8(a) Program Accused of Political Incorrectness
Disabled people say they, too, are "socially disadvantaged" and should be eligible for the set-aside program
A taxi broke his spine and confined him to a wheelchair, but Mark Ballard can't get his Internet-access business into the government's 8(a) set-aside program because he is not deemed socially or ethnically disadvantaged.
Citing his physical disability, Ballard has applied twice to the Small Business Administration for socially-disadvantaged status, but his applications "keep getting kicked back" by SBA officials, he said.
Ballard's allies in Congress have not done much better.
A bill intended to give disabled people wide access to $4.3 billion set aside every year under the 8(a) program for small and disadvantaged businesses got nowhere this year. The bill was introduced by Rep. Jim Ramstad, R-Minn., but never even won a hearing in the powerful Small Business Subcommittee, chaired by Rep. John LaFalce, D-N.Y. Similar language inserted by Ramstad into the new government-wide procurement reform legislation was dropped during House debates.
A small victory was won when new SBA legislation sponsored by LaFalce was passed Sept. 21 by the House. If approved by the Senate, the measure would allow non-profit concerns run by disabled people automatic access to the 8(a) rolls.
But any further changes are dependent on a top-level review of the SBA planned for next year, said LaFalce's spokesman, Zan McKelway.
The administration has no policy on whether the disabled should be allowed into the 8(a) program, which is a "very controversial issue," said Steven Kelman, chief of the White House's Office of Federal Procurement Policy.
Disabled people should be allowed into the 8(a) program because "if you can't get through the door to market your business, that's definitely a handicap," said Ballard, owner of IMS Intercom Corp., an Internet access provider based in Clinton, Md. Because of his inability to drive, he was recently unable to deliver a contract proposal in time for it to be considered, he said.
Doris Lentz, a Washington-based lobbyist for Paralyzed Veterans of America, said disabled people should be allowed into the 8(a) lists "because there is very clear statistical evidence that people with disabilities have been discriminated against, both economically ... and socially."
Under existing congressional legislation that allows the SBA to add groups suffering from "cultural bias" to their programs, disabled people could be put on the 8(a) lists tomorrow, she said.
But SBA spokesman D.J. Caulfield said agency officials need to win congressional approval before giving disabled people 8(a) status.
If the SBA accepted severely disabled people as suffering from "cultural bias," up to 100,000 new firms could be made eligible for the 8(a) rolls, said Lentz. Her estimate of 100,000 new eligible firms is drawn from census figures that show 467,000 business owners among the 49 million Americans deemed disabled by the government.
But far fewer firms than 100,000 would sign up, says Richard Ochsner, whom the Pentagon certified 60 percent disabled because of a heart ailment.
By examining participation rates among various groups, Ochsner estimated fewer than 3,000 firms would sign up. Ochsner is president of Ichiban Inc., a computer repair firm based in Springfield, Va.
After reviewing individual cases, the SBA has only granted 8(a) status to 29 disabled business owners.
The SBA's 8(a) program now includes over 5,000 black, American Indian, Asian or Latino-owned businesses.
Opponents of the proposed change say that inclusion of the disabled would reduce the pool of work available to existing 8(a) businesses and would change the character of program, which was created to fight the impact of racial discrimination.
Inclusion of the disabled would "severely damage Afro-American businesses," which already get less than their share of 8(a) contracts, said Harry Alford, chairman of the Washington, D.C.-based Black Chamber of Commerce. Disabled people "should not come into a program designed for a race," and intended to help overcome the impact of racism, he said.
Alford proposed a broader set-aside program that would earmark percentages of government contracts for the disabled, as well as each racial and ethnic group.
Rep. Kweisi Mfume, D-Md., chairman of the Congressional Black Caucus and of the Small Business Committee's subcommittee on minority enterprise, finance and urban development, "is not non-supportive of legislation to help business development for the disabled," said Carol Kaplan, Mfume's spokeswoman.
"The question in his mind is whether [the 8(a) program] is the best avenue to promote business development for the disabled," she said, adding that one solution might be the creation of a new set-aside program for disabled business owners.
Charles Kamasaki, vice-president at the Washington, D.C.-based National Council of La Raza, an advocacy group for Latino-related issues, cautioned that the expansion of government programs to help the disabled would dilute government resources targeted against racial or ethnic problems.
But the tide seems to be turning towards inclusiveness. Existing government policies are "clearly evolving towards [accepting] additional groups," said Kamasaki, including women, homosexuals, and the elderly.
So Where Are 8(a) lInes really drawn?
The 8(a) program is all about helping socially and economically disadvantaged people, but you don't have to be poor or in some cases even particularly ethnic to get a piece of the action.
Under current Small Business Administration regulations, applicants with a personal net worth of up to $250,000 can join the program. But that figure does not include equity in a personal residence or a small business.
The 1991 Census puts the mean American net worth at $102,118 per household. That includes house, business, car and all financial equity in stocks and bank accounts.
On average, 8(a) business owners do far better than that. According to the SBA annual report to Congress on the program for fiscal 1993, the average personal net worth of 8(a) owners was $129,274, including house and business equity. The group's median net worth was $92,808 -- a hefty $56,185 above the national household median.
Small Business Administration officials argue that 8(a)s need some personal equity to get a business going.
"In the context of starting a business there has to be some net worth to draw upon," said Michael McHale.
The $250,000 cap has drawn ire in Congress for decades, but lawmakers as a whole have been unable to legislate it any lower. In fact, the Congress has never found the collective will to legislate any caps and has left it to the SBA to decide exactly what economically "disadvantaged" means.
The latest round of 8(a) program reforms don't deal with the issue, but rather focus on red tape and the nagging issue of survival rates after the nine-year tenure in the program has ended. The SBA tracked 710 post-8(a) firms from 1990 to 1993 and found that 252 went out of business and 41 others had "curtailed operations."
The social disadvantage portion of 8(a) eligibility is somewhat clearer-cut. The accepted racial groups are: Black Americans, Native Americans, Hispanic Americans, Asian Pacific Americans and Subcontinent Asian Americans. Within these groups, there are no set criteria for lineage. The SBA generally accepts applicants on, well, face value.
The SBA will entertain applications from other racial groups, even whites, but "It's a real tough case to make," said McHale. There are 37 white-owned 8(a) firms -- and many are owned by disabled persons.
American Indian 8(a)s are a special case. The SBA leaves the racial membership question to the tribes themselves. That can sometimes mean rather wispy connections. For example, the Potowatomi Indians of Oklahoma have a set tribal role of descendants. Anyone proving descent from a person on that list is automatically a member, even as far removed as 1/128.