The 8(a) Program is a Small Business Administration (SBA) program intended to provide assistance to economically and/or socially disadvantaged business owners. The initiative, which originated out of Section 8(a) of the Small Business Act—hence its name—provides participants with access to a variety of business development services, including the opportunity to receive federal contracts on a sole-source or limited competition basis. The program has been an important one for thousands of minority entrepreneurs over the past few years.
Entrepreneurs seeking to gain entrance into the SBA's 8(a) program must meet a number of criteria in such areas as ownership, management, and likelihood of success.
Businesses owned by white women may also be eligible for the program. In the past, these entrepreneurs had to demonstrate in strong terms that they had been discriminated against in the past because of gender, and that this discrimination had been sufficiently egregious to hinder their success in the business world. In the late 1990s, however, the SBA adjusted eligibility requirements to make it easier for white women-owned businesses to gain entrance into the 8(a) program.
Certain kinds of businesses are ineligible for inclusion in the 8(a) program. These include franchises of any kind, nonprofit organizations, brokers and packagers, and businesses owned by other disadvantaged firms. In addition, firms may be denied entry into the program for reasons of character. As defined by the SBA, demonstrations of "lack of character" may include any or all of the following:
Under certain circumstances, the SBA permits small businesses that have not yet been in operation for two years to participate in the 8(a) program. These mitigating circumstances include:
Applications to the SBA's 8(a) program can be made through local SBA district offices. Small business owners will be asked to provide a wide range of materials, ranging from personal and business financial statements to organization charts, licenses, and schedules of business insurance. As of September 2004, applications may be made through an electronic online application system that promises to make the process easier, faster and less expensive for small companies.
Rulings on completed applications are generally made within 90 days. Not all applicants are accepted into the 8(a) program, which has been a very popular one since its inception. If an application is turned down, the owner has the right to resubmit the application to the SBA with additional or changed information, but if the resubmitted application is still turned down, the owner may not present a new application until 12 months have passed from the date of the reconsideration decision. Finally, in cases where the applicant has been denied enrollment in the program solely because of questions about the applicant's social or economic disadvantage or majority ownership, then the owner may appeal the SBA's decision to that agency's Office of Hearings and Appeals (OHA). In this case, however, the applicant may not change the application in any way.
If a disadvantaged individual acquires a business that is enrolled in the 8(a) program, he or she may be able to continue to maintain the firm's participation in the program, provided that prior approval was obtained by the SBA.
Companies that are accepted into the 8(a) program are not eligible for 8(a) contracts until they submit and receive approval from the SBA for their business plan. "After the firm has an approved plan, the length of time before the first 8(a) contract is awarded will vary based on the success of the firm's marketing efforts," said the SBA. "While SBA will make every effort to assist a firm with its marketing efforts, the 8(a) program is a self-marketing program and SBA cannot guarantee 8(a) contract awards."
In addition to marketing assistance, participants in the 8(a) program receive help in the following areas during both the developmental stage (first four years) and transitional stage (next five years) of their involvement. During the developmental stage, enrollees can look forward to sole source and competitive 8(a) program support, transfer via grants of technology or surplus property owned by the U.S., and training to enhance entrepreneurial skills in a variety of areas. During the transitional period, meanwhile, small business owners can look forward to continued aid in the above areas, as well as assistance from procuring agents in forming joint ventures and technical assistance in planning for graduation from the 8(a) program.
In the late 1990s the SBA introduced a new Business Development Mentor-Protege Program meant to help improve the fortunes of 8(a) participants seeking federal government contracts. Mentors—which may include graduates of the 8(a) program, firms in the transitional stage of that program, or other businesses—are required to demonstrate the ability to assist the protĂ©gĂ© company for at least one year. Mentor companies also are required to be in good financial health and be existing federal contractors in good standing.
Companies interested in entering the program as protĂ©gĂ© firms, meanwhile, must be in the developmental stage of the 8(a) business development program, unless it has never received an 8(a) contract or is of a size that is less than half the size standard for a small business in its primary industry. It also must be qualified for inclusion in the 8(a) program in all other respects and be current with all reporting requirements.
Ideally, benefits of this special 8(a) program to the protĂ©gĂ© firm—which can have only one mentor at a time—will include technical and management assistance; options to enter into joint-venture business agreements with mentor firms to compete for government contracts; financial assistance in the form of equity or loans; and qualification for other SBA assistance programs. The Small Business Administration intends to conduct annual reviews of this program to evaluate its success, with an eye toward possible future expansion (or suspension, if it fails to meet stated goals).
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