Quick Guide: 8(a) Business Development Program
By Kristin Ghanem | Harkcon’s Contract Management Specialist
Government contracts may be set-aside for small businesses who meet the following certification and socio-economic category requirements:
8(a) Business Development
HubZone Program
Woman Owned Small Business (WOSB) Program
Service Disabled Veteran Owned Small Business (SDVOSB) Program
In the next series of posts, we are going to spend some time discussing the basic requirements of each program and the steps you need to take to qualify.
Today we are focusing on the 8(a) Business Development Program.
What is the 8(a) Business Development Program?
The 8(a) Program is an assistance program for small disadvantaged businesses that are at least 51 percent owned and controlled by socially and economically disadvantaged individuals. It helps thousands of businesses gain access to and traction in government contracting.
The program’s goal is to graduate businesses that will thrive in a competitive environment. Because of this, 8(a) businesses are required to maintain a balance between commercial and government business and have limits on the total dollar value of sole-source contracts that they receive while in the program. SBA district offices monitor and measure the progress of 8(a) businesses through annual reviews, business planning, and systematic evaluations. The SBA also offers specialized business training, marketing assistance, and other resources for the 8(a) Program.
What are the Program requirements?
1. Social Disadvantage
To qualify, the disadvantaged individual must show that he or she is socially disadvantaged. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identification as members of groups without regard to their individual qualities. For the 8(a) program the following groups are presumed to be socially disadvantaged:
Black Americans
Hispanic Americans
Native Americans
Asian Pacific Americans
Subcontinent Asian Americans
However, individuals who are not part of the presumed groups may be found to be socially disadvantaged and eligible for the program by showing applicable personal experiences in education, employment and business history. To prove social disadvantage, the owner must show that his or her personal experiences had a negative impact on his or her ability to enter or advance in the business world.
2. Economic Disadvantage
Once the SBA determines that an individual is socially disadvantaged, it can determine whether he or she is economically disadvantaged. According to SBA’s regulations, “economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise systems has been impaired due to diminished capital and credit opportunities.”
Each individual must provide the SBA with a narrative statement of economic disadvantage and personal financial information. The SBA will then use several factors to determine whether an individual is economically disadvantaged, including the applicant’s spouse’s financial information. Generally speaking, the individual’s assets cannot exceed $4 million, the average three year personal income cannot exceed $250,000, and their adjusted net worth must be less than $250,000.
3. Ownership
All 8(a) approved firms must be owned by disadvantaged individuals. This means that the economically and socially disadvantaged individuals must show at least 51 percent ownership in the business. The SBA will typically review various corporate documents to determine that disadvantaged individuals possess at least 51 percent direct and unconditional ownership. Once approved, the SBA continues to monitor 8(a) businesses to ensure that ownership remains with the disadvantaged individuals.
4. Size
To be approved and remain part of the 8(a) program, all 8(a) businesses must qualify as a small business using SBA size determinations. If a company grows out of the small business designation, the SBA will likely consider it a success story and graduate it from the program. Remember, this is the ultimate goal of the 8(a) program!
5. Miscellaneous Requirements
In addition to the strict requirements above, the SBA also requires that the business and its principles show good character. A company will be automatically declined if owner, partner, manager, or key employee lacks business integrity or is currently incarcerated, on parole or probation.
Additionally, once a business or disadvantaged individual participates in the 8(a) program, they are not eligible to participate again. Eligibility is for one-time only.
As you can see, while the 8(a) Program requirements are stringent, participation can be invaluable for those businesses that qualify.
In our next post, we will discuss HubZone programs.
If you would like to contact the author of this blog, send an email to blog@harkcon.com and reference the title, "Quick Guide: 8(a) Business Development Program.”
