Don't Kill the 8(a) Program, Reform It
Don't Kill the 8(a) Program, Reform It
By Mary Ann Elliott
What is the future of the 8(a) program? Are we to believe its opponents in Congress who want to scuttle the program entirely?
What about the courts, which have expressed numerous opinions - notably the 1995 Adarand v. Pena Supreme Court decision - that equate such programs with reverse discrimination, or other critics who base their objections on the claim that past prejudice no longer justifies affirmative action programs?
Participation in the 8(a) program is not based exclusively upon race or gender-based considerations as many detractors would argue. One cannot accept the contention that in today's world all individuals and companies have equal opportunities for success. The truth is that bias is still present in the contracting process; race and gender-based barriers exist and will for at least another generation.
Few supporters of the 8(a) program believe changes in the way the program is used and administered are unnecessary. Critics quickly point to examples of program abuse by some participants as justification for its termination.
Mary Ann Elliott
Meeting Performance Goals
At present there is little effort by contracting officers to monitor the utilization of small businesses, small disadvantaged businesses or 8(a) firms by large firms as subcontractors on major procurements. Verification of a large firm's compliance with its stated goals should be made prior to award of successive contracts. Just as points are awarded based upon the plan proposed, points should be deducted for past failures to meet those goals, much in the same manner as past performance evaluations are rated.
Despite the fact that government agencies may require that 8 percent to 20 percent of the contract award be subcontracted to small businesses, there is little follow-up to ensure that large firms meet these goals. Although large firms include the small businesses in teaming arrangements and formal subcontracts, the small business generally spends inordinate amounts of time, sometimes over a period of several years, attempting to tie down the prime contractors to meet their contractual obligations. In many instances, the small firm never realizes any benefit from these subcontracts and the large firm knows that it will not be called to account for its failure to meet the small business utilization goals.
-Mary Ann Elliott
In reality, most participant firms in the 8(a) program are run and managed by honest, hard-working entrepreneurs who, but for the socioeconomic policies underlying this successful program, never would have had a fair opportunity to succeed in business.
What, then, can be done to improve the image of the program, to assure the success of participant firms, and to survive the onslaught of attacks by its critics? There are at least three recommendations for improving the program: a more thorough initial screening of applicants through oral presentations, the use of program mentors, and changes to the investment restrictions.
Applicant Screening Through Oral Presentations
Anyone who has been involved with the 8(a) process is well aware that a firm has a much better chance of having its application approved if it hires an experienced consultant or attorney to prepare the submission. These individuals understand the process, how to answer application questions and know what it takes for the Small Business Administration to quickly review and approve individuals.
The application process does nothing to assure that the applicant has the requisite business acumen or technical ability to engage in its line of business.
We have all heard stories of participant firms that were either fronts for other businesses or which were headed by individuals with little or no understanding of the requirements of the industry classification that was assigned their firm.
Many government agencies have developed contracting procedures that require the submission of oral presentations with a question-and-answer phase as part of the proposal process. This assures that the bidder is able to show understanding of the problem and proposed solution.
The SBA could incorporate a similar procedure in its 8(a) certification process. The process would incorporate the use of a review panel with the resident expertise to perform a constructive review of the applicant's business plan and, in the case of specialized firms such as those in the hi-tech industry, a panel of peers or industry consultants to ask questions and
determine the applicant's level of knowledge.
The program's image would benefit, but more important, the minority owners would be given the opportunity to express to the SBA their ability to own and operate a business in their chosen field.
The program would thus be viewed less as a government subsidy and would reduce the number of unqualified applicants from being accepted into the 8(a) program.
There is nothing like experience. How many times have we said, "If I had to do it over again I would have..."? The mentor-protégé program could be expanded to provide funding or an incentive, such as bonus points on procurements, to successful 8(a) firms to assist with the development of newer program participants. The lessons learned from successful participants may, in many instances, be more valuable than being selected as a protégé to a large business.
As structured, the present program restricts the new entrepreneur from being able to seek outside capital. An individual coming into the program has a limit on his or her individual net worth, but still must have enough financial reserves to operate the business until it is established and contract revenue is earned.
This is often a one- to two-year period. Certainly, no one wants to see 8(a) firms that are little more than fronts for other, larger organizations. Firms such as these are few; the majority of applicants need access to capital in order to be successful.
It is very difficult to borrow capital, establish a line of credit or have enough in reserve to establish a new business. The SBA should review its policies in this area to allow access to outside investment, under supervision by the SBA, so that fledgling firms can stay the course for their first two years.
The strategic view of the 8(a) program is to provide a direct response to a critical social need - to assist small business entrepreneurs to compete with large businesses as well as with those outside the minority mainstream. There is no better way to help small disadvantaged businesses than to create a level playing field.
We must continue this bold effort to set forth a pathway to tomorrow for all minority businesses. And with the continued implementation of the 8(a) program, we will harvest the strengths of America's diversity and allow all Americans to participate equally in our collective growth.
Mary Ann Elliott is president and CEO of Arrowhead Space and Telecommunications Inc. in Fairfax, Va.