Partnerships Key to Life After 8(a)

By Marianne Dunn, Staff Writer

Armstrong Data Services Inc., Vienna, Va., which graduated from the Small Business Administration's 8(a) program 15 months ago, is maintaining close ties to the program through strategic business partnerships.

"The current atmosphere for small businesses is to see how well they can team," said Jack Priester, founder and chief executive officer of ADS, a provider of records management, information technology, supply and logistics and systems engineering software support.

In 1997, Priester started the Enterprise Development Team Partnership (EDTP) program to help 8(a) businesses capitalize on their classification by partnering with each other to win government contracts.

But Priester still benefits from the program, as do the other participants. That is because member company representatives attend meetings to pick up tips from Priester, whose company used the 8(a) program to win contracts with the Navy, Federal Aviation Administration, National Institutes of Health and the Space and Naval Warfare Systems Command.

And Priester benefits by meeting members who may eventually become ADS partners.

"That is what a lot of companies are doing now as they are graduating from the 8(a) program," said Tom Meagher, an analyst with Boles, Knop & Co., a Middleburg, Va., investment bank. "They are keeping one foot in the door by working with other 8(a)s."

Active EDTP member companies include Bay State Computers Inc., Lanham, Md.; Consolidated Services Worldwide, Washington; Crystal View Technology Corp., Irvine, Calif.; Fourel Industries, Inglewood, Calif., Lee Andrews Group, Los Angeles; Prometheus, Alexandria, Va.; Sigma Plus, Lake Forest, Calif.; Stronghold Electric, Riverside, Calif.; TCSix, North Wales, Pa.; Tessada and Associates, Newington, Va.; and VisionNet, Centreville, Va.

The group meets every few months to identify business opportunities, usually within the federal government, and to form teams to pursue contracts. ADS has partnered with TCSix and Crystal View on Navy contracts, but an ADS spokeswoman would not release details about the projects.

According to Meagher, the problem with this partnership strategy is that some graduating 8(a) companies rely too heavily on the 8(a) program and partnerships that result from it.

The 8(a) program is designed to help small disadvantaged businesses compete for federal contracts. But according to SBA data, of the 234 companies that graduated from the program in 1996, only 91 were still in business in 1998.

"A lot of people do not succeed, because the program is not built to make you succeed," said Priester. "When you first come into the 8(a) program, you are given one or two guidelines, and if you are lucky you can find a seminar or a class that will help. But the SBA does not get involved with the 8(a) until the 8(a) receives some work. And if you don't get work after the second year, they kick you out."

Priester calls ADS an 8(a) success story. His company entered the program in 1989 with revenue of $2.3 million, which hit $5.3 million one year later. Revenue continued to climb steadily, hitting $25 million in 1998, the company's final year in the program.


Although the company is still profitable, Priester said, its revenue has dipped to $23 million to $24 million in 1999. Meagher said ADS' revenue loss is not that unusual, because 8(a) business owners often underestimate the amount of business they will lose after the company graduates from the program.

"What is important is that [ADS] is still profitable," said Meagher.

As long as Priester followed SBA's recommendation to graduate from the program with less than 20 percent of the company's business from the 8(a) program, Meagher said, "then he is doing what he should be doing. If he is, then he is in good shape."

According to Priester, ADS adhered to the SBA recommendations.

"We have had 30-some projects but not all are 8(a), because after you are in the program for a while, you learn how to compete, and that is what the 8(a) vehicle is all about," said Priester. "You are supposed to learn how to position yourself and compete. If you learn how to do that, you will win."

Priester said the 8(a) program taught him how to win government business. ADS generates 80 percent of its business from government contracts, including agencies such as the Environmental Protection Agency, Federal Aviation Administration, the National Institutes of Health, the departments of Education, Justice and Treasury, Naval Air Systems Command, Naval Sea Systems Command, and the Space and Naval Warfare Systems Command.

Although the partnership approach seems to be working for ADS right now, Meagher said the company is entering an interesting phase. As it distances itself from the program, he said, it must compete with much larger and more experienced businesses.