SBA Issues Formal Guidance Regarding the 8(a) Program

The U.S. Small Business Administration (SBA) on January 22, 2026, issued a press release and formal guidance related to the 8(a) Business Development Program (8(a) Program). The 8(a) Program provides federal government contracting assistance for participating firms, including access to procurements set-aside for 8(a) Program participants. The new policy is effective immediately.

SBA's announcement states that it finds the 8(a) Program's presumption of "social disadvantage" based on race to be unconstitutional, that the 8(a) Program itself is discriminatory, particularly as to "white Americans" and that it will fundamentally alter its test for determining social disadvantage, including by considering whether an individual owner of an applicant has been the victim of "illegal or radical DEI policies or illegal affirmative action policies." The SBA's announcement has broad implications for the 8(a) Program and likely renders moot pending constitutional challenges to the 8(a) Program's presumption of social disadvantage.

Background

The 8(a) Program, as it applies to individually owned companies, currently requires those individual owners to demonstrate that they are "socially disadvantaged" among other requirements. SBA's regulations, as currently written, provide a "presumption" of social disadvantage for members of certain racial groups. This presumption of individual social disadvantage has been challenged on constitutional grounds in a number of federal courts. In 2023, the U.S. District Court for the Eastern District of Tennessee ruled that the presumption of individual social disadvantage in SBA's regulations is unconstitutional. Ultima Servs. Corp. v. U.S. Department of Agriculture, 683 F. Supp. 3d 745, 774 (E.D. Tenn. 2023).

The District Court in Ultima has been considering the appropriate remedy in the case, which is still before the court. Shortly after the court's initial ruling in Ultima, SBA attempted to fix the problem by requiring each individual owner of an 8(a) firm (and subsequent applicants) to present a narrative stating how they had, in fact, been impacted by discrimination-based specific identities/characteristics, including race. SBA did not, at that time, amend its regulations to incorporate its new approach.

SBA's Announcement and Guidance

In the January 22 guidance, SBA cites to a November 25, 2025, letter from the U.S. Department of Justice (DOJ) to U.S. House of Representatives Speaker Mike Johnson, in which DOJ advised that it views SBA's regulations in implementing the 8(a) Program as unconstitutional, in that they presume an individual is "socially disadvantaged" based solely on a person's membership in certain racial groups. The guidance goes on to note that DOJ advised that it would not defend the constitutionality of the presumption.

SBA's guidance states that it "fully agrees" with DOJ and that SBA's regulations excluded "large segments of American society … from the program – particularly white Americans." The guidance then notes that SBA is "finalizing" regulations to eliminate the presumption and announced certain new practices including the following:

1. No applicant to the 8(a) Program shall be denied, nor given any presumptive preference, based solely on his or her race. The 8(a) Program should be administered race neutrally.
2. SBA will not approve admissions to the program based on the Biden Administration "social disadvantage narratives," nor will SBA utilize in any way or refer applicants to use those narratives.
3. SBA employees involved in administering the 8(a) Program are directed to treat all Americans fairly and equally in compliance with President Donald Trump's Executive Orders 14151 and 14173.
4. When considering whether an individual has suffered social disadvantage, SBA employees are directed to consider factors "such as whether the individual has been the victim of illegal or radical diversity, equity and inclusion (DEI) or affirmative action policies, or has otherwise been the victim of discriminatory practices such as race-based quotas, set asides or hiring targets whether by governmental or non-governmental actors." The guidance goes on to state that SBA should also consider whether an individual was previously excluded from participating in the 8(a) Program while such "unconstitutional laws, practices and policies were in effect."

Impacts

The SBA's guidance will have several immediate consequences for individually owned firms participating in and applying to the 8(a) Program.

First, it will directly affect new and pending applications from individually owned companies by administering the 8(a) Program in a race-neutral manner.

Second, it creates a significant risk that current individually owned participants could have their 8(a) status suspended or terminated, even those who have already submitted a social disadvantage narrative. Therefore, current participants should closely monitor their program status for any official correspondence and be prepared to provide further information to reaffirm their eligibility under the new criteria.

Additionally, SBA's policy change is directly tied to the Trump Administration's goal of removing DEI programs from the federal government. The SBA press release reinforces this position by inviting complaints from businesses that feel "unconstitutionally excluded" from the 8(a) Program and announcing the hiring of new officers to address "fraud, illegality, and Constitutional concerns." The SBA's stated objective is to administer the 8(a) Program as a "race-neutral vehicle."

Third, while as of this writing, no substantial activity has taken place in the Ultima case, the SBA's actions would seem to moot the case, ending that and other legal challenges to the constitutionality of individual social disadvantage presumption currently found in SBA's regulations.

Finally, this announcement comes amid numerous other Trump Administration actions related to the 8(a) Program and small business procurement generally, including the following:

• Consistent with a statement in SBA's guidance, SBA has not been accepting social disadvantage narratives since late January 2025. This is evidenced by the fact that SBA has approved only a few firms, as few as 20, in the past year (versus several hundred in a typical year).
• As noted in the press release, SBA issued a "Data Call" to all 4,000-plus 8(a) participants in early December 2025, requiring them to submit substantial amounts of information by January 19, 2026. SBA announced that it has suspended more than 1,000 firms for failing to respond.
• Numerous other federal agencies have announced reviews of the 8(a) Program, including the U.S. Department of the Treasury. On January 16, 2026, Secretary of War Pete Hegseth announced that the U.S. Department of War will conduct a "line‑by‑line review of every small business, sole source, 8(a) contract that is over $20 million."
• While the Federal Acquisition Regulation (FAR) Overhaul did not remove SBA set-aside contracts per se, it removed many provisions in the FAR that facilitated set-aside contracts of any sort, including small business set-asides generally.

Conclusion

These events are not isolated. They are clear indicators of a coordinated, government-wide strategy to fundamentally alter the 8(a) Program and other small business set-aside programs. Current and aspiring 8(a) participants, should 1) immediately reassess their social and economic disadvantage under today's stricter legal standards, 2) review and analyze any small business set-aside or 8(a) contracts to ensure compliance with all requirements, and 3) prepare for a shift in the use of set-aside contracts.

For more information or questions on a specific matter, please contact the authors or another member of Holland & Knight's Government Contracts Group.