Two Democrats on the Senate Small Business and Entrepreneurship Committee raised objections this week to a proposed Trump administration rule that would make significant revisions to the federal government’s 8(a) contracting program, including by formally removing the presumption that members of socially and economically disadvantaged racial and ethnic groups are eligible for the program.
In a letter to Kelly Loeffler, the administrator of the Small Business Administration, Sen. Ed Markey (D-Mass.), the committee’s ranking member, and Sen. Mazie Hirono (D-Hawaii) said SBA’s planned revisions “contravene the statutory intent of the 8(a) program, including by ignoring barriers to entrepreneurship in minority communities.”
The agency argues the regulatory update is needed, in part, because of a 2023 federal court ruling that found the “rebuttable presumption” of 8(a) eligibility for minority business owners, as implemented in SBA’s regulations, was unconstitutional. Since the ruling in Ultima Services Corp. v. USDA, the agency has been conducting more individualized eligibility determinations to decide whether prospective applicants have faced social or economic disadvantages Congress had in mind when it initially created the program in 1978.
“SBA recognizes, however, that from the time the regulatory rebuttable presumption was established in 1986 until its demise in 2023, the 8(a) BD program unconstitutionally categorized and favored certain individuals solely on the basis of race and ethnicity,” the agency wrote in its rulemaking notice. “Practically speaking, these regulations, both the text and its application, rendered white Americans almost totally unable to participate in the program. Further, this practical reality persisted until 2025 when certain related practices and policies were terminated.”
In their letter, the senators argued the 8(a) program has always been open to all American small business owners who face socioeconomic hurdles, regardless of race, and that SBA’s proposed rule goes well beyond complying with the Ultima decision.
“Although the rule’s language may be facially neutral, we are concerned that there will be disparate outcomes in its implementation with certain groups receiving favorable treatment. The use of examples centered on white individuals, as opposed to any other groups, may discourage non-white individuals from applying to the program. In the proposed rule’s examples, it appears that SBA is claiming to implement a “race neutral” standard while focusing on identifying instances of harm to white Americans,” he wrote. “‘We are concerned about the potential selective application of discrimination or bias determinations given the nature of the examples provided by the agency in the proposed rule. SBA has provided no guidance or details for how the agency will make determinations regarding the evidence applicants are required to provide to prove discrimination.”’
In laying out what it says will be a self-certification program and a new test for making social disadvantage determinations, SBA says it will look to whether an individual faced discrimination or bias in their lifetime by a federal, state or local government or a university or corporation — or whether one of those entities gave favorable treatment to a racial or ethnic group the applicant is not a member of.
“Examples of such discrimination would include, but are not limited to: unlawful diversity, equity, and inclusion programs or policies; unlawful affirmative action programs or policies; race-based quotas, set-asides, or hiring targets; or, any government or private entity policies or programs that favored some groups over others on the basis of race,” SBA wrote in its notice. “To provide two specific examples, an individual American citizen may establish that his or her group experienced discrimination, bias, or harm by showing evidence that his or her group experienced a barrier to accessing a federal program or contract that other designated groups did not (e.g., was not eligible for the rebuttable presumption in violation of the Constitution), or that the citizen’s racial or ethnic group was disadvantaged in college or university admissions decisions or otherwise discriminated against by a private entity in an unlawful manner.”
The Democratic senators argued that in addition to failing to provide enough information about how SBA would administer the new test, the agency appears to be straying far from the 8(a) program’s original mission.
“SBA’s proposed rule ignores present-day barriers that entrepreneurs from minority and underserved communities face. Discrimination is not dead; minority entrepreneurs continue to face reduced access to contracting opportunities and capital, as well as racial threats and targeting, including unequal treatment, refusal by others to work with minority-owned firms, being called racial slurs, and bias in the workplace,” they wrote. “These barriers lead to wide underutilization of, and less revenue for, minority-owned businesses compared to majority-owned businesses, as supported by decades of disparity studies. The proposed rule diminishes the history of systemic racial and ethnic discrimination in the United States by claiming that remedies for discrimination create discrimination in and of themselves.”
The proposed rule, issued for public comment on June 11, only applies to the portion of the 8(a) business development program that’s meant for individually owned firms. It would not affect the 8(a) program for Native American, Alaskan Native and Native Hawaiian-owned companies.
SBA acknowledged the new test would be a significant change from how the agency had made 8(a) determinations, even in the three years since the ruling in Ultima.
“SBA believes that this new test would not only remedy the federal government’s unconstitutional discrimination against members of groups who were not subject to the rebuttable presumption, but will also allow into the 8(a) BD program a member of any racial, ethnic, or cultural group who has been targeted by any governmental or private entity’s discrimination and who has been harmed by such targeting,” officials wrote. “SBA believes it is appropriate to require evidence of government or private entity discrimination or bias so that program eligibility is underscored by objective criteria. SBA further believes self-certification of group membership and individual harm would appropriately balance requiring individual harm while also preserving the statute’s group-based construction and SBA’s limited resources.”
Since the beginning of the second Trump administration, SBA and other agencies have already taken other steps that cast doubt on the future of the 8(a) program as it’s currently structured.
Last year, the agency sent letters to 4,300 current 8(a) participants asking for more than a dozen types of data as part of an audit of the program, ranging from a list of the company’s employees to bank statements for the last three fiscal years to a copy of all the firms’ 8(a) contracts.
And last month, Markey released a report showing that set-aside contract dollars to firms in the 8(a) program were down 29%, and that 8(a) certification approvals for small businesses owned by socially and economically disadvantaged individuals were down 92%, with no approvals since August 2025.
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