Legal Opinion Concerning the Exercise of Options in Section 8(a) Contracts and Comments on a Pertinent Provision in H.R. 1807 Amending the Small Business Act

T-OGC-87-1: Published: May 20, 1987. Publicly Released: May 20, 1987.

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In response to a congressional request, GAO discussed: (1) a proposed legislative provision that would amend the Small Business Act; and (2) the Small Business Administration's (SBA) exercise of options under 8(a) contracts. GAO found that: (1) SBA may not extend or continue an 8(a) contract after the contractor's eligibility for such contracts has expired; (2) if SBA improperly extends an 8(a) contract after the contractor has left the 8(a) program, or if SBA does not exercise contract options in compliance with the Federal Acquisition Regulation, the contract extensions are voidable rather than void; and (3) other government agencies may execute 8(a) contract options either as SBA agents, if the contracts continue to be 8(a), or pursuant to their own authority, if the contracts are no longer 8(a). GAO believes that the provision should also require that: (1) the contractor certify that the individuals owning the business do not intend to relinquish ownership or control during the term of the contract; (2) all 8(a) contracts contain a provision stating that contract default may result if the individuals owning the business relinquish ownership or control during the contract or option term; and (3) the 8(a) contractor give prompt notification if its ownership or control will change during the contract or option term.

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