Rival Plan Threatens 8(a) Firms

By the end of the year, the 8(a) program may fall victim to a crossfire of congressional proposals and court decisions

P> Republicans in Congress quietly have prepared several new proposals that threaten the 8(a) and other affirmative action programs.

The most ambitious plan will be introduced soon by Sen. Christopher Bond, R-Mo., chairman of the Senate Committee on Small Business. It calls for the creation of a massive new business development program, valued at $6 billion, by 2001.

Although not intended to supplant the $4.8 billion 8(a) program or the $8 billion Small, Disadvantaged Business program for minority entrepreneurs, Bond's proposal likely will be entangled in a controversial effort by House Republicans to replace affirmative action programs with a race-neutral "economic empowerment" plan.

At the direction of House Republican leader Newt Gingrich, R-Ga., the empowerment plan is being written by a group led by Rep. James Talent, R-Mo., and Rep. J.C. Watts, R-Okla. It recommends a grab bag of measures, such as tax credits, deregulation for small businesses and school choice for students to jump-start economic activity in poor areas, said a congressional staff member. The details of the empowerment strategy will be released soon, he said.

The empowerment strategy will complement the planned Republican rollback of affirmative action programs. The most ambitious effort, led by Republican Senate leader Bob Dole, R-Kan, and Rep. Charles Canady, R-Fla., would bar any form of race-based affirmative action. If passed, the Dole-Canady measure would eliminate the race-based entry qualifications for the Small Business Administration's 8(a) program, which allocates government contracts to roughly 5,300 companies owned by African-Americans, Latinos and other racial minorities. In the Washington suburbs, there are roughly 750 infotech 8(a) companies plus hundreds more small government contractors -- many of which might be enticed into D.C. to participate in a HUBZone program.

The 8(a) program is also opposed by Rep. Jan Meyers, R-Kan., chairwoman of the House Committee on Small Business.

Bond's new proposal would redirect 4 percent of government contracts to companies in cities or rural areas classified as Historically Underutilized Business Zones, or HUBZones. To qualify for the HUBZones program, companies would have to hire 35 percent of their workers from the zone.

A HUBZone is a geographic area where 50 percent of the households in a census tract have incomes below 60 percent of household income in the surrounding metropolitan statistical area. For example, the Washington metropolitan statistical area includes the District of Columbia, as well as Fairfax, Montgomery and Prince George's counties.

To steer the contracts to HUBZone companies, government contracts worth up to $5 million could be set aside for a qualified HUBZone company. Other contracts would be reserved for a HUBZone company if two or more HUBZone companies bid for the contract, or if a HUBZone company offers to do the work for a price no greater than 10 percent more than the bid offered by a large, non-HUBZone company.

There are many details to be worked out, such as whether the $51 billion in federal subcontracts should be earmarked for HUBZone companies.

Whether the Democrats will oppose Bond's proposal is unclear. The HUBZone idea matches earlier calls by President Bill Clinton for an extension of affirmative action programs -- such as the 8(a) program -- to poor areas. But nothing has come of Clinton's proposal; "I heard him talk about it once, and then it went away.... No legislation was ever submitted by the Clinton administration to Congress," said Paul Cooksey, counsel to Bond's Small Business Committee.

However, the Clinton proposal is not dead yet. Vice President Al Gore is leading a review of empowerment ideas. The view is being coordinated at the Community Empowerment Board of the Office of the Vice President.

Also, the Department of Justice is reviewing all affirmative action programs, including the 8(a) program, to harden their legal defenses against pending court cases. The review began after last year's Supreme Court decision, Adarand Constructors Inc. vs. Pena, which curbed affirmative action programs. The 8(a)'s first courtroom battle is scheduled for March 8, where Clinton appointee Judge Emmit Sullivan will hear an anti-8(a) lawsuit lodged by Dynalantic Corp., Deer Park, N.Y.

Senate Democrats may not oppose the HUBZone plan, partly because it promises to aid poor communities, said a Democrat staffer. However, the empowerment strategy pushed by House Republicans may be harder to swallow, he said.

Similar measures have been supported by Democrats. For example, Sen. Dale Bumpers, D-Ark., the chief Democrat on the Senate Small Business Committee, won approval in 1988 for an economic zone called the Lower Mississippi Valley Delta Development Commission, first chaired by Bill Clinton.

But any effort to scale back the 8(a) program will be strongly resisted by the 8(a) industry. "The companies are extremely well-organized, tenacious and aggressive in protecting their turf," said a Democrat staff member.

The HUBZone plan "may well have some value" for poor areas, said Wade Henderson, the Washington-based lobbyist for the National Association for the Advancement of Colored People, Baltimore. But if the HUBZone plan gets entangled in Republican efforts to roll back the 8(a) program or other affirmative action programs, "we would oppose it," he said.

Cooksey said the HUBZone plan is not related to the House effort to curb affirmative action. But one House staff member said they are eyeing the Bond plan as part of their empowerment strategy.

The lack of skilled workers living in HUBZones would hurt companies, said Babielyn Trabbic, president of The Presidio Corp., Lanham, Md., and president of the National Federation of 8(a) Companies. "A company should be free to locate where it would be most advantageous to their business climate.... Historically, there are few individuals who reside in the HUBZones that meet the educational qualifications or training skills required to perform on highly technical government contracts," she said in a statement.

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