How to Protect Your Small Business Certification During Heightened SBA Oversight

Understanding the Enforcement Landscape

What makes the current environment unique is the coordination across agencies:

• SBA Office of General Counsel: 8(a) program-wide audit with suspension/termination authority
• Department of Justice: Civil Rights Division, False Claims Act enforcement
• Treasury Department: $9B contract review with debarment authority
• Agency Inspectors General: Contract-specific investigations

The False Claims Act Threat: Under the FCA, penalties include up to three times the government's damages, plus $11,000-$27,000 per false claim. If your certification application contains inaccurate information—even through negligence—you may face FCA liability.

Pillar 1: Contemporaneous Documentation

The most powerful protection is contemporaneous documentation—records created at the time decisions are made, not reconstructed later.

• Calendar Everything: Maintain a record of the disadvantaged owner's activities
• Document Decision-Making: Create brief memos noting who was involved, what was decided, and why
• Preserve Communications: Retain emails, texts showing owner involvement in management
• Photograph When Relevant: For HUBZone firms, maintain evidence of employee residency

Pillar 2: Regular Self-Audits

Don't wait for the SBA to audit you. Conduct quarterly self-assessments against certification requirements.

8(a) Self-Audit Questions:

• Is the disadvantaged owner still unconditionally controlling day-to-day operations?
• Is personal net worth still below $850,000?
• Have any ownership changes occurred that weren't reported?
• Are subcontracting percentages within allowable limits?

Pillar 3: Clean Corporate Governance

Your corporate documents are evidence. Ensure they tell the right story.

Review These Documents:

• Articles of Incorporation/Organization
• Bylaws/Operating Agreement
• Shareholder/Member Agreements
• Bank Signature Cards
• Contract Signature Authority

Red Flags to Address: Supermajority voting requirements that give non-disadvantaged parties veto power, management agreements that delegate authority, investor rights that restrict business decisions.

Pillar 4: Subcontracting Compliance

Subcontracting relationships are under intense scrutiny. The "pass-through" concern is central to current investigations.

The 50% Rule: For most 8(a) contracts, your firm must perform at least 50% of the cost of personnel with your own employees (or 15% for construction).

Documentation Requirements: Written teaming/subcontracting agreements, clear delineation of work scope, evidence that percentages are being monitored, justification for why the relationship is necessary.

When Problems Are Discovered

If your self-audit reveals serious eligibility questions:

• Stop. Consult with a government contracts attorney before taking any action.
• Do not destroy or alter any documents.
• Do not make false statements to correct or cover up issues.
• Evaluate voluntary disclosure options.

Self-disclosure of violations often results in better outcomes than having problems discovered during an audit.