8(a) grads advise: Use program wisely

Small information technology firms that participate 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.

The executives spoke in McLean, Va., Wednesday to small-business owners. Their own businesses are no longer small.

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.

Mody said he used the program to enter the Patent and Trademark Office in 1995, and then looked for other opportunities within the agency that were not set aside for 8(a) firms, using the initial agency customer as a reference.

"Who better to attest to your work?" he asked. Eventually, Signal grew its staff at PTO from six to 120 people. Most of those workers were not on 8(a) contracts.

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.