Competition, Not a Shortcut: How 8(a) Contracts Work

The public debate about the Small Business Administration’s 8(a) program has drifted from facts to exaggeration. Many claim the program lets firms grab federal contracts without competition, but that is a false picture. An 8(a) company does not have a special license to win contracts by default. It is part of a congressionally authorized program that works like other small‑business categories, such as Women‑Owned or Veteran‑Owned businesses. All these programs aim to level the playing field for groups that have been historically underrepresented, not to eliminate competition. When a contract is marked “8(a) set‑aside, ” it means every eligible 8(a) firm can bid. They submit technical proposals, pricing, and compliance documents just like any other bidder. The award is decided by standard methods—lowest price technically acceptable, best‑value trade‑off, or other criteria set by the government. The standards for performance and proposal quality stay the same. Occasionally a contracting officer may award a contract without competition, but that power belongs to the officer, not to the contractor. This sole‑source authority exists in many SBA programs and is used sparingly because of protest risks and oversight scrutiny. When abuse happens, it is an exception that must be corrected. SBA programs also limit subcontracting. For service contracts, the prime contractor must do at least 51 % of the work (excluding material costs). This rule stops firms from simply passing the contract through to another company. The prime must keep labor, management, and performance responsibilities mostly in-house while subcontractors add specific expertise.This arrangement is common in federal work. Large projects—from IT services to shipbuilding—often involve multiple firms under a single prime integrator. Subcontracting does not mean wrongdoing; it reflects how complex government projects are executed. 8(a) firms, especially those linked to Alaska Native corporations (ANCs), face extra criticism. ANCs distribute profits directly to native shareholders, supporting community income and stability. Created under the Alaska Native Claims Settlement Act, ANCs replaced reservation land with corporate ownership. Over time they built operating companies, including 8(a) subsidiaries, to generate sustainable revenue. These subsidiaries do not stay in the program forever. After about nine years they must leave the 8(a) status and compete on equal footing with other businesses. Many have done this successfully, becoming competitive small or large enterprises. Recent scrutiny has intensified. SBA audits are legitimate oversight tools and should be welcomed when applied fairly. However, a second review layer from the Department of Defense has raised concerns. Firms report that even after passing an audit, contracts can still be terminated or re‑tendered if the government believes a lower price is available elsewhere. This uncertainty hurts businesses. The scrutiny seems uneven across SBA programs, disproportionately affecting minority‑owned 8(a) firms and raising legal questions about selective enforcement. Accountability is necessary, but it must be consistent and based on conduct, not identity. The federal government faces a choice: apply rigorous standards uniformly across all programs or risk turning oversight into discrimination. A fair, consistent approach benefits everyone and preserves trust in the procurement system.