Smalls: Know your rights in dealing w/the SBA; and if you don’t know…Ask

“Let me tell you small business owner, despite anything you might hear to the contrary – your SBA district office does not have the power to unilaterally do anything to you without justified cause backed up by statutory regulation.” If you have a problem or issue in dealing with the SBA at any level; I and my firms’ legal clerks & counselors are available to assist you.

Many in the SBA 8(a) Program struggle with, or outright do not know their rights in the Program and as a result are not able to represent or defend them at the district office level when they believe they are unjustly being asked for information or to provide documentation that they feel crosses the threshold of reasonableness.

So, how do you find out?

Well, I recently made an inquiry of the SBA Office of General Counsel (OGC) regarding the following three questions; and received the following corresponding answers. I am posting this information in order to empower those of you who are afraid to ask out of misplaced fear of being penalized or kicked out of the program.

Let me tell you small business owner, despite anything you might hear to the contrary – your SBA district office does not have the power to unilaterally do anything to you without justified cause backed up by statutory regulation. So, stop being afraid to ask (and sometimes demand) about you rights and recourse. This said; what will follow are verbatim responses from the SBA-OGC to my queries:

  • (R.Sutherland-Q1) Please provide the citations for the circumstances by which an SBA District Office Legal Counsel may request to review [documents] put in place between an SBA 8(a) participant and an outside consultant:

– (SBA-A1) Sections 8(a) and 7(j) of the Small Business Act grant SBA, and only SBA, the authority to certify firms for participation in the 8(a) Business Development (BD) program. [15 U.S.C. § 634(b)(6), § 636(j), § 637(a), § 637(d). Through that authority, SBA determines eligibility and continued eligibility for program participation. See 15 U.S.C. § 637(a)(1)(C). In addition to the authority granted through the Small Business Act, SBA has properly promulgated regulations that notice the participant of its responsibilities for participation. See 63 FR 35739 (June 30, 1998) and 76 FR 8253 (Feb. 11, 2011). One such responsibility is to cooperate with SBA when it requests information regarding its activities as a business. The Associate Administrator for Business Development is tasked with the responsibility of administering and maintaining the integrity of the program. The district offices are delegated certain functions with regard to administering the program at the district office level. The district directors, business development specialist and district counsel all bear the responsibility of monitoring, oversight, and fraud detection in the 8(a) BD program.  In order to maintain the integrity of the program and to ensure that only qualified participants receive the benefits of the program, cooperation between the 8(a) firm and the SBA is critical. That cooperation includes providing information to SBA so that a determination as to continued eligibility is possible. SBA has the authority to request information SBA deems necessary in order to determine whether or not the firm meets the requirements for continued participation in the program. See 13 CFR § 124.112.

When there is the appearance or potential of lack of continuing eligibility SBA is required to perform its due diligence in determining whether or not a concern continues to meet the eligibility requirements of 8(a) certification. As you know, only those firms that are owned and controlled by socially and economically disadvantaged individuals who are citizens of theUnited States, possess potential for success and demonstrate good character are eligible to receive the benefits of the program. In cases were a non-disadvantaged individual appears to exercise control over a disadvantaged owner or the potential to control a participant SBA will require the 8(a) certified firm to demonstrate that there is not negative control.

As an additional reference, please note that on March 14, 2011 changes to SBA’s regulations governing the 8(a) BD program took effect. A new § 124.4 addresses applicant and Participant representatives retained to assist 8(a) applicants and certified firms.

  • (R.Sutherland-Q2) What process or steps (if any) must the District Counsel follow to insure that the request for information is being made is reasonable?

– (SBA-A2) District Counsel review the facts available to them, in the light of applicable law and regulations, to determine if requests made by them for further documents or information are reasonable.  [See (A1) above for thorough discussion of the pertinent legal framework for such decisions.]

  • (R.Sutherland-Q3) What right(s) of protest and/or denial (if any) does the 8(a) participant have if s/he does not believe the request for the stated information is reasonable?

– (SBA-A3) In general, 8(a) firms may not refuse to provide information or documents pertinent to their eligibility or continued eligibility to participate in the 8(a) program, or respecting their compliance with applicable rules and regulations governing the program. [See (A1) above.]   A firm which disagrees with the Agency about a particular document or information request should, in the first instance, discuss the issue with the Business Development Specialist assigned to that firm; and then, if there is an unresolved issue, with that employee’s supervisors and the District Director for that firm’s District.  Further unresolved disputes, if any, may be directed to the Associate Administrator for Business Development, Mr. Darryl Hairston, whose office is in DC.

Should a program suspension or termination action be commenced against a Program Participant for refusal to cooperate in eligibility or compliance efforts by the Agency, then the procedures set forth in the regulations governing such matters (including opportunities for the affected firm to object and to set forth its views and position) will govern.

Any program participant may seek and obtain independent legal advice on its rights and remedies generally relating to objecting to government decisions which it believes adversely affect it.

  • (R.Sutherland-Q4) What rights does [a] consulting firm have (if any) to insure that the content of [documents it shares] are not made public or disclosed to outside parties?

– (SBA-A4) The Agency’s duties involving maintenance of information and materials received from federal program participants, and its various duties and obligations involving protection and disclosure of such information and materials (including exceptions to disclosure), are governed by various statutes and regulations, including the Privacy Act, the Freedom of Information Act, etc.

So, stop being afraid to ask (and sometimes demand) to know your rights and recourse.

\\ rudy

Contact Rudy Sutherland

More to come… One Voice…

Hot-Link to Discussion forum


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: