Sunday, January 22, 2023

SBA's 8(a) program can help some businesses compete

SBA's 8(a) program can help some businesses compete


 SBA's 8(a) program can help some businesses compete


Q: A friend told me that as a woman of Native American descent, she might be eligible for a special SBA program to help me start a small business. She said that she could compete for government contracts through this program. Can you tell me which SBA program you are referring to?


A: Her friend is probably referring to the Small Business Administration's (SBA) 8(a) Business Development Program (BD). The 8(a) Program (named for the section of the Small Business Law from which it stems) is an SBA program created to help disadvantaged small businesses better compete in the U.S. market and in the field of public procurement. The SBA provides business development, technical assistance, and other services to small businesses that are accepted into the 8(a) program.

The 8(a) program is reserved for what the SBA calls "socially disadvantaged individuals." Socially disadvantaged people are defined as those who have been subjected to racial or ethnic prejudice or cultural bias due to their membership in a disadvantaged group.


The SBA has designated the following groups as socially disadvantaged:


African Americans Hispanic Americans Native Americans (Native American Indians, Eskimos, Aleuts, and Native Hawaiians) Certain Asian Pacific Americans Others who can demonstrate that they meet the SBA criteria for being considered socially disadvantaged

One point your friend is wrong about is that the 8(a) program is for startups. The 8(a) program is primarily for companies that have been in business for a minimum of two years, although that rule can be waived if your company can meet some fairly stringent management, financial, and performance criteria.

The Small Business Act requires that all small businesses have the opportunity to provide goods and services to the United States government. To help ensure that mandate, the SBA negotiates annual procurement preference goals with each federal agency and reviews each agency's results to ensure the goals were met.

The statutory targets are: 23 percent of all major contracts go to small businesses; 5 percent prime contracts and subcontracts for small disadvantaged businesses; 5 percent of prime contracts and subcontracts for women-owned small businesses; 3 percent of prime contracts for HUBZone small businesses; and 3 percent of primary and subcontracted contracts for small businesses owned by service-disabled veterans.

A HUBZone (Historically Underutilized Business Zone) is a designated area within urban and rural communities that has been given preferential contract award consideration in an effort to stimulate economic development. A business can qualify for HUBZone status if it is owned or controlled by one or more US citizens, has at least 35 percent of employees living within the designated zone, and has a main office located there. HUBZones are a completely different topic that we can discuss at another time. Suffice it to say that a company that obtains both 8(a) and HUBZone status may be entitled to a double dip in the public procurement channel, which is why you often find a number of 8(a) companies moving specifically to HUBZone areas to take advantage of the benefits offered by both programs.

The US government buys billions of dollars worth of goods and services every year, from basic goods to those wonderfully expensive toilet seats. Getting 8(a) status allows small businesses to compete for a piece of that business.

The basic requirements to apply for 8(a) status are that your business must be a small business as defined by the SBA, must be owned and controlled by one or more socially and economically disadvantaged persons who are U.S. citizens, and must show potential for success. The SBA defines a small business as "one that is independently owned and operated, organized for profit, and not dominant in its field."

Unsurprisingly, the 8(a) program has its supporters and its detractors. His fans are those companies that obtain 8(a) status and thus get preferential treatment when competing for public procurement contracts.

The detractors of the program are usually those companies that do not obtain andl 8(a) status or that don't meet the definition of socially disadvantaged, i.e. businesses owned by my white American men (that's a can of worms we won't open this week).

You can get more information on the SBA website (sba.gov) or by calling your local SBA office.

Here is your success!