The U.S. Small Business Administration (SBA) has issued policy guidance that eliminates race based presumptions of social disadvantage in the 8(a) business development program
The guidance, issued on January 22, aligns with other Trump administration efforts to eliminate diversity, equity and inclusion (DEI) programs in the federal government, including the Department of Transportation’s move to end the use of race- and sex-based presumptions of disadvantage for establishing eligibility under the Disadvantaged Business Enterprise (DBE) and Airport Concessions DBE (ACDBE) Programs last fall.
The 8(a) program is aimed at small businesses owned and controlled by individuals who are both socially and economically disadvantaged. A company’s participation in the program provides access to federal contracting opportunities that are otherwise unavailable to most small businesses. The Small Business Act defines “socially disadvantaged individuals” as “those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.” Although statute itself does not identify specific racial or ethnic groups, nor does it establish presumptions of disadvantage, SBA’s implementing regulations create a rebuttable presumption of social disadvantage for individuals who are members of certain enumerated racial or ethnic groups.
In 2023, a federal district court in Tennessee held that SBA’s race-based presumptions of social disadvantage were unconstitutional. Following that decision, the Trump administration’s U.S. Department of Justice announced that it would not defend the constitutionality of those provisions.
SBA’s January 22 guidance states that under its past regulations, “large segments of American society were excluded from the presumption and, in partiality, from the program – particularly white Americans.” The guidance states that the 8(a) program must be administered on a race-neutral basis, and that no applicant may be denied admission or given any presumptive preference based solely on race. SBA also disavows the use of “Biden-era ‘social disadvantage narratives'” and related guidance documents previously used to assess eligibility. SBA personnel are also instructed not to request, consider, or rely on those narratives in evaluating applications. Instead, the guidance states that SBA will conduct a fact-specific inquiry into whether an individual has actually experienced social disadvantage. The guidance directs SBA staff to consider “such factors as whether such individual has been the victim of illegal or radical DEI policies or illegal affirmative action policies.”
Historically, the 8(a) program admitted hundreds and in some years thousands of new participants each year. But the SBA subsequently announced om January 28 that only 65 companies were admitted to the 8(a) program in 2025. The announcement also comes on the heels of SBA’s demand in late December that all 4,300 8(a) contractors to produce financial records as part of a campaign to root out fraud, waste, and abuse.
The January 22 guidance indicates that SBA is preparing formal regulatory changes to align the rules with the new policies. ACRA will continue to monitor developments and identify opportunities to provide comments to the SBA.