Breaking: SBA Eliminates Race-Based Presumptions in 8(a) Program - What Small Businesses Need to Know

A major policy shift in federal small business contracting took effect this week that every government contractor should understand, whether or not you participate in the 8(a) Business Development Program.

On January 22, 2026, the Small Business Administration announced it is eliminating race-based presumptions of social disadvantage in its 8(a) Program, fundamentally changing how the program evaluates applicants and awards contracts.

Understanding the 8(a) Program

The 8(a) Business Development Program, authorized under Section 8(a) of the Small Business Act, provides business development support and contracting opportunities for small businesses owned and controlled by socially and economically disadvantaged individuals.

For decades, the program operated under regulations that presumed certain racial and ethnic groups were socially disadvantaged, allowing streamlined entry into the program for members of those groups.

What Triggered This Change?

Three key developments led to this policy shift:

1. Federal Court Ruling: In 2023, a federal court ruled in Ultima Services Corp. v. U.S. Department of Agriculture that the race-based presumption of social disadvantage in SBA regulations is unconstitutional.

2. Department of Justice Position: In November 2025, the DOJ announced it would not defend the constitutionality of these race-based presumptions, stating they violate constitutional principles of equal protection.

3. Trump Administration Executive Orders: Recent executive orders (E.O. 14151 and E.O. 14173) directed federal agencies to eliminate what the administration characterizes as unconstitutional discrimination and unlawful DEI policies.

The New Framework

Under the revised approach effective January 22, 2026:

Race-Neutral Administration: No applicant can be denied entry or given presumptive preference based solely on race. The program must operate without racial considerations.

Discontinued Tools: The SBA has eliminated Biden-era "social disadvantage narratives" and the related guidance documents. These materials are no longer accepted or referenced.

New Evaluation Criteria: When assessing social disadvantage, the SBA will now consider factors such as:

• Experience as a victim of illegal DEI policies

• Impact from illegal affirmative action policies

• Discrimination through race-based quotas, set-asides, or hiring targets (in government or private sector)

• Exclusion from the 8(a) Program while unconstitutional policies were in effect

The key shift: applicants must now demonstrate individual experiences of discrimination rather than relying on group-based presumptions.

What This Means for Current and Prospective 8(a) Participants

If you currently hold 8(a) certification: Your existing certification should remain valid through its current expiration date. However, stay alert for SBA communications regarding recertification requirements or additional program modifications.

If you were planning to apply: The application process has fundamentally changed. You will need to document specific instances of social and economic disadvantage rather than relying on demographic presumptions. The barriers to entry may be higher, and the documentation requirements more substantial.

If you're already pursuing 8(a) contracts: Continue fulfilling your existing obligations. Monitor for any changes to ongoing solicitations or contract vehicles that utilize 8(a) set-asides.

Does This Affect Other Small Business Certifications?

This guidance specifically addresses the 8(a) Program only. It does not currently impact:

• Women-Owned Small Business (WOSB/EDWOSB) certifications

• Service-Disabled Veteran-Owned Small Business (SDVOSB) certifications

• HUBZone certifications

• Small Disadvantaged Business (SDB) status

However, the broader policy direction suggests the regulatory landscape around identity-based preferences may continue evolving. The legal reasoning applied to race-based presumptions could potentially extend to other classifications in future challenges.

Strategic Implications for All Small Businesses

Whether or not you hold 8(a) certification, this development carries important lessons for government contractors:

1. Set-Asides Are Not Guaranteed

Political and legal shifts can fundamentally alter preference programs. Building a contracting strategy that relies exclusively on set-aside opportunities creates vulnerability.

2. Competitive Excellence Matters More Than Ever

The strongest position is one where your business wins on merit regardless of certification status. Focus on:

• Developing distinctive technical capabilities

• Building strong past performance records

• Competitive pricing strategies

• Quality delivery and customer relationships

3. Diversification Is Essential

Pursue multiple pathways to federal revenue:

• Open competition opportunities

• Prime contractor relationships

• Subcontracting arrangements

• Multiple agency customers

• Various contract vehicles

4. Documentation and Compliance Are Critical

Regardless of which certifications you hold, maintain meticulous records:

• Ownership and control documentation

• Financial statements and tax returns

• Annual recertification materials

• Any correspondence with certification agencies

The Broader Context: Government Contracting in Transition

This policy change reflects larger debates about equity, access, and fairness in federal contracting. Reasonable people disagree about the best approaches to ensure all qualified businesses can compete for government work.

What's clear is that the regulatory environment is shifting. Small businesses need to stay informed, remain adaptable, and build resilience into their contracting strategies.

Practical Next Steps

Stay Informed: Monitor SBA announcements, federal register notices, and industry news for additional developments. Changes could come quickly.

Review Your Strategy: Evaluate how dependent your business is on any single certification or set-aside program.

Strengthen Core Capabilities: Invest in the fundamentals that make you competitive: technical expertise, past performance, efficient operations, and relationship building.

Seek Expert Guidance: If these changes directly affect your certification status or contracting strategy, consult with qualified legal counsel and experienced advisors who understand government contracting.

Document Everything: Keep thorough records of your business structure, financials, and any materials relevant to current or future certification applications.

Looking Ahead

Government contracting has always required adaptability. Regulations change, priorities shift, and successful contractors adjust accordingly.

The fundamentals of winning government work remain constant: deliver quality solutions, build strong relationships, maintain competitive pricing, and demonstrate proven performance.

While the rules governing certain programs may be changing, the opportunity to serve government customers and grow your business through federal contracting remains robust. Success comes from strategic positioning, operational excellence, and the ability to compete effectively regardless of the regulatory environment.

About Total Optim Solutions

Total Optim Solutions provides strategic consulting and bid support services to small businesses pursuing government contracting opportunities. With 20+ years of executive-level procurement and supply chain experience, we offer unique buyer-side expertise to help businesses navigate the government marketplace.

Learn more at https://www.totaloptim.com/bid