WWW Project - J. Toigo SEP 98

SMALL BUSINESS ADMINISTRATION’S

8(a) BUSINESS DEVELOPMENT PROGRAM

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

The Office of Minority Enterprise Development (MED) Program was created to assist socially and economically disadvantaged business persons to gain access to the resources necessary to develop small businesses and improve their ability to compete in the mainstream of the American economy. The most well known element of the MED program is the 8(a) Program, named from Section 8(a) of the Small Business Act. The 8(a) Program is a business development program that provides its participants access to a variety of business development services, including the opportunity to receive federal contracts on a sole-source or limited competition basis. Under the 8(a) Program, SBA enters into prime contracts with federal departments and agencies and subcontracts the performance of work to disadvantaged small businesses that are certified participants in the program.

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

The applicant firm:

must be a small business; SBA size standards are based on SIC codes
must be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States. SBA requires that at least 51% of the applicant firm is unconditionally owned by socially and economically individuals.
must demonstrate potential for success.

3. Who are socially 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.

An individual who is not a member of a designated group must establish social disadvantage on the basis of a preponderance of the evidence.

4. What does it mean to be economically disadvantaged?

Economically disadvantaged individuals are socially disadvantaged individuals whose abilities to compete in the free enterprise system have been impaired due to diminished capital and credit opportunities. The factors are considered when SBA evaluates the economic disadvantage of an individual are the individual's net worth, after excluding the individual's equity in the firm and the equity in the primary residence, may not exceed $250,000. SBA, however, 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.

Does SBA have a minimum length of time in business requirement?

Yes. The applicant firm must have been operational for at least two full 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. A firm still apply for participation in the 8(a) BD Program if it has not been in business for two full years. However, the firm must obtain a waiver of the two years in business requirement by meeting all of the following conditions:

The individual or individuals upon whom eligibility is based must have substantial business management experience.
The applicant firm must demonstrate the technical experience to carry out its business plan with a substantial likelihood for success.
The applicant firm must have adequate capital to sustain its operations and carry out its business plan.
The applicant firm must have a record of successful performance on contracts from governmental or non-governmental sources in its primary industry category.
The applicant firm must have, or must be able to demonstrate that it has, the ability to timely obtain the personnel, facilities, equipment, and any other requirements needed to perform on contracts if it is admitted to the 8(a) program.

6. 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 is designed to help participants overcome the remaining elements of economic disadvantage and to prepare participants for leaving the 8(a) program.

7. How do I apply to the 8(a) BD program?

The first step in seeking certification with the program is to contact the local SBA district office serving your area. SBA representatives 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 review various SBA forms. The forms are also available from the SBA web page.

For more information about the 8(a) program, check out the following web sites.

http://www.sba.gov/med/shortq&as.html

This web site contains the 35 most frequent questions asked about the Small Business Administration’s 8(a) business development program.

http://www.sba.gov/gopher/minority-Small-Business/8a-Contracting-Program/8aall.txt

This web site contains the 8(a) Program eligibility criteria. It is an excerpt from 13 Code of Federal Regulations Part 124.

http://www.sba.gov/library/forms.html

This web site contains SBA forms that can be downloaded in PDF format, including forms for the 8(a) application.

http://www.osha.gov/oshstats

This web site contains the Standard Industrial Classification (SIC) Manual which is published by the Office of Management and Budget (OMB). SIC codes are used by the Federal Government to identify and classify specific categories of business activities that represent the primary line of business of a firm.

http://www.sba.gov/size/

This web site contains the Small Business Administration’s definition of a Small Business for the various SIC codes.