For over 60 years, the Small Business Administration has celebrated Small Business Week to highlight the contributions of small and medium-sized businesses to the national economy. The Trump Administration marked this year’s Small Business Week celebration with a proclamation noting the benefits of its public policy initiatives, especially those pertaining to tariffs and deregulation. The proclamation, issued on May 5, 2025, promises that small businesses will benefit directly from the Trump Administration’s policy initiatives, which will result in increased access to capital, improved opportunities for public and private investment, and assistance exporting products on a global scale.

In this post, we look at current policy initiatives aimed directly at improving opportunities for small business contractors. 

New “Extraordinary Circumstances” that avoid “Negative Control”

In a final rule issued on December 17, 2024, the SBA expanded the circumstances under which a small business program minority shareholder has permissible decision-making authority while the qualifying individual does not have control. Under this comprehensive revision, SBA will not find that a lack of control (or “negative control”) exists for the listed extraordinary circumstances for service-disabled veteran owned small businesses (SDVOSBs) (13 CFR § 128.203(j)); 8(a) Business Development concerns (13 CFR § 124.106(h)); and women owned small businesses (WOSBs) (13 CFR§ 127.202(h)). Borrowing language from the VetCert rules, these “extraordinary circumstances” create uniformity across the various small business programs. Minority shareholder control is now permitted for SDVOSBs, WOSBs, and 8(a) Business Development programs in all these extraordinary circumstances:

1. Adding a new equity stakeholder or increasing the investment amount of an equity stakeholder;
2. Dissolution of the company;
3. Sale of the company or all assets of the company;
4. The merger of the company;
5. Company declaring bankruptcy;
6. Amendment of the company’s corporate governance documents to remove the shareholder’s authority to block any of the actions in paragraphs (1) through (5) of this section; and
7. Any other extraordinary action that is crafted solely to protect the investment of the minority shareholders, and not to impede the majority’s ability to control the concern’s operations or to conduct the concern’s business as it chooses.

This expansion not only harmonizes the “extraordinary circumstances” rule across the various small business programs, but it also presents new opportunities for small businesses to draw equity stakeholders and partnerships that benefit the concerns.

Agency discretion in assessing protégé past performance

The SBA’s Final Rule also includes new guidance on how agencies should evaluate the “capabilities, past performance, and experience of joint ventures, including SBA mentor-protégé joint ventures.” New language in 13 CFR 125.8(e) makes it clear that agencies have discretion as to whether to require the protégé to meet a past performance or experience requirement or to rely solely on the past performance and experience of the mentor. 13 CFR 125.8(e)(1). The revised language also explains that agencies may relax the past performance and experience that is required of proteges, such as by requiring experience on “fewer prior contracts of lower values than that required of other offerors.” 13 CFR 125.8(e)(2). Overall, the requisite past performance, experience, business systems and certifications necessary to perform a contract would be considered “in the aggregate.” 13 CFR 125.8(e)(3). 

Joint venture partnerships should closely review solicitation details to ensure that the requisite past performance and experience examples are provided for the protégé or lead small business member as required.

The future of the “Rule of Two”

The “Rule of Two” is a foundational consideration of the federal government’s small business program. Pursuant to FAR 19.502-2 and 13 CFR 125.2, agency acquisition of supplies or services with an anticipated dollar value above the micro-purchase threshold (but not over the simplified acquisition threshold) must be set aside for small business unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns at fair market value. On October 25, 2024, the SBA proposed a rule that would apply the Rule of Two to most task orders and delivery orders issued under multiple-award indefinite quantity indefinite delivery contracts. 

While it is not clear whether this rule will ever be finalized, it could result in a substantial increase in the opportunities available for small business contractors. In accordance with FAR Part 19, GAO has concluded that agencies have discretion to make a Rule-of-Two determination prior to issuing orders under multiple award contracts, but that they are not required to do so.

Outlook for disadvantaged small businesses

President Trump’s anti-DEI initiatives, most clearly reflected in Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”, will likely reduce the number of opportunities available to “disadvantaged” businesses that qualify for the SBA’s 8(a) Program, HUBZone Program, SDVOSB Program, and WOSM Program. In early February, the SBA reset the government-wide contracting goals for all prime and subcontract awards for all of the available socioeconomic categories to the five percent statutory floor. SBA Administrator Kelly Loeffler stated that the SBA would return 8(a) contracting goals to statutory levels: “The previous Administration increased the 8(a) federal contracting goal for Small Disadvantaged Businesses to an all-time high of 15%.” According to Ms. Loeffler’s statement, SBA “unfairly tipped the scales against any small business that did not qualify as ‘disadvantaged,’ negatively impacting many veteran-owned small businesses.”

The SBA’s ongoing reorganization and mission revision will likely also have a negative impact on opportunities for disadvantaged businesses. On March 21, 2025, SBA announced that it “will refocus its resources on the core missions of supplying capital, fostering innovation, supporting veteran small business owners, providing field support, and delivering timely disaster relief.” Notably absent from the list of core missions are the socioeconomic programs, such as minority-owned and women-owned small businesses.

It is certainly worth noting that the SBA’s Office of Advocacy and the Office of the Inspector General are exempted from its expected reduction in force. The SBA is targeting an estimated $200 billion in fraud involving the Paycheck Protection Program and Covid Economic Injury Disaster Loan program. Almost daily for the last several weeks, the SBA has highlighted news releases regarding small business loan fraud arrests, settlements, convictions, and sentences. And while the SBA has not yet highlighted a civil rights violation case, a May 19, 2025 memorandum issued by the U.S. Department of Justice expressed the government’s intent to pursue federal contractors of all sizes under the False Claims Act for violations of federal civil rights laws. We address the DOJ memorandum in another post, available here.