more competition, more technology. And it’s just been a, I’m very glad to hear that it’s probably on the glide path to being re-upped and being re-upped for a number of years.

Sam: Where do you see this program evolving with this opposition to multiple award winners and then this new emphasis now on larger awards and on commercialization? Where do you see it two, three years from now?

Damien: It’s interesting because the SBIR program is sleepy right up until it has to be renewed. That’s how it goes. Is that there is a, it gets renewed. There are some tweaks; last time there were ones about foreign investment and those sorts of things that were the, where the changes last time. The real question I think going forward now is, okay, is our focus on. Early-stage research and development. Are we buying lottery tickets here, or are we really ends-based and we’re going to be focused on the end outcome? And these larger awards are an indication of an ends-based mindset that we really want to get to the end. And that’s a policy choice that is way above my pay grade.

But I do think that. The purpose of the SBIR program is not to be just another procurement program; it’s to do basic research and development that nobody else is going to bet on, but the federal government. If you are in a place where co, where venture capital will come and bet on your company, it’s great to be in the SBIR program, but you’re not the target audience, at least from my perspective. And I also just, if the goal is to cap awards to particular companies, I don’t know how effective that is to implement because they can just start another company, and I don’t know if you’re going to then track those people, and all of a sudden this starts to get very complicated, very fast. Sure. Whereas I think if you. If you do more to advertise the program internally and externally, I think there are more people on the private side that know what the SBIR program is than in the whole of the government. So if you do more to advertise the program, you get more people involved on both sides and run through Silicon Valley, and you run through all the technology corridors that we have in this country, that’s the solution rather than some arbitrary cap.

Sam: And that’s a good entry point to whatever it is, government contracting or grants. These are companies that have done no work with the federal government at all. And now they’re able to get their systems in place and get introductions to people. They can potentially be part of the industrial base.

Damien: That’s right. And the thing that we’re assuming knowledge of, but let me actually emphasize it, is that SBIR phase ones are not necessarily winner takes all. The topic can come out, and the government can make any number of awards on those. And so if you’re an emerging small business, one path is to go beat Lockheed Martin, and the other one is to be one of three awardees on a hundred thousand dollars SBIR. There’s one of those that is a far easier entrance point to the market.

The Congressional Experience and Policy Evolution

Sam: Certainly. So look forward to getting that passed and then getting the funding out for this fiscal year. Want to take a step back in your bio? I didn’t mention that you actually started as a congressional staffer on the Small Business Committee. How has the experience of a congressional staffer changed? Or maybe more broadly, if you can’t answer that. How has the process for getting small business legislation through Congress changed? Since you were there.

Damien: You know the answer to this from your seat. So I was up on the Hill for a heartbeat while I was in law school. I was in the Senate Small Business Committee. Had the great pleasure to work for Kevin Wheeler, who is just one of those SBIR experts, and to work collaboratively with Max Kidalov, who is still working on SBIR stuff today. He was there as well. And one of the things that we were frustrated with then—again, even in the short time I was there—was that we couldn’t get things done. It wasn’t a priority to get small business legislation pushed through, seen as a collaborative, but not a particularly high-priority committee. And we were mostly looking for other pieces of legislation to hang things on in order to get them. Through.

And when I came out, I intended to go back after law school. I was going to go back and work on the hill. And I didn’t, and I will tell you that because of folks at SBA, like you, who, and John and the others who were willing to talk to industry, I think that those of us on the outside can get more done than even the Hill staffers can. Because the regulations that are coming out on small business affiliation or recertification or whatever, if the agencies are willing to talk to industry and folks who care, we have the ability to actually get things done without worrying about what bill we’re tying it to, or whether we need to have a hearing.

I think, I’ve also seen, there was, even then there was an increase in partisanship, and I’ve thought of that as a non-partisan committee. Everybody wants small businesses to succeed. We can disagree on the 8(a) program or on any particular program, but everybody wants. I bustling Main Street, a successful small business program. Everybody wants the government to buy the best new technologies from the most interesting, innovative firms. Everybody wants that. But when we get tied up in fights about particular programs, things just hit the rocks. And in my seat now outside is outside counsel. I’ve testified before the committee a couple times on the House side. I’ve been able to work on rules with smart SBA lawyers. And I’ve also been able to get exposure to way more businesses than I would have had. I just stayed on the Hill. Hundreds of small businesses a year. I talk to the private equity guys, the venture capital folks. All those perspectives are really valuable and have helped frame how I see the small business rules as well.

Sam: That’s certainly one of the, maybe the last place, of true bipartisanship, the small business committees. At least in their hearings. Maybe not so much in their legislation that’s coming out, but at least they are cordial to each other in their hearings.

Damien: It was always collaborative, but a little too slow for me.

Affiliation, Recertification, and the “January 16th Cliff”

Sam: Speaking of your background and your work now with private equity firms and investment firms. I mentioned in the last recording of this that you had worked on a paper. It’s probably more than 10 years ago now, with Jessica Tillipman on investment potential in small business contractors. If you were to go back and look at that paper, how do you think it’s aged? Do you think those ideas have become more mainstream since you wrote the paper in terms of allowing more investment into small business contractors?

Damien: It’s interesting, I think Jessica may have said—I was a law student at the time, so now we’re talking about years ago, right? One part of that analysis was here’s how affiliation works. And affiliation is incredibly hard. The regulations are thousands of words. And that’s not even the good stuff. The good stuff is in the case law. And that’s where you get more of it.

But the question was, okay, how do we maintain some level of purity where real small businesses are getting real awards? But we allow them to. To grow. We allow them to potentially take minority outside investment, or we allow them to have a pot of gold at the end of the rainbow, where they get to exit. Because if you don’t have that, you’re going to limit the people that come into the market. If the idea here is that I’m going to build a business that is going to be a permanent, small business, that’s going to attract one slice of people. If you say, okay, it’s going to be a small business, and then you can grow, and you can go compete with the bigs, that’s going to be another. Small but optimistic slice of people. But if they’re, but if you then have a situation where those people can build value, and they’re maybe regular entrepreneurs or they come from an entrepreneurial background. Many of my clients come from entrepreneurial families, right? They want to build something to eventually sell, to potentially do it again.

And so if you want the most people to come into the funnel. You have to attract all three of those. You can’t just attract the first two. And the purpose of the paper was to argue that there are places where we can allow more outside investment, where we can have different affiliation rules, where we can modify how we look at it without just throwing the doors open and saying, no more small businesses. Everyone gets to be large. I think it’s aged pretty well. But what that didn’t anticipate was the whole recertification regime that we now have on top of that. Did not see that one coming.

Sam: Let’s get into that because I did have a talk with a business owner—this morning even--asking, what is the point of this new recertification rule? So he is referring to the January 16th cliff. Now that the cliff has passed, the rule is that if you’re a small business that gets acquired by a large business, you can no longer qualify for small business set-aside orders or orders off of an IDIQ that was originally set aside. And so the

Damien: question, and you get off from the IDIQ.

Sam: Yes.

Damien: If it’s a set aside, IDIQ, right?

Sam: Or you could get shifted over to the large business pool if that’s an option. I wish the rule said that a little more clearly. You could talk more about that. That would be the, that would be the ideal state of the rule. So I argued in a Substack post a couple of weeks ago, when the cliff arrived, that part of this recertification regime is to have small businesses competing against other small businesses rather than having a small versus large situation. It’s a matter of fairness.

But even more to the point, it is a sticking point for the SBA Inspector General and for a particular whistleblower group for over 20 years. Now, since 2005, the SBA IG had been prodding SBA to make changes to recertification because the idea was that without this recertification regime, small business dollars were going to large. And by the way, I found some testimony from one Damian Specht saying this is a problem and that SBA needs to fix this problem of small business dollars going to large businesses. So, looking back on that, but more to looking at junior 16th, the arrival of the cliff, what do you think about this particular issue--this cliff issue of preventing acquired small businesses from going after small business orders?

Damien: So first off, I don’t know that you and I agree on the premise necessarily, right? So I agree that set aside dollars to generally go to small businesses, but I think that we can make a business judgment that says: The important thing here is that the government is hitting its small business goals and that those dollars are making it to small businesses. And if we have a recertification regime that runs to credit as opposed to eligibility. We’ve balanced the market between allowing for growth, allowing for acquisitions, and making sure that 20-some odd percent of federal dollars end up in small business hands. I think you and I probably disagree on that, but when we talk about small business dollars, there’s a difference for me between a contract that was awarded to a business that was a small business at the time that it certified, that it was, and counting that as for credit after they’ve been acquired. So I think I see a distinction between those things. That is a policy call, right? That is not the outside counsel call. And it’s not like it’s illegal to do it that way. It’s just a policy call. But the implication.

Sam: It’s also a technology call, though. Let me just mention that I don’t know that it’s actually technically possible to separate the credit from the eligibility. Please go ahead.

Damien: I’m sure we’ll solve that problem in good time. But, because what worries me and I’ll, I will get to, I promise I’ll get to the January 16th, but what worries me is a circumstance where you have the 180-day rule. Where a submitted proposal for a small business that is a single award, not a MAC. If you recertify within the first 180 days as large, you are ineligible for award. After 180 days, you’re eligible, and then if it’s a MAC, you’re ineligible no matter when it happens. What I worry about is a circumstance where I’m a contracting officer, and I’m trying to let a procurement, and I get X number of proposals. The procurement timeline is six months a year, 18 months. CIO-SP4: The rest of our lives. And all that time, people are drifting off. We are getting less competition because the folks that the government would’ve awarded to are falling off.

And once they win that award, then they have to recertify as large during the course of it. So now the awardees are trickling off. And what you’re doing at the end of the day is not only reducing competition, which is a goal of the system, but you’re also reducing the certainty for that contracting officer who’s trying to make that award, trying to decide, hey, is this going to be a small business contract at all? Do I want to take that risk of having people fall off? I just want to let it full and open. Okay. Soapbox over with the January 16th rule. There was an anticipation that there would be a lot of transactions running up to January 16th because people were trying to get grandfathered in, right?

Some of that happened, I think there was less there for a couple reasons. Number one, totally unclear how any of this relates to the GSA schedule, right? I don’t understand how it fits under the rule. And the GSA schedule is just a huge driver of business. With that, there’s no certainty. I don’t know if January 16th, 2025, or January 16th, 2026, is the cutoff date for that. So I think that was part of the issue. The other part is that 2025 was not a great year for government contractors. There’s the direct impact of DOGE and the cuts that occurred there. But there’s this more subtle impact, which is that a lot of contracts last year got extended. So the incumbent got extended, but there was no recompete. And that may have been intentional; it may have been because of a lack of staff, who knows? But it is what happened.

And as a result, it’s very hard to sell a business where I say, oh, I’ve got this contract for another six months, as opposed to, I won the recompete, I have it for another six years. And so there were a number of transactions before that date, but I think the overall impact of those two things. Really stopped that from occurring. Now what’s going to happen going forward? We’re going to have to figure out how this rule works, right? So I did the math. This rule, 125.12, is 1,684 words.

Sam: Oh, okay. It’s just over 1,000.

Damien: 121.404. The other recertification rule, 1,274 words.

Sam: That’s a lot to go through. Good for lawyers.

Damien: So 3000 words. Where we used to have size is determined when you submit your bid, including price, right?

Sam: Yes. FAR Overhaul is maybe a sentence.

Damien: Exactly. Exactly. And frankly, you could make the argument that in 1,684 words, there are actually too few words in here because there are a number of issues that are unaddressed that we need to address going forward to figure out certainty. And there’s going to be litigation on. How does this apply to the point you made before? What if there is an IDIQ contract that has a large pool and a small pool? I think the text of the rule probably says that if you recertify in a reserve, which is what the small pool is, you’re ineligible for options. I cannot imagine that’s the outcome. That SBA wanted, right? There’s no policy reason to kick the company entirely as opposed to just moving them up to the full and open pool. So could we deal with some clarification there? Things like that need to be fixed here. And I understand that the timeline for the rule was, was a little rushed, et cetera. But at any event.

Sam: Just quickly, do you think it applies to novations?

Damien: I do not think that 125.12 applies to novations. I think it’s a gap. But the problem is the FAR does require recertification for an asset transfer innovation, right? So what controls your guess is as good as mine? We’re going to find out at some point. We’re going to find out. Your guess is as good as mine. But no, I don’t think it applies to novations.

Market Trends 2026: M&A and Private Equity

Sam: You mentioned the downturn in 2025 because of DOGE and extended contracts. How are things looking market-wise in 2026 so far?

Damien: Busy. There’s a lot going on in the M&A market, and I think it’s important to baseline what the M&A market looks like for government contractors. The overwhelming majority of transactions. Are somewhere between $50 million and $100 million. So we see all of these transactions that are a billion dollars or hundreds of millions of dollars. Those are an extraordinary minority. The actual majority of deals are those smaller ones. And so every single transaction has some level of small business involvement in it. Because those are the deals that are coming up as I’m doing $45 million in a five-year average revenue, I can compete as small. That $46 million can be a problem, right? Or 47 or 48, depending on where the numbers go with inflation. And so that is a huge part of the market and a huge part of all of these transactions.

So it’s been busy. There has been a lot of investment, and that investment comes, I think, in three major flavors. There’s private equity in our market. Those are control investments. They are recertifying as large, and they’re making a bet that that company plus other companies will be able to compete full and open and, and that those businesses will be more sophisticated with their work. There are private equity firms that do minority. We would refer to them as venture capital, but they’re not. So there are venture capital firms that take small amounts, but there are also investors that’ll take 30, 40% of a business in our space. Keep them small, give them some resources to grow, and then see if they can compete on a full and open basis. And then there are what are referred to as strategic transactions. So that’s either a large existing business, like a publicly traded business that buys a small business, or two small businesses combine. We see that a lot where somebody, my $45 million individual, he and another 45 million individual want to combine, be a $90 million enterprise, and think that’s a more competitive way to go forward.

Sam: And that’s preferenced under the new rule.

Damien: It is preferenced in the new rule, a small, acquiring a small. Though small for what isn’t totally clear, right? Small in their primary code; small, under a given contract. Not totally clear.

Sam: I promised the person this morning that I would ask. Now, post January 16th, what are the strategies that you would suggest to a company that did not make their transaction in time for the cliff?

Damien: You’re not going to be surprised, but number one, win more work, right? That’s easy. But primarily, we talk about the mentor-protege program as a way to transition, and I think that is beneficial to everyone. It’s beneficial to the business that is graduating. It’s beneficial to the business that is coming up as a protege. There is set aside work that needs to transition to someone. And you’ve got incumbent personnel who are performing it, and you’ve got a small business who wants to get into that market, wants to meet that customer, wants to do that work. And if you can marry the two of those, that’s the whole point of the mentor-protege program.

How does that relate to the M&A? I no longer have a recertification obligation if I’m the mentor. So instead of saying, oh, will you keep this small business work or this 8(a) work, or this SDVOSB work, or whatever it is. Will you keep that work in a transaction? It’s a fait accompli. I don’t have to recertify because the size of the mentor protege joint venture is based on the small, and so that’s one strategy. I think that is a particularly good strategy for the IDIQs. I’m going to get off-ramped from an IDIQ. Maybe it makes sense to take that IDIQ and move it to a mentor-protege JV, where it can benefit an upcoming protege and there’s not an off-ramp issue that comes up.

Sam: Okay.

Damien: Does that make sense?

Sam: And the mentor in that case isn’t necessarily a large business; it’s just trying to plan for the future certification.

Damien: You’re planning for the future, and you’re planning for either your growth or an exit or your own acquisition with it. You want to go buy somebody. The other piece that is going to get more popular here is going to be the minority investment, right? I don’t have to recertify. And as an entrepreneur, I’ve got all my eggs in one basket. A minority investment helps me get paid for some of that so that I don’t have all of my personal wealth in one place. It gets me connections to the minority investors’ connections, and their, if it’s a venture capital person, it gets me involved in all of the different businesses that they invest in, all of those technologies. Or it gets me connections to folks who have done this before, who have ridden the ride before, been entrepreneurs before, and it can get me access to professionalized staff, a new CFO, a new chief growth officer, or something like that. There are a ton of benefits that come from that, and that is going to be a more attractive option going forward for folks who didn’t transition.

Minority Investment and Compliance Traps

Sam: That’s interesting that those are the collateral benefits of getting minority investment. When I was at SBA, there was a policy effort to open up all of the programs to additional minority investment, and we changed what’s called the extraordinary circumstances rule. Essentially, allowing for more supermajority requirements. Has that shifted the market at all? Have people taken advantage of that? Does it matter?

Damien: Big change, right? So it used to be that all of the programs had slightly different rules, and it was hard to know if you were going to make a minority investment, how that would work. And yes, I know you were involved in driving that forward and making it more uniform across the programs. That is a humongous change, right? That is a humongous change. Super beneficial. And it has certainly cost me billable hours, in that I don’t have to interpret all these various programs. It’s one rule across them all.

Sam: If only they could do that for joint ventures.

Damien: Exactly. But it’s interesting. So I separated out minority private equity from minority venture, and I did that on purpose. The minority private equity folks that play in this space know these rules, et cetera. But there’s a whole other group of businesses, we think of them as Silicon Valley, but they’re all over the country. And they are the ones who are coming up with cool technologies and are primarily commercial-facing, and they take venture capital based on standardized venture capital terms. These things are fairly rote, right?

And interestingly enough, the way that the SBA rules work, even as revised, is still not consistent with that. And so I certainly, I have a real concern. That, we’re on the one hand, we’re saying, Hey, we want better technology. We want more businesses that are doing cool stuff, which is what the venture capital folks are trying to invest in, but our small business rules aren’t actually keeping up with that. And so I think that’s the next major challenge on the minority side, anyway, is figuring out how it is that we marry the way that market has developed and our desire for it. With the affiliation rules, and maybe it’s a, maybe it’s a carve out for a certain percentage of ownership or something like that. Somebody below 10% doesn’t have to worry about negative controls; there’s a number of ways to get there, but I do think that there’s an and a disconnect, and that’s more than a frustration disconnect. It’s a compliance trap because those folks are going to enter this market. They’re going to win an SBIR, they’re going to win a small business contract. Somebody’s going to file a size protest, and they’re going to lose.

Sam: Interesting. What about the catch-all at the end of the extraordinary circumstances? Does that not cover it?

Damien: Maybe. That’ll be up to Holleman, right?

Sam: That’ll be the question once they get through their 1000 cases that they’re working on right now.

8(a) Program Audits, AI, and Subcontracting Limits

Sam: Actually, let’s talk about that. There have been at least two, maybe now three waves of suspensions in the 8(a) program. The first was 1100 companies did not reply to the data call on the holiday that it was due. The second wave was DC area firms that SBA suspected of not being economically disadvantaged. And it looks like there’s now an effort to look outside of the DC area. What are you seeing on 8(a) audits and suspensions generally? Do you think SBA has gotten it right? And what would you say to a company that’s caught up in the middle of this?

Damien: And can I add onto that, too? All the limitations on subcontracting action that’s going on as well.

Sam: That’s Treasury and War. That’s all running in parallel as well.

Damien: So, number one, it is clear to me that they’re using some sort of AI to make a lot of this analysis. I think it’s great to use AI to detect fraud, right? We have forever been at this point where we say, okay, what is the return on investment for detecting fraud? How much do we spend versus how much can we catch? And using AI to do that, I think you get a better return on investment. None of us wants fraud in the programs. That’s great. The problem is that at the volumes, I think it’s going out right now. I have not seen the quality control that I would have expected.

And so what I’ve seen in terms of the letters that have gone out are errors, and I know you’ve pointed them out on some of your prior discussions, but also misunderstandings of how the regulations work. And I’m a Luddite. I don’t, I’m not great at AI, et cetera. I don’t know how you teach it to do stuff, but it seems to me that. Future letters would benefit from an extra level of review before they go out. Particularly because those 8(a) letters are coming with an instant suspension from the program. They’re not going out as a Show Cause, which is probably how they should have gone out is a Show Cause. Prove it to me, and then if you don’t prove it to me, we’ll suspend you, or we’ll terminate you from the 8(a) program. They went out as if we assume the AI is correct, which has not been my experience.

And there have been follow-on contracting actions. OASIS+ has said, okay, if you are suspended from the 8(a) program, you are not eligible for 8(a) awards on my contract. We’re going to put you in essentially dormant status.

Sam: How does OASIS+ have the ability to do that? Wasn’t the idea that you get on it and then even after you graduate, you stay on OASIS+ in the 8(a)? So what’s the difference between being suspended and being graduated?

Damien: Oh, and that’s how the contract works. The contract says that if you recertify as other than, then you go dormant. So if you’re acquired or you hit one of the recertification points—five years—then you can go dormant. That’s fine, because that’s the way that contract was set up, and that’s what everybody was told the rules were. A suspension letter from SBA, and you’ll correct me if you think I’m wrong, but a suspension letter from SBA is not a recertification. And so I don’t know how they can do that. It’s not how the contract works, and it seems to me to be a due process problem. Right is that you’re just assuming guilty until proven innocent. And I think what we’ve seen with the late submissions, and I think what we will see with these waves, is quite the opposite, is that a lot of these folks are guilty of what?

Sam: Guilty of SBA, moving from one platform to another, and potentially losing your documentation, guilty of, as you said, SBA, not applying the clear rules on how to calculate income. Maybe there are a smattering of cases where firms are legitimately ineligible, but as you mentioned, I haven’t seen a whole lot of those.

Damien: No, those are actually the ones that were the most fascinating are the letters. They’re like, you never gave me your tax returns, and then you can get a screenshot of where the tax returns were submitted. And in fact, the letter includes information that could only have been calculated using those tax returns. So it’s a little bit of a loop.

Sam: That may be for the LLMs and the training data that you have to come up with a tax return sentence.

Damien: But I’m supportive of using every anti-fraud tool we have. And I’ll say the same thing on the limitation of subcontracting. Limitation of subcontracting has been in the rules forever, and it hasn’t been closely monitored in any way that I’m aware of. There’s reporting on it. But has it been closely monitored? Not really. Great. But to your point, there are exceptions, right? There are exceptions for ODCs; there are exceptions if you’re looking at a services contract versus a production contract, right? There are all of these exceptions, and it’s not clear that those are being applied consistently with the right level of human interaction.

Sam: Yes. And they never mentioned the non-manufacturer rule, which is a big exception to the limitation on subcontracting. I’ll reiterate this. I seem to say this on every single podcast. SBA has a statutory responsibility to set up a system for tracking limitations on subcontracting. It has not done that. So as a result, the Treasury Department and War have to send out these notices to 8(a) companies to send in monthly reports or whatnot. Save everybody a lot of time. If SBA or GSA just set up this system, that’s been talked about for over a decade now.

Damien: I’ll say on the limitation of subcontracting, those rules are also incredibly complicated, right? I did not do a word count for how many words there are, but I can tell you they’re incredibly complicated. What is the measurement period? What counts, what doesn’t? What diligence do I have to do for a similarly situated subcontractor that might count? Those rules are incredibly complicated, and I do think that there is space for reshaping the SBA rules to make them a little simpler. A little bit clearer for people. Because I think what happens is that over time they start simple, and then over time you address different problems. And every once in a while, it’s probably worthwhile to give some thought to how we might clarify and simplify.

Regulatory Conflict: SBA Rules vs. the FAR Overhaul

Sam: One effort to simplify was the FAR Overhaul, which cut at least 20% from the FAR, maybe even more from part 19. But now there are conflicts between the complexity of SBA’s rules and the simplification in the FAR Overhaul. So there’s a couple of areas that we could talk about. One is the 8(a) program with the once, 8(a) Always 8(a) rule. And sole source versus competition. Another is recertification where SBA, as you said, has 1600 words or so on recertification, and the FAR Overhaul has a sentence. Where do you see this going? How is this going to play out? Is it just going to be court case after court case, OHA case after case?

Damien: There’s one thing that is unknowable, which is, or at least from where I sit, which is, is there a rewrite of 13 CFR coming to conform it in some way to the Revolutionary FAR Overhaul? And I don’t know the answer to that. I don’t know if that’s the way this is going to go. Color me skeptical, that’s the way that’s going to go. I’m sure there will be revisions to 13 CFR, and there’s a discussion of the potential rules coming out soon.

But I think those things are in conflict at the moment, and you’re right in important ways. Somebody’s going to try to move a contract out of the 8(a) program and move it to a service-disabled veteran or HUBZone, or woman-owned small business, one of the other small business programs. And, will SBA take a stand on that and say that’s inconsistent with 13 CFR, and what wins in that instance? Show me the release. Where did SBA release then? And we cannot wish into being the world that we want. And I think that’s part of what the Revolutionary FAR Overhaul was doing and saying, here’s what we want the rule to be, and that’s great, but you need to figure out how those two rules work together.

But the FAR and 13 CFR have been inconsistent for years. It was pre-Revolutionary FAR Overhaul, but in the other direction, which is to say that 13 CFR was coming out ahead, was making new rules, and the FAR Council was not getting around to implementing those rules. And so that’s been inconsistent for years, and at least the default has been to apply the more specific SBA rules. But I don’t know that’s been litigated.

Sam: On the recertification question, if a client comes to you and says I got acquired. I need to figure out which rule to follow. What are you telling them?

Damien: I’m a lawyer. I’m conservative. 13 CFR, right? We go to those recertification rules and tell them, look, your risk profile. If you want to rely on the FAR, that’s fine, but SBA is the agency that does this, and they have more detailed rules. And so, at least for the moment, we follow those rules, and those are the rules that we cite to.

Sam: And there’s no Office of Hearings and Appeals for the FAR Overhaul and all that.

Damien: Now, again, how that gets litigated over time and where that gets litigated, right? If you recertify and you get ramped off of a contract, I guess you file a claim for it, and you fight it out.

Sam: Interesting,

Damien: As to whether or not the FAR or 13 CFR controls, I am not a smart enough lawyer to know how that ends.

The Building People Case and HUBZone Challenges

Sam: Speaking of off-ramps and you being a lawyer, I was interested in this decision. This is The Building People decision from GAO in November of 2025 because I worked on this issue when I was at SBA. There’s something called the 8(a) pool on the GSA. And similar to what we were talking about with OASIS+, the idea was you get on the 8(a) pool, you stay on the 8(a) pool for competitive, even if you graduate from the program. Or you become other than small. You do have to be in the 8(a) program for sole source, but for competitive, you can stay in there. That question came up before the Department of Energy, and you represented a company called the Building People, which was on the 8(a) pool. And they were excluded anyway because of, not really clear, maybe a question of their size or their eligibility, but essentially the agency said it says you can stay on, but you don’t really have to stay on.

Damien: It is worse than that. It is worse than that. The RFP actually said, we’re not requesting recertification.

And in Q&A, the agency said you just have to be in the 8(a) pool. And to your point, I don’t think there’s any argument that The Building People were in the 8(a) pool. So, how do you get to a result where they get excluded? And procedurally, the answer to that is the agency refers the matter to SBA for an 8(a) determination. Okay. But that’s not what you said you were going to do when you set up the competition. And bids are not free. There is not only the cost of preparing the bid, but there’s the opportunity cost of, if you had told me this was the rule, maybe I would’ve bid as a subcontractor. And so when an agency does that, when they do something that is contra to what they’ve announced for the rules of the competition, that seems like a protest to me, like an issue, a problem. And the GAO’s conclusion was just that it says that they have to get an SBA opinion under these circumstances, but it doesn’t say they can’t just do it every Tuesday because they choose to.

Sam: And it doesn’t give any company certainty. And it seems like SBA was very active in this; for whatever reason, it seemed like it really caught their attention.

Damien: Yeah. Yeah.

Sam: And it raises questions about this OASIS+ scenario, too. Can they get around the strict language of the contract, as you mentioned, just by pointing to this case?

Damien: Not only the contract, the task order, right? The task order said no recertification.

Sam: On the Q&A. Let’s talk about proposed rules. SBA is coming out with the proposed rule sometime soon. They’ve already presented it to the White House Office of Information Regulatory Affairs. What do you want to see in that?

Damien: Probably not what’s going to be in it is probably the short answer. I made the point a couple of times here that I think clarity, simplicity, uniformity, all the things that put me out of a job, are the things that I’m looking for in the regulations. And that takes time, and I think it takes interaction with industry to figure out, hey, where are the pain points? And that was something that SBA in prior years was great at. Hey, industry, what sucks? What is not working for you? Where are the problem areas? And so if it were me, I think I would see more work on recertification and minority controls, and some cleanup of things that are outdated that we can address in other areas. That, that’s probably not what we’re going to see. I think we’re going to see a very likely focus on the 8(a) program that has been a consistent focus here.

And in truth, the 8(a) program has not been reformed in a while. I would like to see is reform on the HUBZone program, because that has been tried over and over again, and every year the government doesn’t hit its HUBZone goals. In part because, and I hear this from clients, it is basically impossible to comply 35%.

Sam: Is that the problem? 35% compliance?

Damien: It’s because the problem is you win a big contract, and how do you ramp and you’re recruiting for folks who aren’t steeped in the HUBZone rule. Your employees, 35% of your employees, have to come from a historically underutilized business area. These are census tracts, many of which are populated by students. Because they have lower incomes during college, et cetera. These are not necessarily—people think about urban blight, but it’s not. It’s some urban areas, some rural areas, and then college towns are where you’re hiring from. And if you win a contract where you now have to deploy a hundred people, and you have to deploy them in 30 days, it’s a real challenge.

Sam: It’s not meant for modern-day contracts. Most of these contracts are service contracts now. It doesn’t really make sense to have that same,

Damien: Maybe the answer is an investment in those HUBZones, right? If you’re not going to meet that goal, maybe there’s a way you can upgrade your office space; you can do whatever. Maybe there’s a financial component to rebuilding those places. That, that allows for more flexibility. Because until then, you’re going to have a situation where there are very few, and very few end in HUBZones.

Sam: And that creates fewer opportunities because you have to satisfy the rule of two. To put the HUBZone requirement out there.

Valuation and M&A Pitfalls

Sam: I do want to run this one question by you. Speaking of the M&A situation, even as 2026 seems to be better for M&A. Somehow I get more responses on my M&A articles than anything else. One of the responses I got was: My company was valued more when we were at half the size standard, or three quarters of the size standard than we are now, as we’re getting close to the size standard. So, where else can you see a company that’s growing and valuation actually goes down? Because it’s very close to not being eligible for set-aside work.

Damien: It’s not only what you do about that. It’s not only that, it’s that they’re eating their backlog of their small business wins. If I’m an outside investor and I’m looking at your single award, small business contract, if I’ve got five years left on it, it’s got a value. If you’ve got 18 months on it, it’s got a different value, right? And so as you get closer to that line, the, can you win this on recompete question becomes much, much harder. And you don’t have that tail to transition you through.

But the answer is, and all the smart people in this industry say, run a business, don’t participate in a program. And so the way out of that is to diversify your base, right? To use the mentor-protege program, use subcontracts where you are the sub to comply with the limitation of subcontracting, but you’re the sub to a small right? Make your revenue less small business dependent, right? One. Number two, while you are still small, and I’ll tie this to the beginning of our conversation, participate in the SBIR program. Develop intellectual property and the SBIR program allows you to go out and win sole-source work without the 8(a) program. If the 8(a) program went away tomorrow, you could still get sole-source SBIR Phase III awards. Go do that and go build a plan where a buyer can only see some backlog, but sees a plan, and then has the IP to dream on that you can win in less competitive operations. Does that make sense?

Sam: So, as you’re looking at these transactions that may be coming up and working with buyers, one of the things you engage in is diligence. Trying to make sure that the valuation is right or the transaction is proper; folks are compliant. What are you seeing in that? What are the biggest pitfalls companies should be looking out for in this?

Damien: If you’re a small business, I often say that we see more non-compliance than the inspector generals do. Because we are out there looking at dozens and dozens of businesses, and I don’t have to send them a CID or a subpoena. They open a data room, and I get to look at everything. And so we can see trend lines, and we can see all the errors, and we can see what’s going on.

So, for your small business audience, and for your large business audience that wants to acquire a small business, a couple points. The number one mistake we see is affiliates. People look around the four walls around them, and they say, that’s the size of my business, but they forget that they own another business over there, and their brother owns another business over there, or maybe they’ve got a parent corporation, right? We see that all the time with subsidiaries of larger corporations. They just say, oh SAM asked me, not Sam you, System for Award Management asked me, how many employees I have? I know how many employees I have. At the subsidiary, I’ve got 50 people on the payroll. So they put in 50 and that auto-populates the small business representations. What SAM wants them to do is to go look up and go all the way up the chain to be able to calculate that, but that’s not intuitive. And it’s not the obvious answer. For you and me it is because this is what we do for a living. For somebody who’s out there trying to actually run a business, it’s not. So we see that a lot.

And the same thing ties back to the venture piece, which is if you have taken even small minority money, but with the wrong negative controls, you can run into the same affiliation problem. So I would probably clean that up. This is going to make you bang your head on the table, but another one of the issues that comes up a lot is the belief that I don’t have to update my size status until I file my taxes.

Sam: Okay.

Damien: As the rule is once you become aware that you’re going to cross, and you’ve closed off that fiscal year, then you update SAM and you are now a large business. There is a lag. There’s a persistent myth that if you don’t file your taxes, you don’t know what your numbers are, you don’t have to recertify. And so you have folks filing on extensions in September. And that nine months, they’re qualifying as a small business in SSAM, but they’re not. I see that mistake quite a bit. That happens.

I’ll hit just two more, and then we can continue on other topics too. But SBIR, SDVOSB, WOSB they require in different ways, direct ownership, right? We see problems with that all the time because folks go to a tax lawyer or an estate lawyer that says, if you organized this way, it would be more tax efficient. That may be true. But it is non-compliant with those programs and that’s got a really long tail because that’s going all the way back to when you made that change. And we see it in the SBIR program a lot and we see it on occasion in some of the other programs. The SBA certification process has weeded a lot of that out, but it still exists. And so the important part there is just if you are restructuring your business, have a government contracts lawyer, have a small business lawyer to look at it.

The last topic I’ll hit is JVs. OHA has no patience for errors in joint ventures, right? There are the requirements and those have got to be hit, and you’ve got to update it every time you submit a bid because you have to actually break out how the work share is going to look. The regulations say you got to identify the work and the materials and the locations, and the only way to do that functionally is to update your JV agreement every time you bid. A lot of times folks go to their lawyer; they get a great JV agreement. It’s right for the first contract, and it’s wrong for every contract after that because they don’t update it, and you’ve got issues that you will lose a size protest on that basis.

The other JV issue that comes up is really esoteric, but the way that you calculate revenue coming from a mentor protege JV, or any JV, it’s not the intuitive answer. Okay I got a subcontract from the JV and I count that as income, and the other party got a subcontract from the JV and they count that as income because the JV is unpopulated. But that’s not how the regs work. If there is other income right in that JV, there are other subcontractors, et cetera, you need to divide that revenue and allocate it to the parties. That is not an intuitive outcome and people get caught on that as well.

Sam: Oh, interesting. So they don’t realize that’s the way the SBA JV rules work.

Damien: It’s all stuff that’s not intuitive. The policy rationale makes perfect sense. It’s just not, if you told a man on the street that, they’d go bang their head on a wall for a while.

Sam: We have to do some education, to put this out there.

Damien: This is part of why I’m thrilled to be on this. Not only because of the folks that you’ve had on it before, but that we can do some education.

Sam: That’s great. And thanks so much for coming on. How can people find you?

Damien: On the web, the picture’s a little old. The bio’s a little old. But if you want to email me, my email address is DSpecht, so D-S-P-E-C-H-T at mofo.com. That’s mofo.com for real.

Sam: Morrison Foerster, a great abbreviation. Damien Specht, thanks so much for being on the show.

Damien: Thanks for having me. This was awesome.

Sam: Thanks everybody.

About the guest

Damien Specht is a partner in Morrison Foerster’s Government Contracts & Public Procurement practice. Damien represents clients in government contracts transactions, regulatory counseling, subcontract and teaming agreement negotiations, contract disputes, size protests, and protests. He has played a significant role in hundreds of government contracts transactions, representing industry leaders, private-equity firms and entrepreneurs.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

SBA preps “Fraud, Waste, and Abuse Reforms”

Sam Le — Wed, 25 Feb 2026 16:20:47 GMT

Transcript

Good morning, everybody. It’s Sam Le from GovCon Intelligence. Welcome back. I’m here in Virginia Beach at the Virginia Beach Convention Center. I just spoke this morning at the SAME Mid-Atlantic Conference. Let me just show you what the conference looks like here. Let’s see a good number of people out on the convention floor, networking, making connections. If anybody’s here is actually online, want to come by and say hi, I’ve got another microphone if you want to stop by and say hi real fast.

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Upcoming SBA Regulatory Changes

I felt the need to come online today because, as I discussed this morning at my talk, there’s a big SBA regulatory change right around the corner. Just yesterday, people started discovering that SBA had submitted a request to a White House office. It’s called the Office of Information and Regulatory Affairs, a request for review of a proposed rule that SBA will release once this review is over.

The proposed rule is called Fraud, Waste, and Abuse Reforms. It’s on the Office of Information and Regulatory Affairs website as Fraud, Waste, and Abuse Reforms, a proposed rule states that it’s economically significant as received by OIRA February 20th. And it’s got a RIN number, AI66.

So what does this mean? Fraud, Waste, and Abuse. SBA has been talking a lot about Fraud, Waste, and Abuse. particularly in the 8(a) program. And it’s thought that perhaps this could be related to the news releases and 8(a) data call, the audits that have been coming out with respect to 8(a). There may be other areas involved as well. It could be something they’re looking at for the loan programs or the grant programs.

Subcontracting and Reporting Requirements

I said this morning at SAME, I would expect to see something in here about the limitations on subcontracting. Limitations on subcontracting have been a big emphasis for SBA during the data call. There’s something brought up by Secretary Hegseth for the sledgehammer video.

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So you might see SBA propose to require companies to submit reports on their limitations on subcontracting. There’s actually a requirement in the law for SBA to create a electronic system for companies to report their compliance with the limitations on subcontracting. So SBA may be using that statutory responsibility to now take action on the limitations on subcontracting.

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8(a) Program and Economic Disadvantage Thresholds

There may be action in there on the 8(a) program. SBA has been sending out suspension and proposed termination letters to 8(a) companies based on the economic disadvantage thresholds. There are three economic disadvantage thresholds that all 8(a) companies must comply with. There’s a net worth threshold. That’s $850,000. There’s an income threshold, adjusted gross income over three years. That’s $400,000. And there’s a total assets threshold, $6.5 million.

I’ll just know that I’ve heard from some people at this conference that the total assets threshold, particularly for Companies that require bonding is especially difficult to comply with. Because once you start getting contracts, you start to bump up against that $6.5 million threshold. Because that’s not personal assets. That can include assets in the company. So if a company needs bonding, if it needs to grow, it needs to have that capital to grow. And then it starts to bump up against that $6.5 million total asset threshold. So SBA may be looking at those thresholds or continuing compliance audits of economic disadvantage. That’s the effort that the agency is going through now with the letters of intent to terminate and suspensions.

Joint Ventures and Mentor-Protege Arrangements

What else could be in this proposed rule? Fraud, waste, and abuse reforms. Over the past few years, SBA has started to closely study joint ventures and mentor-protege arrangements. I remember when I was at SBA, I prepared a good amount of data to show the growth of joint ventures and the growth of mentor-protege over the last few years. It has grown a lot. It’s not a huge part of government contracting, but it has grown immensely as compared to small business contracting in general.

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So you may see something in these so-called fraud, waste, and abuse reforms about joint ventures, maybe more reporting on joint ventures. There are significant reporting requirements now that joint ventures may not be aware of, so there may be some efforts to formalize those requirements, at least have a designated mailbox at SBA for those or electronic system to obtain those reports from joint ventures. There was also a proposal over the past few years to cut down on the ability of mentor-protege joint ventures to win long-term contracts and multiple award contracts. So you might see that come back. in this fraud, waste, abuse reforms.

OIRA Review and Public Comment Period

That was submitted. This proposed rule from SBA on fraud, waste, and abuse reforms was submitted to the Office of Information and Regulatory Affairs on February 20th. Usually, things sit at OIRA for up to 90 days. SBA, in its last submission to OIRA, the one related to the data call, asked for expedited processing. I think they got it across in something like 24 hours that time around. So it could be that SBA looks at trying to get some sort of expedited processing with this OIRA submission for fraud, waste, and abuse reforms.

The good thing about this is it’s a proposed rule. So that means that SBA will be asking for comments from the public. Ordinarily, those comments would be a 60-day period. If SBA is trying to really push on fraud, waste, and abuse, maybe it would be something like 30 days. But that does give companies and trade associations, members of the public, the opportunity to submit comments to SBA on whatever these reforms look like. So if it’s something like economic disadvantage or joint ventures, maybe there’s something in there related to tribal, Alaska Native and Indian tribes, then organizations, individuals, and companies can submit comments to SBA. And the Supreme Court has said that agencies have to respond to significant comments received during that process.

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Use of AI and Rulemaking Precedents

Now, I’m suspicious of whether SBA might be using AI and algorithms to go through this data call. I discussed that in my last video with Dean Jessica Tillipman.

It’s not unlikely that SBA might be using AI and algorithms to go through the comments that are received as well. You know, SBA typically receives hundreds of comments on its proposed rule. So they may be getting a lot of those comments and running it through some sort of algorithm.

But even then... SBA is still required by the Supreme Court precedent under the Administrative Procedure Act to respond to significant comments during the rulemaking. So it is worth it for companies to look at this proposed rule when it does come out. It may not come out for 90 days. It may come out in a couple of weeks, depending on whether it goes through expedited processing.

Guidance for Submitting Comments

But when the proposed rule does come out, it’s worth it to companies to review it closely and submit comments through regulations.gov. It’s very easy to use website. Just go in. There’s a text box. If you have a PDF document, you can upload that to the website. And then those comments have to be considered by SBA if they’re significant.

One tip on the comment is if you can, submit data. It’s really important for an agency while it’s going through a rulemaking process to consider hard facts. And for the most part, that’s data. So if you have data that’s specific to your industry or specific to your company, your trade association, if you have data that’s specific to your members, that’s particularly relevant information.

Regulatory Flexibility Act and Economic Impact

There’s also an opportunity through the comment process to emphasize the economic impact of the rule on small entities. That’s a requirement under the Regulatory Flexibility Act, or IRFA. They call it the Initial Regulatory Flexibility Act analysis. This rule, this fraud, waste, and abuse reforms proposed rule is designated on the OIRA website as economically significant. It says it is economically significant.

So if this rule comes out, we don’t know what’s in it yet, but if it comes out and it has an impact on small entities, including small businesses, it’s worth it to bring that up. And then that triggers an analysis under the Regulatory Flexibility Act. There’s actually another office at SBA, the Office of Advocacy, that has oversight on the Regulatory Flexibility Act. So you could see separate offices of SBA involved in this proposed rule, depending on what the impact is on the Regulatory Flexibility Act.

Scrutiny of the 40% Rule for Joint Ventures

Some other things that I brought up at this conference, people had questions about mentor-protege and joint ventures. I am hearing that even though SBA hasn’t done much on the data call with joint ventures, individual contracting agencies are starting to closely scrutinize joint ventures. People in joint ventures are aware of the 40% rule. That’s the rule that the managing venturer has to perform at least 40% of the work of the joint venture. So in a mentor-protege relationship, that’s going to be the protege that’s performing 40% of the work of the joint venture.

I’ve seen cases where agencies are starting to reach out to joint ventures and ask about their compliance with the 40% rule. So pay attention to that. I did have somebody come out and ask me, where does that apply? Is that at the contract level, if you have a multiple award, IDIQ contract, or is that task order level? The answer to that is the old lawyer's answer: It depends. You have to really look at your contract to see whether a particular box is checked under the limitations of subcontracting. Maybe it’s under the contract. That’s the default rule. But if that box is checked, it could be on the task order level. And it’s important to look at your contract closely to see whether your contract’s 40% rule, as well as the limitations of subcontracting, is at the contract level or at the order level.

Impacts of the FAR Overhaul and Contracting Personnel

I’ve had a number of people. Again, I’m at the SAME Mid-Atlantic Conference in Virginia Beach. People talk about the impact of DRP and the fork of contracting officers leaving the federal government. There’s a host of impacts on the small business side as well as on the contracting side. It happens at the same time as agencies are starting to implement the FAR overhaul. So the Department of Defense, Department of War just put into place 37 parts of the FAR overhaul on February 1st. That’s a huge regulatory action. And you have a smaller cadre of 1102s and contracting officers that are handling these regulatory changes.

Additionally, the FAR overhaul has additional discretion for contracting officers. So I’m hearing that now you have younger and less experienced contracting officers that suddenly have a host of new discretionary authorities under the FAR overhaul. How is that working out? So I wouldn’t be surprised if you’re on the outside and you’re watching solicitations come through, that you’re seeing things that you haven’t seen before or new procurement authorities that you haven’t seen before, because the FAR overhaul opens it up, but also you have fewer experienced contracting officers that are running through that.

It’s a lot of work for these contracting officers to get up to speed on these regulations. That’s part of my purpose here is to give education to federal agencies as well as contractors on what some of the new initiatives are.

The 8(a) Suspension List and Technical Barriers

Another question I got by email, and I also got it here at the conference, is where can I find the 8(a) suspended list? Now, you might have seen from some of my posts on Substack, I track the companies that have been suspended.

I just posted the other day that the number of suspended companies went back down to the 800s. It was up to 1,000 for a bit, and it’s dipped down back to 800s. I try to track that on a daily basis. So keep track on govconintelligence.com and the notes section. I’ll post every few days about how many companies are suspended and whether it seems to be going up or down.

So I have knowledge of how to find the list. I am reluctant to put the list out there. My view on this whole suspension and termination wave is that most of these companies have done nothing wrong. On the suspension side, the initial wave was companies that did not reply by the January 19th deadline to the data call. January 19th was a holiday. It was difficult for a lot of those companies to get the tech support they needed. This system, anybody who actually replied to the call knows the system is not infallible. They’ve seen a lot of like twirling circles on the system. So there were companies that were not able to submit by that January 19th deadline. If they didn’t submit by the January 19th deadline, They were immediately suspended. Didn’t matter if they submitted the next day. I don’t think they did something wrong by being suspended. They may just have had technical issues that really could have been a system issue rather than something on the company’s side. So that’s the first wave.

AI Algorithms and Economic Disadvantage Reviews

And the second wave now are companies being identified for issues with economic disadvantage. That’s probably another 230 companies that have been suspended and proposed for termination for economic disadvantage. Companies go through an economic disadvantage review every year. 8(a) companies are required to submit financial documents to their district office to go through a review of whether they’re economically disadvantaged. So these companies, if they’re in the program now, they’ve already been cleared by a human being.

Now SBA is using likely an algorithm, AI, to go through those same documents again. And that AI is finding issues with maybe a few hundred companies. I’m not certain that those are legitimate issues. And some of the cases I’ve seen, those are not issues that comply with SBA practice and regulations. I’ve talked about this before. There are exclusions to the economic disadvantage threshold. This AI, this algorithm is not, in all cases, applying those exclusions.

So I think a lot of these 200 or so companies that have been identified in the second round, first of all, they’ve already been cleared by a human. That’s why they’re in the program. And second of all, this computer is making mistakes as it goes through. Jessica Tillipman and I talked about the fact that SBA is just really jumping to suspension and termination, rather than having another human in the loop to review these suspensions and terminations. So that’s all to say, I’m not on board with saying that these companies are somehow engaged in some wrongdoing. And for that reason, I’m not putting a list out there. You can find which companies are suspended. You can go to the SBA website. It’s search.certification.sba.gov and start searching up companies and see whether they’re suspended or not. It’s not that hard to start to go through the whole list. I just not willing to put a list out there for it.

Conflicts Between 13 CFR and FAR Part 19

A few more questions that I got today in the Virginia Beach SAME conference. I got questions about CFR versus FAR overhaul. There are a lot of changes in the FAR overhaul, particularly with the 8(a)A program. And what controls when there’s currently this conflict between the SBA rules, which is 13 CFR, and the FAR overhaul rules? Those are out there in Part 19.

Some of the areas of conflict include the once 8(a), always 8(a) rule. Is there an automatic release for contracts that are being moved from the 8(a) program to service-disable VET or HUBZone or women-owned? Another area is on recertification. I wrote about that in my last article on whether agencies need to require a company to be eligible at the time of order where SBA rules say they must be eligible at the time of order. The answer is we haven’t seen it happen yet. So we don’t really know.

On the 8(a) side, SBA would tell you SBA is in charge of the 8(a) program. They have a partnership agreement with every agency on how that agency is expected to conduct its contracts under the 8(a) program. So, for example, on the once 8(a), always 8(a) rule. SBA issues releases. If an agency doesn’t get a release you’re not supposed to take something out of the 8(a) program. FAR overhaul doesn’t say that. FAR overhaul says there’s an automatic release.

But SBA hasn’t changed its rules. The SBA will still require that there be a release from the SBA headquarters in order for that agency to take that out of the program. So if sSBA a is in charge of the 8(a) program and it hasn’t released yet, the current rule would say, since SBA is in charge of it, that contract has not been released.

And I’ve heard instances where SBA has been asked for a release. And just because of the last thing that I mentioned, people taking the DRP, taking the fork, they’re not getting around to those releases fast. It can be months, potentially, for an agency to actually get a response on a release. And if it hasn’t gotten that release, that means that requirement, based on the CFR, should stay in the program. That’s also what the 8(a) partnership agreement says.

Future Outlook and Closing Remarks

We’ll see when this comes up. It’s certainly a big issue that could come up in litigation before GAO, both that 8(a) issue as well as the recertification issue. We’re in this interim period right now where SBA rules say one thing, the FAR overhaul says something else. It’s been said, Larry Allen said in an interview with a law firm that SBA rules eventually will change. That hasn’t happened yet. It might happen in this new Fraud, Waste and Abuse Reform rule that comes out where SBA might consider some of the changes that happen in the FAR overhaul. But that doesn’t seem to be, you know, if you call something Fraud, Waste and Abuse Reforms, it doesn’t indicate that it’s going to be changes to reflect the FAR overhaul.

I think that wraps all the questions that I have. I just want to call everybody’s attention again to the proposed rule that will be coming out from SBA on Fraud, Waste and Abuse Reforms. You might see that in 90 days. You might see that in 30 days. Depends on whether SBA requested expedited processing from OIRA. When it does come out, there’ll be an opportunity to comment. It’s designated as economically significant, and certainly I’ll come back online and talk about it when it’s available to the public for review. Thanks, everybody, for joining me. I had fun talking to SAME Mid-Atlantic here in Virginia Beach, and I’ll see you next time. Thanks, everybody.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

AI, GovCon, and the Perils of Speed (with Jessica Tillipman)

Sam Le — Fri, 20 Feb 2026 20:34:10 GMT

Jessica Tillipman is the dean of GW Law’s procurement law program and the leading expert on the use of AI in government contracting. I caught up with her about the Supreme Court’s tariffs decision, the potential for AI-enabled corruption, and the future of lawyering. Along the way, we discussed SBA’s recent wave of suspensions and proposed terminations of 8(a) firms.

An auto-generated summary of the conversation follows.

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In this episode of GovCon Intelligence, Jessica Tillipman, the associate dean for government procurement law studies at the George Washington University Law School, discusses how rapid federal adoption of artificial intelligence is reshaping oversight, competition and integrity in government contracting.

The conversation opens with breaking news about a Supreme Court decision striking down tariffs as a tax and turns to Tillipman’s forthcoming article, Buying Blind: Corruption Risk and the Erosion of Oversight in Federal AI Procurement, which argues that “risky buying equals risky deployment” when agencies pursue A.I. without sufficient training, infrastructure and governance. Sam links those concerns to the Small Business Administration’s February 11 wave of more than 150—closer to 230—letters suspending or proposing termination of 8(a) companies, describing basic errors and legal deficiencies that suggest automated screening without adequate human verification or due process.

Tillipman explains her “wedding cake” model of the A.I. tech stack—chips, data and cloud infrastructure at the base; foundation models as the “brain”; applications near the top; and human oversight above it, with security and governance layered throughout.

She warns that market concentration and preferred partnerships can deepen lock-in and complicate accountability. She also outlines how the stack can create organizational conflicts of interest, from biasing ground rules and unequal access to information to risks that arise during customization and fine-tuning, and she raises concerns about “algorithmic collusion” and the use of telemetry and logging data.

Drawing on South Africa’s “state capture” scandal, she describes how procurement can be exploited to capture institutions and argues that A.I., operating quietly inside data-rich agencies, could magnify those dangers.

The episode distinguishes between “corruption risks,” including A.I.-generated fraud, prompt injection and proposal gamification, and “integrity risks,” such as bias, drift, hallucinations, opacity and automation bias. Tillipman urges agencies to treat A.I. as an aid rather than a substitute, emphasizing human-in-the-loop oversight, traceability to solicitation requirements and proposal text, and the need to protect due process for those flagged by fraud tools. She critiques the current federal posture as governance in retreat—citing a speed-first approach, promotional OneGov pricing that can fuel behavioral dependency, and the disruption of a FAR overhaul alongside buyouts and retirements.

The discussion also addresses a ProPublica report on the Department of Transportation’s effort to draft regulations rapidly with Gemini and rumors of Pentagon pressure on Anthropic tied to contractual clauses allowing any lawful use of A.I. systems. Tillipman says these developments underscore that A.I. governance is not neutral and that the government still wields leverage, including through supply-chain risk designations.

Turning to the classroom, she describes growing anxiety among students about the job market and worries that heavy reliance on A.I. is eroding foundational legal skills, prompting a shift toward more in-person, closed-book assessment and instruction aimed at A.I. literacy. Tillipman predicts that industry may use governance as a competitive differentiator, but she expects a scandal-driven swing back toward reform.

She directs listeners to jessicatillipman.com and LinkedIn.

00:00 Meet Dean Jessica Tillipman (GW Law)
00:31 Small Business Affiliation Rules: The Paper That Shaped SBA Policy
02:23 Supreme Court Tariffs Ruling—What It Means for Business & GovCon
05:20 The paper, ‘Buying Blind,’ and AI Corruption Risk in Federal Procurement
06:16 SBA’s 8(a) Suspension Letters. Did AI Fraud Detection Get It Wrong?
08:48 ‘Risky Buying = Risky Deployment’: Human-in-the-Loop & Due Process Safeguards
11:36 The ‘Wedding Cake’ AI Tech Stack Explained
16:03 Conflicts of Interest in the AI Stack: Algorithmic Collusion, OCIs & Telemetry
21:40 South Africa’s ‘State Capture’ Scandal
25:47 Promo Pricing, OneGov Deals & Behavioral Dependency
30:23 Corruption Risk vs. Integrity Risk
32:31 AI Fraud & Voice Consent: The Next Wave of Scams
32:47 System Corruption in Procurement, Prompt Injection & Proposal Gaming
34:01 Hallucinations, Protests, and FAR Part 15: Why Humans Must Stay in the Loop
37:08 Using AI the Right Way in Evaluations
40:10 AI ‘Slop’ and Losing Your Voice
41:44 Speed vs Guardrails in the FAR Overhaul Era
45:35 Should AI Write Regulations? The DOT ‘20-Minute Draft Rule’ Debate
48:34 Prompts for Brutal, Bias-Checking Feedback
50:58 Pentagon vs Anthropic
54:48 Preparing the Next Generation for the Job Market
59:52 10-Year Outlook: Compliance as Advantage, the Next Scandal, and Finding the Middle Ground
01:02:54 Wrap-Up: Governance & AI Literacy as Differentiators + Where to Find Jessica Tillipman

About the Guest

Jessica Tillipman is the Associate Dean for Government Procurement Law Studies and Government Contracts Advisory Council Distinguished Professorial Lecturer in Government Contracts Law, Practice & Policy at the George Washington University Law School. She is a leading authority on public procurement, corruption, and the governance of AI in the public sector, with a particular focus on integrity, compliance, and emerging technology risks in government contracting.

With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com.

This video is for informational purposes only and does not constitute legal advice.

How large businesses get small-business contracts

Sam Le — Thu, 12 Feb 2026 13:24:35 GMT

The FAR Overhaul became effective across much of the Federal government last week. And with that came the setup for a big catastrophe, an inevitable train wreck taking place in slow motion.

Here’s how the disaster will happen under the new FAR Overhaul.

A small business gets a big multiple-award contract, an IDIQ. Let’s assume that IDIQ was not restricted to small businesses in any way. That small business does really well, maybe because of the IDIQ. So it grows to become a large business. Then that now-large business wins a blanket purchase agreement on the IDIQ. An agency sets aside work on the BPA for small businesses to compete for.

Multiple small businesses bid for the agency’s set-aside work. Yet the large business wins the work. The small businesses wasted their time bidding on the set-aside.

This is bad. It’s unfair to the other small businesses competing. The work went to a large business on the basis that it used to be small. That seems counter to the concept of a set-aside. Is it allowed?

Here’s the worst part: There is no answer. No one can confidently say what will happen in this scenario. And that’s because the FAR Overhaul says one thing, and the SBA says another.

Which one is right?

The SBA Inspector General’s 20-year crusade

SBA has the stricter rule, but the SBA’s rule didn’t come about organically. The agency had to be pushed.

Starting in 2005, the SBA Office of Inspector General started sounding the siren about large businesses winning small-business contracts. “Procurement flaws allow large firms to obtain small business awards and agencies to count contracts performed by large firms towards their small business goals,” the SBA IG reported.

Large firms obtain small business awards. The actual facts were scandalous—at least by early 2000s standards. Verizon reportedly won $107 million in small-business contracts. Raytheon got small-business money too.

The SBA IG had found a cause to fight for. The issue of large businesses winning small-business contracts became the IG’s #1 “serious management” challenge. It stayed at #1 for fifteen years. Only in 2021 did the large-business issue get dethroned by COVID loan fraud. Even then, the cause went down just one spot to #2.

SBA’s contracting policy was profoundly affected by the IG’s crusade. In part because of pressure from the IG, SBA issued a merger-and-acquisition recertification rule. I discussed the latest iteration of that rule in a recent post:

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SBA also published a series of other recertification rules, each with its own exceptions and contingent scenarios. The current version is 19 paragraphs long. It has a whole subsection dedicated to exceptions.

But, even with those changes, the IG kept up the crusade. Plus, an outside watchdog, the American Small Business League, repeatedly sued SBA on the issue. This went on for 20 years. That’s 20 years of SBA getting beaten up for small-business contracts going to Verizon and Raytheon.

It didn’t stop until SBA published the current recertification rule.

The FAR Overhaul vs. SBA’s recertification rule

SBA’s recertification rule now prohibits, in that first scenario, the now-large business from winning the work. If the original contract isn’t set-aside, the firm must be small to win set-aside orders. Not just small for the contract—which might have been years ago—but small for the order, for the work itself.

That change was enough to satisfy the SBA IG. In 2025, the SBA IG finally took the large-business issue off the list of top SBA management challenges. It was because of that change to the recertification rule.

And for a short, glorious period, the FAR mirrored SBA’s change. Both sets of rules agreed—large businesses shouldn’t get small-business work. That was February of last year.

But, in September, the FAR Overhaul changed it back. In a nod to the Overhaul’s simplicity ethos, the Overhaul’s recertification rule is much shorter. It’s hardly a rule at all, and the result is that large businesses (if they used to be small) can win small-business work:

A business that represents as a small business concern at the time of its initial offer for the contract (whether or not the offer includes price or the price is evaluated (see 13 CFR 121.404(a)(1)(iv)), is considered a small business concern for each order issued under the contract.

This was, in a word, breathtaking. This sort of territorial swordfighting doesn’t happen often in procurement policy. After the IG’s 20-year crusade, the SBA rule now states that a small business has to be small at the order (with lots of caveats, the main one being that the contract itself was not set aside). The overhauled FAR rule doesn’t say that. The FAR—which just eight months before had adopted the SBA rule—now says that the business only needs to be small for the overall contract.

There’s no Tenth Amendment in procurement policy. So this isn’t JB Pritzker vs. ICE, with a tiebreaker to the states. There isn’t a clear winner in FAR vs. SBA.

Leave it to the courts

If Kalshi opens this battle up to betting, I’d give a slight edge to SBA. The main reason is the sequence a case would need to follow.

Because recertification really gets to whether the company is small, SBA’s OHA would get to rule first. I wrote about OHA two weeks ago as the office that hears 8(a) suspension appeals:

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OHA also hears size appeals. I’ve appeared as the lawyer in 55 published OHA appeals, and most of them are size cases. In size cases, OHA follows SBA rules.

But OHA is not the last word. If the large business loses at OHA, the business can go to court. There are a couple of court cases favoring SBA’s rules over the FAR. It’s not certain that those cases would control, though.

One factor might be the depth of explanation. SBA’s recertification rule was developed over 20 years. Each time, SBA explained why it was changing the rule, received hundreds of pages of comments, and then explained the rule again. There are likely thousands of pages of explanation between the SBA commentary and the public comments.

The FAR Overhaul’s explanation is basically a sentence, plus Don Draper against a blue background, holding an oversized pen and staring aggressively at a seven-foot scroll:

FAR Overhaul Part 19 Practitioners Album (Acquisition.gov)

It’s also relevant to this discussion that the SBA Administrator has staked her reputation on combating fraud and abuse in government contracting. Just yesterday, the SBA suspended 150 D.C.-area contractors for, in essence, winning a lot of contracts. Those firms, some would argue, were just good at contracting; they weren’t abusing the system. Here’s what’s abusive: large businesses winning small-business contracts.

Maybe that’s what the FAR Overhaul says can happen. But read the law: The SBA Administrator has the authority to “determine within any industry the concerns, firms, persons, corporations, partnerships, cooperatives, or other business enterprises which are to be designated ‘small-business concerns’ for the purpose of effectuating the provisions of this Act.” In otherwords, for size, what SBA says goes.

But let’s say the FAR Overhaul prevails. The large business wins. Then what? Prepare for disappointed small businesses, more uncertainty, and lots of protests.

This article is for informational purposes only and does not constitute legal advice.