I talked a while ago about the WOSB initiative under section 8(m) of the Small Business Reauthorization Act of 2000. In that post, I mentioned that I would get around to 8(a), and now that the storm has passed, I can provide the following brief on what the program entails. I mention socially awkward, but bear with me and I will get to that.
The Small Business Administration (SBA) created the 8(a) Business Development (BD) program to help small, disadvantaged businesses compete. The program is a business assistance program offering a broad scope of assistance to firms that are owned and controlled (at least 51%) by socially and economically disadvantaged individuals. When I read that on the SBA website, I scratched my head a little. Economically disadvantaged is relatively easy to determine (especially during an election year). But, is “socially disadvantaged” something like the kid that used to stand in the corner at the school dance? Or maybe the one with the extra dark makeup? I had to find an easier explanation.
According to the SBA definitions, socially disadvantaged individuals are:
- Hispanic Americans,
- Asian Pacific Americans,
- Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians), and
- Subcontinent Asian Americans.
However, just because you are not a member of any of these groups doesn’t mean you can’t get into the program. The kid in the corner of the dance still has a chance if he can show through a “preponderance of the evidence” he is socially disadvantaged because of race, ethnic origin, gender, physical handicap, long-term residence in an isolated environment; or other similar causes. I am sure, however, that the application lacks a checkbox for “socially awkward at school dances.”
Let’s not forget that the program also indicates “economic disadvantage” which must be justified through financial statements and narratives (similar to what I am going through to get a mortgage, I assume). Generally speaking, there are NAICS size standards, tests for potential growth and success, and ownership verification.
Once you are in, the program benefits start to show up in the forms of set-asides and sole source justifications, but time is of the essence to prove your mettle. Participation has a 9 year limit – 4 years of development and 5 years of transition. Nine years, one-time participation is the limit. The goal is to graduate from the program and thrive in a competitive business environment.
Unfortunately, I have seen “graduating” (based on time limit) companies that just didn’t get there. With so many opportunities set aside for 8(a) businesses, it is a veritable smorgasbord of potential awards. There is little in the way of capturing enough business to strike a balance between commercial and government business and break through the $100 million mark. In the cases that I have seen, it seemed to me that the company was organized for the benefits of the set aside, but not ready to take the assistance that is available for through the program – basically they used the label.
From the SBA website: “Because the program is of a limited duration and has a one-time eligibility restriction, it is important for firms applying to the program to understand the basic eligibility and reporting requirements. Once a firm has established its eligibility, it is required to maintain that eligibility, which SBA monitors, annually.”
Do you have an 8(a) story to share?