13 C.F.R. § 124.107

What is potential for success?

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SBA must determine that with contract, financial, technical, and management support from the 8(a) BD program, from contractors or from others assisting with business operations, the applicant concern is able to perform 8(a) contracts and possess reasonable prospects for success in competing in the private sector. To do so, the applicant concern must show that it has operated and received contracts (either in the private sector, at the state or local government level, or with the Federal Government) in its primary industry classification for at least two full years immediately prior to the date of its 8(a) BD application, unless a waiver for this requirement is granted pursuant to paragraph (b) of this section.

(a) Income tax returns for each of the two previous tax years must show operating revenues.

(b)(1) SBA may waive the two years in business requirement if each of the following five conditions are met:

(i) The individual or individuals upon whom eligibility is based have substantial business management experience;

(ii) The applicant has demonstrated technical experience to carry out its business plan with a substantial likelihood for success if admitted to the 8(a) BD program;

(iii) The applicant has adequate capital to sustain its operations and carry out its business plan as a Participant;

(iv) The applicant has a record of successful performance on contracts from governmental or nongovernmental sources in its primary industry category; and

(v) The applicant has, or can demonstrate its ability to timely obtain, the personnel, facilities, equipment, and any other requirements needed to perform contracts as a Participant.

(2) The concern seeking a waiver under paragraph (b) must provide information on governmental and nongovernmental contracts in progress and completed (including letters of reference) in order to establish successful contract performance, and must demonstrate how it otherwise meets the five conditions for waiver. SBA considers an applicant's performance on both government and private sector contracts in determining whether the firm has an overall successful performance record. If, however, the applicant has performed only government contracts or only private sector contracts, SBA will review its performance on those contracts alone to determine whether the applicant possesses a record of successful performance.

(c) In assessing potential for success, SBA considers the concern's access to credit and capital, including, but not limited to, access to long-term financing, access to working capital financing, equipment trade credit, access to raw materials and supplier trade credit, and bonding capability.

(d) In assessing potential for success, SBA will also consider the technical and managerial experience of the applicant concern's managers, the operating history of the concern, the concern's record of performance on previous Federal and private sector contracts in the primary industry in which the concern is seeking 8(a) BD certification, and its financial capacity. The applicant concern as a whole must demonstrate both technical knowledge in its primary industry category and management experience sufficient to run its day-to-day operations.

(e) An applicant will not be denied admission into the 8(a) BD program due solely to a determination that potential 8(a) contract opportunities are unavailable to assist in the development of the concern unless:

(1) The Government has not previously procured and is unlikely to procure the types of products or services offered by the concern; or

(2) The purchase of such products or services by the Federal Government will not be in quantities sufficient to support the developmental needs of the applicant and other Participants providing the same or similar items or services.

[63 FR 35739, June 30, 1998, as amended at 88 FR 26204, Apr. 27, 2023; 89 FR 102488, Dec. 17, 2024]

Notes of Decisions

Cited in 8 cases (1 in the last 5 years), 1989–2025 · leading case: Cognitive Prof'l Servs. Inc. v. U.S. Small Bus. Admin., 254 F. Supp. 3d 22 (D.D.C. 2017).

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Cognitive Prof'l Servs. Inc. v. U.S. Small Bus. Admin., 254 F. Supp. 3d 22 (D.D.C. 2017). · cites it 21× “CPS further contends that the SBA regulation that addresses the potential-for-success factor — 13 C.F.R. § 124.107 — is “itself invalid” because it does not “reflect the congressional intent of the governing statute.”

Ardmore Consulting Grp., Inc. v. Contreras-Sweet, 118 F. Supp. 3d 388 (D.D.C. 2015). · cites it 3× “I at 54-55; see also 13 C.F.R. § 124.107 (a). Nor, in the SBA’s view, was Ardmore eligible for the relevant waivers.”

Fagan v. United States Small Bus. Admin., 783 F. Supp. 1455 (D.D.C. 1992). · cites it 2× “13 C.F.R. § 124.107 (c) (1989). Additionally, new personnel regulations had been developed that allowed government agencies to use recruiting agencies such as that owned by Fagan.”

Vaughn v. United States Small Bus. Admin., 65 F.3d 1322 (6th Cir. 1995). · cites it 4× “According to the SBA’s “potential for success” test, 13 C.F.R. § 124.107 , an applicant cannot participate in the 8(a) program unless the applicant’s contracting business has generated some revenue in the two years prior to application, which Vaughn’s business has not.”

Neuma Corp. v. Abdnor, 713 F. Supp. 1 (D.D.C. 1989). “Although the SBA’s regulations do not elaborate on the statutory language, see 13 C.F.R. § 124.107 , additional guidance is provided in the agency’s Standard Operating Procedure (SOP) 80-05.”

United States v. Crummy, 249 F. Supp. 3d 475 (D.D.C. 2017). · cites it 2× “An applicant is deemed to possess reasonable prospects for success competing in the private sector *478 if it has been “in business in its primary-industry classification for at least two full years immediately prior to the dates of its 8(a) BD application^]” 13 C.F.R. § 124.107…”

Samuels v. Small Bus. Admin. (S.D.N.Y. 2025). “]” 13 C.F.R. § 124.107 . Even assuming Plaintiff has a business, if that business is ineligible for the SBA’s 8(a) program in the first place, a ruling that the WOSB program is unconstitutional would not provide Plaintiff with redress.”

SRS Tech. v. DOD (4th Cir. 1997). “First, SRS complains that HTS was not qualified to participate in the 8(a) Program because it had not fulfilled SBA's two-year experience requirement, as gener- ally required by 13 C.F.R. § 124.107 . However, even if HTS were not qualified, this would not affect SRS.”

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