Understanding the Dreaded SBA’s 8(a) 70% Rule
I often run into firms that have spent the last few years working as a subcontractor for a federal prime contractor. These firms learn the benefits of obtaining an 8(a) Certification and becoming a prime contractor themselves. But when these firms go to apply, they find out about the dreaded 70% rule. Many of these firms have large opportunities in hand if they could obtain the 8(a) Certification.
I am going to go over the 70% Rule to provide a greater understanding of how it works, so firms can better prepare for compliance with this rule. As always, if you have any questions, feel free to click on the ‘Ask An Expert’ feature on 8a Magazine for clarification on this requirement, or any other thing pertaining to the 8(a) Certification, other Federal or State Certification, or GSA Schedule.
8(a) 70% Rule Basics
Example A: 8(a) Application Date July 1, 2021
This firm is eligible because its largest customer, ABC, represents only 66.67% of the firm’s billing on a 12-month basis.
Now let’s take a look at what happens if we wait until December 1, 2021, to apply. During the month of December in 2020, all of the firm’s billing comes from ABC, instead of XYZ
Example B: 8(a) Application Date December 1, 2021
This firm is ineligible because its largest customer, ABC, represents 70.83%, and is over the 70% threshold on a rolling 12-month basis.
Exceptions to the 70% Rule:
If you are interested in exploring if the 8(a) Certification could have a profound impact on your firm’s business development potential, I always recommend contacting an industry expert such as ez8a or Advance 8a. Both do not charge for an initial consultation.