Businesses within the Small Business Administration 8A Program - Research Paper Example

SBA 8(a) program inserts his/her Number The Small Business Administration is an entity committed to the development and growth of small businesses in the U.S. While various facilities have been provided to encourage the continuity of such businesses, no program has previously targeted disadvantaged individuals in the past. This paper provides an overview of the 8(a) program that specifically targets socially and economically disadvantaged entrepreneurs running small businesses. Furthermore, the eligibility criteria along with the application process are concerned. Finally, the paper briefly highlights the need for SBA to strengthen its anti-fraud mechanisms so that only deserving firms get access to this facility. Keywords: SBA, 8(a); disadvantaged; eligibility; application The Federal Government of U.S has, since a long time, actively promoted the socio-economic welfare of small businesses. It is for this particular reason that the Small Business Administration (SBA) was founded to ensure that small businesses have the business acumen and resources to survive and grow in the competitive marketplace. Several opportunities have been provided to small businesses, including the securing of no-bid contracts and granting of prime contracts. In recent years, the 8(a) business development program by SBA has gained a lot of attention owing to generous incentives and growth capabilities offered by the SBA for businesses that meet the criteria for this program. The 8A program was introduced by the SBA with the main objective of assisting and facilitating small and disadvantaged businesses so that they can compete in the competitive marketplace. The popular 8(a) Business Development program is specifically targeted towards small businesses that where individuals who are “socially and economically” disadvantaged own and control at least 51% of such businesses (Koprince, 2012). Accordingly, it helps such entrepreneurs to get accessibility to mainstream business in the American market. Furthermore, it helps harness the aspirations of entrepreneurs by securing government contracts for such businesses to help them grow. The 8(a) program is separated into two stages: the developmental 4 year period and the transitional 5 year period (SBA.gov). The 8(a) program offers several benefits for disadvantaged entrepreneurs. Firstly, the program entails the “sole-source” no-bid contract which implies that participant businesses shall not have to bid for contracts and shall be the sole providers of the products to be provided under the contractual agreement (SBA.gov). This holds true for contracts under $3.5 million worth of services and $5.5 million worth of commodities (Redstone, 2010). Additionally the program also entails developing the institutional and competitive knowledge capital of participant firms while at the same time providing them with opportunities to engage in competitive acquisitions that constitute government contracting in the U.S. Secondly, this program allows bidding for contracts through the formation of joint venture and teams by participant businesses (SBA.gov). This is particularly done to develop businesses’ capabilities to secure prime contracts which are contractual agreements that are granted directly by the state (SBA.gov). It also helps prevent the practice of merging contracts into a larger one. A specific aspect of the 8(a) program, the Mentor-Protégé Program, particularly addresses the need of small businesses to learn from their more experienced counterparts (SBA.gov). To become a part of the 8(a) program, firms are required to adhere to certain principles. Firstly, the 8(a) businesses are required to sustain equilibrium between their profitable and government business. Secondly, there is a limit on the dollar value of no-bid contracts that a singly participant business can seek. This limit has been defined as $100 million (SBA.gov). However, the requirements for becoming eligible for the 8(a) program are diverse and range from core requirements to eligibility based on size, control, ownership, economic and social disadvantage. At the very least, business must owned by an American national and must be owned by a 51% majority (SBA.gov). Furthermore, individuals who are ‘socially disadvantaged’ have been characterized as those who have suffered from any bias or prejudice in America based on their race, culture or ethnicity by virtue of their being a member of such groups without any recognition of their individual skills or qualities. The program effectively caters to particular groups who are presumed to be socially deprived including Black, Native, Hispanic, Asian Pacific and Subcontinent Asian Americans (SBA.gov). Additionally, individuals who are deprived socially but do not fall in the above groups must be able to demonstrate to the Small Business Administration that they have an underprivileged status in the American society. This is done either by sharing their experiences of being discriminated against in the American society or any feature (such as physical disability, race, ethnicity etc.) that distinguishes them from the mainstream society (SBA.gov). Eligibility based on being economically underprivileged is based on three major criteria that the individual must possess. Firstly, the individual’s assets must be equal to or below $4 million; personal income must be equal to or less than $250000 over a 3 year period and must have net worth that falls below $250000 (Koprince, 2012). In one case of Construction Toms River, New Jersey, the president misreported by understating the value of his net worth by almost $600,000. Although SBA accepted the false claims (without realizing they were false), the firm voluntarily withdrew later from the program (Kutz, 2010). Additionally, if the individual is married, the financial standing of his/her spouse is also taken into consideration which includes the spouse’s financial assistance to the business. For instance, in one of the cases of an IT consulting firm in Fairfax, the president failed to validate the assertion that her properties were bought from the amount inherited by her spouse which implies that she or her spouse had sufficient resources which would inflate their net worth (Kutz, 2010). Furthermore, various white individuals/owners have been identified as in the case of one Roofing and Construction Company in Hyattsville which implies that the SBA has gone beyond the inclusion of minorities (Kutz, 2010). As far as ownership eligibility is concerned, individuals who are socially or economically underprivileged must own the business directly and without any conditions (Koprince, 2012). Company documents including information pertaining to articles, laws, agreements, previous ownership, and stock is scrutinized by the Small Business Administration before granting eligibility. Control requirements are also considered when analyzing the eligibility of participants. In this regard the income of managers, reimbursement, financial contract, prior and future agreements, company structure, and changes in ownership are considered (SBA.gov). As far as size considerations are concerned, the business must be characterized as a small business as per the U.S law at the very least. The working as well as family relationships of participants in the 8(a) program are also considered. Finally, participation in the 8(a) program requires additional criteria to be adhered to. This includes requirements pertaining to good character of participant individuals, eligibility of specific franchises only and the non-eligibility of brokers as well as other non-profit institutions (SBA.gov). Firms that are indebted to the state for fulfillment of their financial commitments are also excluded. Also, businesses can only apply once for the program as subsequent applications are declined. In all cases, the SBA periodically reviews and monitors the operations of the firm and if the company violates any of the eligibility requirements their membership in this program is declined. Furthermore, SBA has partnered with IRS and Federal Investigation authorities in the U.S to take legal action against cases of eligibility fraud. In one of the cases, the financial and managerial association of a non-disadvantaged member was not revealed. Paradoxically, over 14 cases of ineligible firms who were granted participation in the SBA have been discovered which translates to a loss of $325 worth of resources (Kutz, 2010). The application process for the 8(a) program is fairly simple if understood in a sequential manner. Prior to applying all applicants are strongly advised by SBA to read an online annual module which facilitates the applicants in deciding whether or not this program fits their needs (SBA.gov). Not only does this manual provide an overview of the program but includes all requirements that are necessary in order to be eligible for the program. The next step may take some time as it requires getting hold of all essential documents signed by the company’s directors, owners and other officers. Next, a number known as the D-U-N-S number is required. This number is given free of cost to businesses as a unique code for the business’ physical address (SBA.gov). Along with this number the applicants are required to submit an identification number as a proof of the taxes filed and paid. Once this is done, participants have to create an electronic profile under SAM (System for Award Management) which acts as an interface between the business and government (SBA.gov). Once the participants have registered here they receive their login credentials on the basis of which they can proceed with their electronic application for the 8(a) program. While the completion of the electronic form is just a few minutes away, time may be taken to gather the necessary documentation and information required for filling the application. Additionally, all paperwork that backs the application must be mailed separately to SBA. After approximately two weeks, the SBA provides a confirmation of whether the application has been fully completed or not (SBA.gov). Once it is confirmed the application goes ahead for approval. At all times it is important to note that all information must be honest and must be legible and comprehensible. Although it would seem tempting to seek advice from a third party for completion of the application procedure, the SBA discourages such an attempt as it believes that only SBA can provide authentic guidance with respect to this program. It is also important to understand that, although the SBA has developed the 8(a) program for assisting disadvantaged individuals running small businesses, it does not mean that SBA will not critically evaluate the business’s application. The application phase is, in fact, that particular stage whereby the SBA must choose the most deserving candidates out of thousands of applications; therefore, it may require a lot of time and patience for the procedure to complete. To conclude, the 8(a) program is perhaps the first-of-its-kind broad based program that goes beyond catering to minorities to include individuals who are economically underprivileged. It offers tremendous support to businesses run by disadvantaged individuals by offering them sustained business (through government contracts) along with developing their abilities to survive independently in the long run. The aim is to successfully develop the technical know-how and competitive skills of such businesses so that, even after the nine-year period, they can continue to prosper on their own and compete head to head with their larger competitors. Nevertheless, the program must tighten its anti-fraud checks in order to minimize loss of resources to those firms that do not meet the criteria. References Koprince, S. J. (2012). The Small-Business Guide to Government Contracts. New York: AMACOM. Kutz, G. (2010). Small Business Administration 8(a) Program: Fourteen Ineligible Firms Received $325 million in Sole-Source and Set-Aside Contracts. Washington: United States Government Accountability Office. Redstone. (2010). Contracting Selection. Redstone. SBA.gov. (n.d.). 8(a) Business Development Program. Retrieved from SBA.gov: U.S Small Business Administration: http://www.sba.gov/category/navigation-structure/contracting/contracting-support-small-businesses/8a-business-developme Read More