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4 min read

SBA's 8(a) Program Needs Scrutiny

8(a) Program needs scruity.

The Small Business Administration(SBA) 8(a) program was the focus of a U.S. House of Representatives Small Business Committee (Committee) hearing on Sept. 18th 2019. The Committee is taking a long overdue examination of the SBA program.

Small Business Act

The Small Business Act authorized the recognition of 8 (a) businesses as a special category of disadvantaged businesses warranting contract set-asides to ensure their participation in government contracting. Five percent of all contracting and subcontracting dollars of government contract are supposed to awarded to be awarded to 8 (a) small businesses. See to see the portal for government contracting.

Chairperson Velazquez’s Concerns

In her opening statement, Chairperson of the committee, Cong. Nydia Velazquez (D-NY), shared statistics about the purchasing power of the federal government. Last year it was worth $550 billion. This entails anything from roads to cybersecurity software and everything in between. The government developed contracting goals to ensure small businesses were included in the government contracting largess. Cong. Velazquez admitted that hardships along the way and barriers created by discrimination created a need for the program and that our nation’s history evidences a history of discrimination. The SBA’s 8 (a) program was designed to make it easier for small businesses to participate and encourage minority entrepreneurs. The program now over 40 years old and designed in ensure economic equity warrants an update.

Cong. Velazquez is troubled by going problems including those identified by the Inspector General. She believes that there is a need for more 8 (a) firms – there is a decrease in 8 (a) firm. Getting certified is just the beginning. SBA must aid and monitor the participation. She also believes the standards set for net worth needs to be updated to reflect today’s times. Look at ways to modernize the program. Cong. Chabot, the Minority Chair of the Committee, also expressed his concerns about the SBA 8 (a) program n his opening statement. The entire hearing can be viewed online here.

Is My Business Eligible to be an 8(a)?

In 1978, the Small Business Administration (SBA) was given authority to focus on minority-owned businesses defined as being “historically disadvantaged.” Later the program was expanded to include small businesses owned by four disadvantaged groups: Indian tribes, Alaska Native Corporations (ANCs), Native-Hawaiian Organizations (NHOs), and Community Development Corporations (CDCs). To qualify for the program, individual small businesses must meet the following requirements:

  • Be small,

  • Be at least 51 percent unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who:

    • are of good character and;

    • are citizens of and residing in the US,

  • Business must demonstrate a potential for success, and

  • One-time eligibility only.

Small Business Committee Memo Statistics

According to a memorandum committee staff prepared for the hearing, “ In 2012, there were 8 million minority-owned small businesses in the United States, contributing $1.38 trillion in revenue and 7.2 million jobs to the economy.1 These businesses, which accounted for 29.3% of all firms, were 12% Hispanic-owned, 10% African American-owned, 7% Asian-owned, 1% owned by American Indians and Alaska Natives, and 0.2% owned by Native Hawaiians and other Pacific Islanders.2 Minorities have suffered the effects of discriminatory practices in access to affordable credit, housing, and education throughout the nation’s history simply because of their race or ethnicity. Recognizing this, federal programs have been developed to aid racial and ethnic minorities to level the playing field by incentivizing their full participation in the free enterprise system.”

Additionally, “Federal agencies awarded $16.3 billion, or 3.7 percent, of total small business eligible Federal contracting dollars, using 8(a) sole-source and set-aside contracts. As of April 2018, the 8(a) program had 4,903 participants.”

Small Business Administration

The Small Business Administration oversees the contracting program that ensures minority, women and Native tribes and enterprises are awarded government contracts as either contractors or subcontractors for larger contract. Their top priority is to ensure that small businesses are getting bids and have what they need to participate in training, technical assistance and access to contracts. They are available to provide technical assistance and found PTAC centers across the United States to provide technical assistance and training to small businesses.

Association of Minority Contractors

Mr. Thomas, Association of Minority Contractors, the oldest minority trade association in the US and advocates on behalf of the 100,000 minority contractors across the US was one of four witnesses. He stated that there is considerable support for 8 (a) program but that it has its flaws. He thinks the newly revised Mentor-Protégé program is good. He voiced concerns that about minority contractors are being left behind and don’t get contracts during their nine year term of their 8 (a) status. He said his organization would like to see the Small Business Committee produce a study on this issue because they are concerned about small businesses being left out as the contracts get bigger.

Other Witnesses

Additional testimony was presented by Ms. Dottie Li, Founder and CEO, TransPacific Communications, Cheverly, MD; Mr. Clarence McAllister, CEO, Fortis Networks, Phoenix, AZ; and Ms. Rebecca Askew, CEO & General Counsel, Circuit Media LLC, Denver, CO.

Hearing on Native American Issues in October

Those are significant contributions. It’s no wonder that some people would like a piece of that rich pie even if it means fudging on their social status or tribal status. On July 26, 2019, the Los Angeles Times published a long expose piece on several individuals who presented themselves as Native Americans and members of Tribes in order to qualify for minority set-asides but that weren’t actually members of one of the 576 federally recognized tribes. Census records show them as white. Individuals posing as Indians were able to benefit from contracts totaling over $300 million that should have gone to bonafide 8(a) recipients. To further investigate this issue, the Small Business Committee will hold a hearing on this sometime in October but that date is not yet reflected on their calendar. Most Committee hearings are be live-streamed or available for watching later on You Tube. The Committee is still accepting written testimony for the Sept. 18th, 2019 hearing record on SBA 8 (a) program issues.

US Dept. of Transportation Revisiting Status

In addition to the House Small Business Committee holding its hearing, the House Committee on Transportation will hold a hearing on a program it oversees within the U.S. Dept. of Transportation. According to a Sept. 18th, 2019 story in the Los Angeles Times, “The chairman of a House committee that oversees the U.S. Department of Transportation said his panel also will examine The Times’ findings during a broader hearing on the agency’s Disadvantaged Business Enterprise program, which awards minority contracts.” According to that same story, the U.S. Department of Transportation has called for a review of all Native American companies in its minority contracting program nationwide to weed out firms whose owners do not belong to state or federally recognized Native American tribes.

If you are in need of legal assistance with your business getting certified, please contact the attorneys at Whitcomb, Selinsky Law PC. Call (303) 534-1958 or complete an online form.