8(a) Program Survives Republican Attacks

8(a) companies will soon fee the heat from larger rivals in the federal marketplace

With the national elections only a few weeks away and President Bill Clinton ahead in the polls, 8(a) industry executives are increasingly confident that Republican attacks on affirmative action programs will be set aside.

However, court decisions following the 1995 Adarand vs. Pena decision will remain a problem for affirmative action proponents, said Carlos Sandoval, a partner with the McLean, Va.-based firm of Grossman & Sandoval PLC. These pending cases may restrict affirmative action programs despite pleas by Justice Department lawyers who have backed the programs in courts from California to Washington.

Even if these court cases are defeated, 8(a) companies will face increasing pressure in the federal marketplace from large companies, said Sandoval, who advises 8(a) companies on federal procurement law.

The 1995 federal procurement reform allows agency procurement officials to exclude some companies from bidding for a contract. Some 8(a) executives fear they may be pushed out of the bidding, along with other small companies, as large companies pursue low-value contracts to offset declining federal expenditures, he said.

The reform also promotes easy commercial purchases, reducing some of the incentives for a contract officer to use the quick-turnaround 8(a) process, and establishes a computerized procurement system, which makes it easy for large companies to bid on small contracts that were once pursued only by smaller companies, including 8(a)s, said Sandoval.

Despite his support for affirmative action programs, "Clinton is still an unknown quantity.... How a new Clinton administration will respond to these [procurement] issues" will critically shape the 8(a) industry's backing for him, Sandoval said.

The 8(a) program, managed by the Small Business Administration, awarded roughly $5.2 billion in 1995 to 5,500 minority-owned companies. According to SBA data, 8(a) companies were awarded $1.51 billion from October 1995 through March 1996. This total was 9 percent less than the $1.66 billion spent during the same period last year, sparking fears that Republican criticism of the 8(a) program -- and the various changes in procurement regulations -- are already cutting 8(a) revenues.

However, agency spending has been disrupted by the battle between the White House and Congress over long-term spending plans, and the 9 percent drop may be made up in the final months of the year as agencies rush to spend their funding.

Also, large commercial companies continue to provide opportunities for minority and female entrepreneurs. For example, Lucent Technologies Inc., spends $750 million each year on minority-owned or women-owned businesses, said Virginia Hardesty, manager of minority and woman-owned business outreach at Lucent. "Our business is not driven by government mandate.... It is customer-driven," she said.

In the policy arena, industry executives and Democratic congressional staff members are growing confident that the Republican attack on affirmative action programs has faltered.

For example, Republican leaders have voiced little support for a bill drafted by Rep. Jan Meyers, R-Kan., to eliminate the 8(a) program. No date has been set for a vote on Meyers' 28-page bill, HR 3994, said Craig Orfield, a spokesman for Meyers, who chairs the House Committee on Small Business. "It is not on the calendar at this point," he said.

Meyers will retire in November, leaving her only a few weeks to push the bill through the House, which is already facing a full plate of issues, including the must-pass appropriations bills.

Similarly, a measure proposed by former Sen. Bob Dole and Rep. Charles Canady, R-Fla., never found a place on the congressional calendar. Since he resigned from the Senate to campaign for the presidency, Dole has not raised this measure, which would have barred most federal affirmative action measures.

To shield the 8(a) program from Republican attacks, the White House issued a series of suggested reforms. Among the features of the proposal are:

  • Increased efforts to detect and punish fraud in affirmative action programs, such as the establishment of so-called front companies that claim to be owned by minorities but are effectively controlled by whites.

  • A continued presumption that minority entrepreneurs suffer economic and social disadvantages, allowing them to easily qualify for government contracts and preferences.

  • A provision that would allow nonminorities, such as white men, into the 8(a) program if the "preponderance of evidence" shows that a candidate is socially and economically disadvantaged. This relaxes the current legal standard under which very few nonminorities have qualified for government preferences. However, "I am not convinced that means anything in practical terms," said Deval Patrick, the Justice Department deputy for civil rights, speaking at a Washington meeting in April.

  • A new rule requiring prime contractors to award a set percentage of subcontracts to minority-owned companies. Failure to comply could cause the prime's contract to be canceled.

  • "Benchmarks" that set the percentage of an agency's contract dollars to be awarded to minority-owned companies, according to how many minority-owned companies would exist if discrimination had not reduced their number. Benchmark tests would be set for many categories of business, such as software, food service or equipment maintenance, and would match the Commerce Department's classification of business among three-digit Standard Industrial Codes.

Also, the Republicans have failed to push through a plan drafted by Sen. Christopher Bond, R-Mo., chairman of the Senate Committee on Small Business. Bond's plan, which would divert 3 percent of federal contract dollars to companies based in poor areas, was opposed by 8(a) executives who feared it would weaken government support for the 8(a) program.

This concern also prompted White House officials to alter their Empowerment Contracting plan, which was intended to divert contract dollars toward companies based in poor areas. The executive order signed by President Clinton May 21 specifically excludes set-aside programs, such as the 8(a), from the Empowerment Contracting plan. Also, federal officials have whittled down the plan to a demonstration program and have yet to identify how many contracts and agencies will be included.

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