8(a) grads advice: Use program wisely

Small information technology firms in the Small Business Administration's 8(a) program should not rely too heavily on set-aside contracts under that program, advised three former program participants. Roger Mody, former president and chief executive officer of Signal Corp. of Fairfax, Va., sold the firm last year to Veridian Corp. for $227 million. Rajesh Soin, chairman of Modern Technologies Corp. of Dayton, Ohio, took his firm public last year. Rodney Hunt, president and chief executive officer of RS Information Systems Inc. of McLean, Va., has kept his company private, while growing its staff to 1,300 and its annual revenue to $190 million. "There's a common misperception that there's something magical about it. It's a contract vehicle to get your foot in the door. You need to recognize it as such," Mody said of the 8(a) program, through which participants can compete for set-aside contracts and receive advice from the SBA. Hunt said participants should "follow the money" rather than targeting a specific agency. "When you wake up five years from now, and your 8(a) contracts are all in one agency, and its budget is frozen, your company may be in trouble," he said. Program participants also should be careful about how they set up teaming agreements with large companies, Soin said. "One of the most common mistakes young 8(a)s make is becoming a prime contractor for a large company under an 8(a) contract," he said. If the agreement is structured so that the 8(a) gets the administrative work, while its large-company subcontractor gets the technical work, the 8(a) will grow its revenue and staff but not its technical competencies.Those technical qualifications are what will help the small firm grow after graduation from the 8(a) program, Soin said.