THE FEDERAL 8(a) PROGRAM FOR SMALL BUSINESSES OWNED BY SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS

The following information was taken from SBA publications.

1. What is the 8(a) Business Development(BD) Program?

The SBA's 8(a) BD program, named for a section of the Small Business Act, is a business development program created to help small disadvantaged businesses compete in the American economy and access the federal procurement market.

To participate in the 8(a) Program, a small business must be at least 51 percent unconditionally owned, controlled and managed by either: an individual(s) who is a socially and economically disadvantaged citizen of the U.S. or an economically disadvantaged Indian tribe.

2. How do you apply to the 8(a) program?

Contacting the local SBA district office serving your area is the first step. An SBA representative will answer general questions over the telephone. Some district offices may also have 8(a) orientation workshops to provide additional information regarding the eligibility requirements and to view various SBA forms.

3. What are the basic requirements an 8(a) applicant firm must meet?

The applicant firm must be a small business, 51% of the applicant firm must be directly and unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good charater; citizens of the United States an must demonstrate potential for sucess.

4. Do you need someone to prepare an 8(a) application package? Will it increase the chances of being approved by using a business consultant?

You do not need to pay anyone to prepare your 8(a) application. The application forms are designed so the applicant can complete the application. However, a consultant can assist in completing the application. Please be advised that no one can guarantee that an application for 8(a) program participation will be approved. The application process is intended to assure that each applicant receives a fair, unbiased review, free from favoritism and influence. Any irregularities in the application review process should be immediately referred to the SBA Inspector General.

5. Who are socially and economically disadvantaged individuals?

Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identities as members of groups without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control. In the absence of evidence to the contrary, the following individuals are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (American Indians, Eskimos, Aleuts, and Native Hawaiians); Asian Pacific Americans (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific Islands [Republic of Palau], Commonwealth of the Northern Mariana Islands, Laos, Cambodia [Kampuchea], Taiwan; Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the Marshall Islands, Federated States of Micronesia, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru; Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by the SBA. In addition, an individual who is not a member of one of the above-named groups may apply for 8(a) certification. However, the applicant must establish social disadvantage on the basis of a "preponderance of evidence." Generally, preponderance is evidence of quality and quantity which leads the decision maker to conclude, objectively, that the existance or truth of the facts(s) asserted is more probable than not. Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities, as compared to others in the same or similar line of business and competitive market area who are not socially disadvantaged. For purposes of program entry, an individual whose personal net worth (excluding the equity in their personal residence and business) exceeds $250,000 will not be considered economically disadvantaged. The state will also consider the individual's average two-year income, fair market value of all assets, access to credit and capital, and the financial condition of the applicant firm in evaluating economic disadvantage.

6. What is a SIC code?

A SIC code is the Standard Industrial Classification number listed in the Standard Industrial Classification Manual which is published by the Office of Management and Budget. The SIC mannual is available at your local library or on the internet site http://www.osha.gov/oshstats. SIC codes are used by the Federal Government to identify and classify specific categories of business activity that represent the primary line of business of a firm.

7. What is the definition of a small business?

SBA defines a small business as one that is independently owned and operated, is organised for profit, and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the proceeding 12-months or on sales volume averaged over a three-year period. Examples of SBA general size standards include the following: Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured.

Wholesaling: Maximum number of employees may range from 100 to 500.
Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided.
Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided.
General Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction.
Special Trade Construction: Annual receipts may not exceed $7 million.
Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product.

8. Do you have to be in business for two years to be eligible for the 8(a) program?

Normally yes. The applicant firm must have been operational for atleast two years as evidenced by business income tax returns for each of the two previous tax years which show operating revenues in the primary industry in which the applicant firm is seeking 8(a) program certification. However, a waiver of the two-year rule may be granted if a company meets certain criteria. The waiver criteria are:

  • the individual(s) upon whom eligibility is to be based must have substantial business management experience;
  • the applicant must have demonstrated technical expertise to carry out its business plan with a substantial likelihood for success;
  • the applicant must have adequate capital to carry out its business plan;
  • the applicant must have a record of successful performance on contracts from governmental and nongovernmental sources in the primary industry category in which the applicant is seeking program certification; and
  • the applicant must have or be able to demonstrate the ability to obtain the personnel, facilities, equipment and any other requirements needed to perform the contract.

9. How long does the 8(a) application process take?

The DPCE has 15 days to review the application for completeness. If the application is incomplete, the applicant will have 15 days to provide additional information. The application will then be resubmitted to the regional DPCE. If the DPCE determines the application is complete, a final decision regarding 8(a) Program eligibility should be made within 90 days of SBA's determination that the application is complete.

10. What are your rights if your application is declined?

Each program applicant has the right to request that SBA reconsider a declined application by filing a written request for reconsideration within 45 days after receiving the notice that the application was declined . During their consideration process, the applicant may submit additional information and documentation necessary to overcome the reason(s) for the initial decline. If an application is declined after reconsideration, a new application will not be accepted until twelve months from the date of the reconsideration decision. In addition, if an applicant is declined solely on issues of social disadvantage, economic disadvantage, ownership and/or control, the declined applicant may appeal the decline decision to SBA's Office of Hearings and Appeals (OHA). OHA examines the declined decision only to see if it was arbitrary, capricious or contrary to law. No new or changed information will be considered during the appeal process.

11. How long can a company participate in the 8(a) program?

Program participation is divided into two stages: The developmental stage and the transitional stage. The developmental stage is four-years and the transitional stage is five-years. The developmental stage is designed to help 8(a) certified firms overcome their economic disadvantage by providing business development assistance. The transitional stage designed to help participants overcome, the remaining elements of economic disadvantage and to prepare participants for leaving the 8(a) program.

12. What types of assistance are available to 8(a) program participants?

The following assistance is available to eligible program participants:

  • Participants can receive sole-source contracts, up to a ceiling of $3 million for goods and services and $5 million for manufacturing. While SBA helps 8(a) firms build their competitive and institutional know-how, the agency also encourages them to participate in competitive acquisitions.
  • Federal acquisition policies encourage Federal agencies to award a certain percentage of their contracts to SDBs. To speed up the award process, the SBA has signed Memorandums of Understanding (MOUs) with 25 Federal agencies allowing them to contract directly with certified 8(a) firms.
  • Recent changes permit 8(a) firms to form joint ventures and teams to bid on contracts. This enhances the ability of 8(a) firms to perform larger prime contracts and overcome the effects of contract bundling, the combining of two or more contracts together into one large contract.

13. What are SSBICs?

SSBIC stands for Specialized Small Business Investment Company. SSBICs, formally known as MESBICs (Minority Small Business Investment Companies), are privately owned and operated venture capital firms whose private capital is supplemented (leveraged) by debt or preferred equity which is provided through open market financings guaranteed by SBA. SSBICs provide equity capital and long-term loans exclusively to businesses owned and controlled by persons who are socially or economically disadvantaged. At present there are more than 300 SSBICs. For more information regarding this program, contact SBA's District Offices or log on to http://sbaonline.sba.gov/.

14. What is PRO-Net?

PRO-Net stands for Procurement Marketing and Access Network.

Pro-Net is an electronic gateway of procurement information -- for and about small businesses. It is a search engine for contracting officers, a marketing tool for small firms and a "link" to procurement opportunities and important information. It is designed to be a "virtual" one-stop-procurement-shop. All federal agencies now use PRO-Net's database of some 195,000 small businesses as a primary source for identifying contractors.

A Search Engine

Pro-Net is an Internet-based database of information on more than 195,000 small, disadvantaged, 8(a) and women-owned businesses. It is free to federal and state government agencies as well as prime and other contractors seeking small business contractors, subcontractors and/or partnership opportunities. Pro-Net is open to all small firms seeking federal, state and private contracts.

Businesses profiled on the Pro-Net system can be searched by SIC codes; key words; location; quality certifications; business type; ownership race and gender; EDI capability, etc.

A Marketing Tool

Business profiles in the Pro-Net system include data from SBA's files and other available data bases, plus additional business and marketing information on individual firms. Businesses on the system will be responsible for updating their profiles and keeping information current.

Profiles are structured like executive business summaries, with specific data search fields that are user-friendly and designed to meet the needs of contracting officers and other potential users.

Profiles provide vendors an opportunity to put a controlled "marketing spin" on their businesses. Companies with "home-pages" can link their web site to their Pro-Net profile, creating a very powerful marketing tool.

A Link to Procurement Opportunities

As an electronic gateway, Pro-Net provides access and is linked to the Commerce Business Daily (CBD), agency home-pages and other sources of procurement opportunities.

The system is also linked to key sources of information, assistance and training. The Pro-Net project is a cooperative effort among SBA's offices of Government Contracting, Minority Enterprise Development, Advocacy, Women's Business Ownership, Field Operations, Marketing & Customer Service, the Chief Information Officer, and the National Women's Business Council.

If you have any questions about PRO-Net, send an e-mail to pronet@sba.gov or visit the website where you can also obtain the on-line application at http://pro-net.sba.gov/

NOTE: If your business was previously registered under PASS, please verify that you are not already listed under PASS prior to registering. If you are already registered, please update your information. If you no longer have your password to update your profile, you can send an e-mail to pronet@sba.gov to request a new password.

15. Does SBA issue bonds? No. SBA does not issue bonds. However, SBA does provide a guarantee for bid, performance and payment bonds issued by participating surety companies.

16. Does the SBA offer loans or grants?

SBA does not provide grants. It does however offer several loan programs. Information on all loan programs may be obtained from any of SBA's District Offices or at www.sba.gov/.

17. Are there any penalties associated with the 8(a) Program resulting from a participant's misrepresentations?

Yes the participant will have to exit the 8(a) program before the expiration of its program term.

18. Where do you go to find out more about the 8A program?

You can call 1-800-ASK SBA, go to the SBA web site www.sba.gov/, go the U.S. Business Advisor web site at www.business.gov or call your local SBA District Office.

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