Small Business Act - Section 8

Section 8(a) of the Small Business Act (15 U.S.C. 637(a)) established a program that authorizes the Small Business Administration (SBA) to enter into all types of contracts with other agencies and to let subcontracts for performing those contracts to firms eligible for program participation. The SBA's subcontractors are referred to as "8(a) contractors." When, acting under the authority of the program, the SBA certifies to an agency that the SBA is competent and responsible to perform a specific contract, the contracting officer is authorized, in the contracting officer's discretion, to award the contract to the SBA based upon mutually agreeable terms and conditions.

The law requires that an 8(a) firm, such as an economically disadvantaged Indian tribe, must certify, on an annual basis, that it meets the statutory requirements regarding ownership and control.

The applicable regulations provide that individuals who are not socially and economically disadvantaged may be involved in the management of an 8(a) firm, and they may even be stockholders, partners, officers and/or directors of the firm.

Individuals (or other entities) involved in the management of an 8(a) concern may not:

a. Exercise actual control or have the power control the 8(a) concern.

b. Be an officer or director or more than a 10% owner, stockholder, or partner of another firm in the same business as the 8(a) concern.

c. Receive excessive compensation from the 8(a) concern as directors, officers, or employees.

d. Be former employers of the disadvantaged owner(s) of the 8(a) concern, unless it is determined that the relationship does not give the former employer actual, or the potential to, control.

e. Have an equity ownership interest of more than 10% in another 8(a) concern.

Nondisadvantaged individuals or entities may be found to have control or have the power to control in any of the following circumstances, which are illustrative only and not all inclusive:

a. The nondisadvantaged individual or entity provides critical financial or bonding support or licenses to the 8(a) concern which directly or indirectly allows the nondisadvantaged individual or entity to gain control of the 8(a) concern.

b. A nondisadvantaged individual or entity exercises voting control of the 8(a) firm through a nominee.

c. A nondisadvantaged individual or entity controls the corporation of the disadvantaged owners through loan arrangements.

d. Other contractual relationships exist with nondisadvantaged individuals or entities, the terms of which would create control over the 8(a) firm.

Taken from: http://www.cohenseglias.com/government-contracts.php?action=view&id=88