Relevant Information About the SBA 8(a) Program

Federal Contracting

Federal Government Contracting at a Glance

The Federal Government is the single largest customer in the world. They spend $12,684 every single second of every day (over $400,000,000,000.00 per year) on products and services from commercial vendors. The way the federal government buys goods and services is different from the way it is done in the commercial marketplace, so companies wishing to sell to the Federal Government need to become familiar with the way the Government does business.

Competition

When the Government needs to procure a product or service, and the projected dollar value of the contract is expected to exceed the small purchase threshold (currently $100,000), they must, in general, do so on a competitive basis. Most usually, the Government publishes a solicitation requesting proposals or bids and invites interested potential vendors to compete for the contract. Sometimes contracts are awarded to the lowest bidder, but more often to the bidder that offers the best value, taking price, quality, experience and past performance into account.

Non-Competitive Contracts

In some cases, the Government awards contracts to companies directly without holding a public competition. This mainly happens where the products and/or services being procured are only available from a single source of supply. These are referred to as sole-source contracts. An example might be if the Navy wanted to buy 5 more Trident submarines. The Trident was developed by General Dynamics as a result of a previous competition. It would be insanely costly to hold a new competition to buy 5 more Trident submarines when General Dynamics already has all the engineering done, has the production facilities in place, and has produced all the Trident submarines to date. Effectively, then, General Dynamics is the only source of supply for Trident submarines.

In order to make a sole source contract award, the Government must publish its intention to do so as well as a detailed justification of its reasons for doing so. In some cases, other companies with the same capabilities to supply the required products or services will appeal a sole source decision. If the appeal is successful, the Government may decide to hold a competition instead.

For the most part, however, the products and services offered by small businesses are not unique. The same or similar products and services are available from many vendors. Therefore, small businesses - and for that matter most medium to large businesses as well - are almost never awarded sole source contracts. There are some exceptions, however, that are discussed below.

Limited Competition Contracts

Because the Government is interested in promoting the award of government contracts to certain categories of businesses, another means of procuring products and services that the Government employs is contract set-asides. What that means is that, while the Government holds a competition for the contract, only the designated category of business may bid on the contract. Examples include, Small Business set-asides, 8(a) set-asides, Veteran-Owned Business set-asides, HUB Zone set-asides, and a number of others. In this way, the Government is assured that, no matter who wins the competition, the contract will be awarded to a business within the targeted category.

Interestingly, contracts that the Government intends to award to certain categories of businesses can, in some cases, be awarded as sole source contracts instead. Examples include contracts to be awarded to SBA 8(a) certified. firms, HUB Zone certified firms, and Certified Veteran-owned firms. Below, we will focus on SBA 8(a) sole source contracts.

SBA 8(a) Sole Source Contracts

As mentioned above, there are two main ways that contracts are awarded to 8(a) certified firms. One is where the award is set aside for competition only among 8(a) certified firms. The other is where the contract is awarded directly to the 8(a) firm without holding a competition (sole source). The way the Government decides which way to award an 8(a) contract is determined by the size (dollar amount) of the contract. Contracts that are expected not to exceed $4.5 million in total (for services) or $6.5 million in total (for manufacturing) may be awarded to an 8(a) firm on a sole source basis. Contracts expected to exceed those limits must be competitively awarded as the result of an 8(a) set-aside competition. 

Government-wide Acquisition Contracts (GWACS)

There is yet another way that the Government awards contracts. This is through the use of GWACS. A GWAC is an overarching contract under which the government pre-establishes the products and services on offer, and prices, terms and conditions for those products and services. GWACs are awarded to multiple firms as a result of a general competition in which the most competitive firms receive contracts while those that are not within the competitive range do not. An important distinction is that under a GWAC, the government is not immediately procuring any services or products. Instead they are establishing a competitive range of contractors, as well as pricing and terms, from whom they can order products and services at a future date. In most cases, a further competition limited to the GWAC contract holders - and sometimes set-aside for small or 8(a) businesses as well - may be held for the award of such orders.

The most widely known and used GWACs are the various GSA Schedule contracts, although there are a growing number of others. We mention GWACs here as part of this general overview of Government contracting, but we cover this subject in more depth in a separate article.

Summary

Obviously, the preceding article does not begin to cover everything there is to know about Federal contracting. It would take thousands of pages to comprehensively cover the subject. However, for those who are new to Federal contracting, the forgoing is intended to give a general overview and a place from which to start.

Overview of the SBA 8(a) Program SBA 8(a) Program - Quick Overview

THE SBA 8(A) PROGRAM

The SBA 8(a) Program gets its name is from Section 8(a) of the Small Business Act, which was added by Congress in 1974 to help small companies owned and operated by socially and economically disadvantaged persons to develop their businesses. The program is administered by the U.S. Small Business Administration (SBA).

- Preferred Access to Federal Contracts

The main business development tool of the 8(a) program is preferred access to Federal contracts by 8(a) certified firms. Under the program, certified firms can be awarded sole source (non-competitive) contracts up to $4 million each - $6.5 million for manufacturing contracts - and also participate in 8(a)-only competitions for contracts that exceed that amount. In some cases, SBA acts as prime contractor and subcontracts performance of the contract to 8(a) certified firms. In other cases, Federal agencies can award contracts directly to 8(a) certified firms.

- How to Apply to the 8(a) Program

The first step in seeking 8(a) program certification is to contact the local SBA district office serving your area. An SBA representative will answer general questions over the telephone and schedule your attendance at a pre-application seminar in which they go over the various application forms and eligibility requirements.

The following forms and documentation are generally required to be submitted for an eligibility determination (although SBA is not limited in what they can ask for):

  • SBA Form 1010A, 8(a) Personal Eligibility Statement
  • SBA Form 1010B, Business Eligibility Statement
  • SBA Form 413, Personal Financial Statement
  • SBA Form 912, Statement of Personal History
  • SBA Form 4506, Request for Copy of Transcript of Tax
  • SBA form 1623, Certification Regarding Debarment, Suspension and Other Responsibility Matters
  • FD 258, Fingerprint Card (if indicated)
  • Narrative of Social Disadvantage (if the applicant is not a member of one the presumptive groups set forth below)
  • Narrative of Economic Disadvantage
  • Articles of Incorporation or Organization
  • Bylaws, Operating or Partnership Agreements
  • Meeting Minutes
  • Federal Income Tax Returns (personal and business)
  • Business Financial Statements
  • History of the Business
  • Organization Chart
  • Resumes
  • Financing Arrangements
  • Bonding Information
  • Arrangements for Business Premises
  • Arrangements for Business Equipment
  • Licenses
  • Management, Consulting or Other Agreements
  • Schedule of Business Insurance
  • Information Regarding Affiliates
  • Request for Waiver of Two-Years-In-Business rule (if the applicant business has not been in business for the previous two years)
- Preparing the 8(a) application package

It is SBA's policy that applicants do not need to pay anyone to prepare and submit an 8(a) application. Filling out the on-line forms is relatively simple and is not where the difficulty lies. However, you may well want to retain an experienced consultant to assist in several areas:

  • Determining if any potential eligibility stumbling blocks exist and devise strategies for overcoming the obstacles and getting successfully 8(a) certified. 
  • Preparing and/or reviewing the required attachments (which can number in the hundreds of pages) to be sure they comply with SBA requirements.
  • Providing guidance and assistance with the social and economic disadvantage narratives.
  • Preparing a waiver request to the two-year-in-business rule (if necessary).
  • Making certain the all required documentation is present. SBA's application system does not provide much useful guidance.
- Definition of 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; (persons who are, or are descended from the indigenous peoples of sub-Saharan Africa)
  • Hispanic Americans (persons with origins from Latin America, South America, Portugal and Spain);
  • Native Americans (American Indians [ie: enrolled members of state and federally recognized Indian Tribes], Eskimos, Aleuts, and Native Hawaiians);
  • Asian Pacific Americans (persons who are, or are descended from, the indigenous peoples of 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 are, or are descended from, the indigenous peoples of 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 the preponderance of the evidence.

This is done through the development of a Social Disadvantage Narrative, which must set forth specific incidents of discrimination experienced by the applicant that has led to his/her diminished ability to develop economically (for example: job and wage discrimination). 

  • The narrative must show that each incident was clearly the direct result of discrimination and has no other plausible explanation. 
  • It must also specify the economic or developmental harm the incident caused the applicant
  • It must draw a nexus to how the incident impeded, set back the applicant's ability to start and develop of the applicant business.

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.

- Woman-Owned Businesses

A woman-owned business may be recognized as a socially disadvantaged firm, even if the woman is not a member of one of the groups for which social disadvantage is presumed. In such cases, however, she must establish her individual disadvantage by the preponderance of the evidence that she has suffered discriminatory treatment because of her gender and that this treatment has impeded her entry into or advancement in the business world. SBA will consider any pertinent evidence but will give particular attention to evidence of discriminatory practices suffered in the areas of education, employment and the business world.

- SBA Definition of a Small Business

SBA defines a small business as one that is independently owned and operated and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding 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.
  • Wholesale: Maximum number of employees may not exceed 100.
  • Services: Annual receipts may not exceed $2.5 to $26.5 million, depending on the particular service being provided.
  • Retail: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided.
  • General & Heavy 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 $5.0 million, depending on the agricultural product.
- Years in Business

Applicants normally have to have been in business for two years, as evidenced by significant revenues reported on tax returns for the previous two years, in order to be eligible for the 8(a) program. 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 and demonstrated 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 non-governmental 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.
- Contract Awards

A newly certified firm is not eligible for 8(a) contracts until it submits and receives SBA approval for SBA 8(a) 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 how successfully the firm markets itself. While SBA endeavors to assist a firm with its marketing efforts, the 8(a) program is a self-marketing program and SBA does guarantee 8(a) contract awards.

- The 8(a) Business Plan Requirement.

Promptly after certification, a program participant must submit an 8(a) business plan which must be approved by a SBA Business Opportunity Specialist (BOS) prior to the program participant being eligible for 8(a) program benefits. The submitted plan must include the following data:

  • An analysis of market potential.
  • An analysis of the strengths and weaknesses of the 8(a) firm.
  • Specific targets, objectives and goals for business development.
  • A transition management plan.
  • Estimates of 8(a) contract awards as well as awards from other sources.

In addition, each program participant must annually review its currently approved business plan with its SBA BOS and forecast its needs for contract awards under section 8(a) for the next program year.

  • The SBA 8(a) Business Plan has a different focus: The SBA 8(a) Business Plan is almost totally different than a standard business plan. Although a firm may already have a business plan - even a business plan previously used to obtain SBA loans - it will probably be of little use in preparing the SBA 8(a) Business Plan.
  • Establishing 8(a) business development objectives:  Most business plans are for strategic planning, or obtaining financing. By contrast, the SBA 8(a) Business Plan is for the specific purpose of establishing 8(a) business development objectives.
  • SBA Form 1010C: Your 8(a) Business Plan will be submitted on SBA Form 1010C. The form asks 52 detailed questions that are specific to the 8(a) program. The questions require comprehensive and detailed answers in written narrative form that address your plan for developing your company through the 8(a) program. Otherwise, SBA will not accept the plan.
  • Required Time-Frame for filing the 8(a) Business Plan: SBA requires each newly certified 8(a) firm to file an 8(a) Business Plan within 30 days of its initial 8(a) program orientation. (SBA may grant one 15-day extension). This is not optional and should not be taken lightly Failing to file within the required timeframe leads to serious consequences, including:
  • Termination from the 8(a) Program: If a recently certified firm fails to file its 8(a) Business Plan in a timely manner, SBA will commence termination procedures against the firm. If the firm is terminated from the 8(a) program, it cannot be reinstated or re-apply.
  • Ineligible for award of 8(a) contracts: Over $900 million in contracts are awarded to 8(a) companies each month. However, SBA will not allow an 8(a) company to be considered for contracts until the firm files its 8(a) business plan - and until SBA approves the plan. Delay getting this requirement completed and out of the way means a potential loss of significant revenues for an 8(a) firm. This is because contracts the firm could perform get awarded to other 8(a) companies, who not only reap the benefits of performing that contract, but also any follow-on work it leads to.

SBA Form 1010C, 8(a) Business Plan - Overview and Online Completion

WHY DOES SBA REQUIRE A SPECIFIC 8(A) BUSINESS PLAN?

Congress mandates it: In order to increase the success rate of firms going through the 8(a) program, Congress has mandated that 8(a) firms develop the special 8(a) Business Plan and that they update it yearly. In this way, firms will have a definite plan of development and will increase the chances of being competitively viable by the time they graduate from the 8(a) program. Recently certified firms participating in SBA's 8(a) Program need to promptly file the SBA's special 8(a) business plan or face early termination from the program.

IS THE SBA 8(A) BUSINESS PLAN DIFFERENT THAN TYPICAL BUSINESS PLANS?
  • Yes - the SBA 8(a) Business Plan is totally different: Although some new 8(a) firms may already have a business plan - even a business plan used to obtain SBA loans - it will probably be of little use in preparing the SBA 8(a) Business Plan. Why is this?Establishing 8(a) business development objectives:  It is because most business plans are for a different purpose. Most are for strategic planning, or obtaining financing. By contrast, the SBA 8(a) Business Plan is for the specific purpose of establishing 8(a) business development objectives.
  • SBA Form 1010C: The 8(a) Business Plan is submitted on a special form, SBA Form 1010C. The form asks 52 detailed questions that are specific to the 8(a) program. The questions require thorough and detailed answers in well-written narrative form that address the firm's plan for developing itself through the 8(a) program. Specifically, firms must comprehensively address 8(a) program business development objectives, 8(a) and non-8(a) sales projections, management plans and 8(a) and non-8(a) marketing plans, tables, charts and financial projections.
HOW SOON DOES THE SBA 8(A) BUSINESS PLAN HAVE TO BE FILED?

Within 30 days: Upon 8(a) approval, or shortly thereafter, new 8(a) firms are directed to attend a mandatory orientation session at their local SBA office. The 8(a) Business Plan must be filed within 30 days after that session. Failure to do so can lead to termination from the programSmart 8(a) owners don't wait:  Since firms may not receive any 8(a) program benefits, including 8(a) contracts, until they have filed their 8(a) Business Plan -- and until SBA approves it -- smart 8(a) firm owners get this requirement done and out of the way as soon as possible.

HOW MUCH WORK GOES INTO AN 8(A) BUSINESS PLAN?
  • Between one and several solid weeks of research and writing time:  SBA estimates it will take you 520 hours (10 hours per response). That estimate is probably too high, but it gives a good idea of the level of detail that SBA is expecting to see.
  • If an 8(a) company owner has a team of staff members he or she can assign to the task, it can probably be completed in about a week. If not, the owner will probably have to tackle it. That typically takes much longer. This is especially true because, unless someone is familiar with what SBA is looking for and how to address it, they will probably miss the mark on the first try. That, in turn, can lead to multiple revisions, and time spent going back and forth with SBA.
SHOULD AN 8(A) FIRM HIRE A CONSULTANT TO PREPARE THEIR 8(A) BUSINESS PLAN?

Not required:  SBA does not require that an 8(a) firm hire a consultant to assist in preparing the 8(a) business plan. It is typically an expensive alternative. Many firms do, however, primarily in order to avoid tying up the the time of the owner, and also in order to get it done promptly and correctly so that it can be approved by SBA on the first try. That way the firm can be cleared for the award of 8(a) contracts.

TEMPLATES FOR PREPARING THE 8(A) BUSINESS PLAN

Templates: Several consulting firms sell templates for use in formulating the 8(a) Business Plan. These tend to be "one size fits all", and since they have been used multiple times, SBA can easily spot the plans prepared from a template.

ONLINE PREPARATION OF THE 8(A) BUSINESS PLAN

Online Software: There is also and option to use online software that efficiently gathers company information which is then used to customize an 8(a) Business Plan based on how questions are answered. Many recently certified firms choose this option because it is faster than other alternatives, and yet they still get a professional business plan that doesn't look like it was generated from a template - but without requiring advanced writing skills. For more information on this alternative, click here: PREPARATION OF 8(A) BUSINESS PLAN USING ONLINE QUESTIONNAIRE

How the SBA District Office Processes an 8(a) Business Plan

What happens after your 8(a) Application has been approved?

After your 8(a) Application has been approved, your file is sent to the SBA District Office that corresponds to your geographical location. There, it is assigned to a Business Development Specialist (BDS) who will be your point of contact with the SBA during your nine-year 8(a) participation term. You will need to submit your 8(a) Business Plan to your BDS within 30 days after your initial 8(a) program orientation (which will be held at your SBA District Office).

While 30 days is the amount of time SBA allows for you to complete and submit the 8(a) Business Plan, there is nothing stopping you from submitting the plan earlier. Astute 8(a) firm owners often have their 8(a) Business Plan already prepared by the time they receive their 8(a) approval, and submit the plan immediately thereafter. They do this so they do not miss out on potential 8(a) contract awards while waiting for SBA to schedule an orientation session. Those sessions are usually held not more often than once per month and are attended by multiple newly certified 8(a) firms.

Remember, over $900 million in 8(a) contracts are awarded each month, but until a firm has submitted its 8(a) Business Plan? and the plan has been approved ? SBA will not consider the firm for award of any of 8(a) contracts.

What happens to your 8(a) Business Plan after it has been submitted?

Within ten (10) calendar days after receipt, your assigned BDS will screen your business plan for completeness. If the 8(a) Business Plan is not sufficiently complete to allow a thorough evaluation, it must be returned to you, citing the reasons for its return.

The next step is the evaluation itself. Within 30 working days after determining that your 8(a) Business Plan is sufficiently complete, your BDS will evaluate it and advise you in writing of the following:

  • Results of the evaluation;
  • If necessary, recommendations regarding the improvement and/or implementation of the 8(a) Business Plan; and
  • Recommendations regarding program support levels for the current and succeeding program years. Support levels are estimates only -- not limits on contract support.

Your BDS will evaluate your business plan, identify firm strengths and weaknesses, and analyze your plan?s management, marketing and financial condition. Your BDS can help to ensure that an acceptable business plan is submitted by working with you to explain what is required in the plan.

Each company's situation is different; therefore, evaluation of a 8(a) Business Plan involves a degree of subjectivity. SBA must evaluate the adequacy and clarity of the information provided, as well as how realistically the business plan reflects where your firm wants to go, and how it expects to get there in terms of marketing, management, and finance. In making this evaluation, the SBA will consider the internal resources of your company, and assistance that is available from SBA and other resources. Based on the evaluation of your business plan, your BDS should be able to provide guidance to you, and, if necessary, arrange for the provision of management and technical assistance.

Inherent in evaluating an 8(a) Business Plan is the identification of the strengths and weaknesses of your company. SBA uses a 1010c evaluation form with questions and a summary to provide a mechanism for assessing strengths and weaknesses. The identification of weaknesses does not necessarily mean that your 8(a) Business Plan will not be approved. Instead, it means that these are items of concern in one or more of the areas of finance, management and marketing that should be addressed in the summary section. A negative answer in some cases could indicate that information in a particular section of the 8(a) Business Plan is inadequate or unrealistic. In such cases, your BDS should provide feedback to you so that you can revisit those parts of your plan.

The Key to Quick Approval on your 8(a) Business Plan

Obviously, with hundreds of millions of contract dollars slipping away each month, you cannot afford to have the 8(a) Business Plan preparation and approval process drag out for a long time. The key to avoiding this is to know exactly what SBA expects to see in the business plan and to thoroughly address each and every question on the Form 1010C, 8(a) Business Plan in a way acceptable to SBA. That way, your plan can be quickly approved without having to go through multiple revisions.

How can you be sure your 8(a) Business Plan is exactly what SBA is looking for? The chances are that you will need to get some expert help. Numerous consultants provide this service. Typical consulting fees for preparation of an 8(a) Business Plan range from a low of around $2,000 to a high of $5,000. 

Less Costly Approach

Recently, ARA Consulting introduced an online tool for efficiently gathering the information needed to produce a professional, customized 8(a) Business Plan. It typically takes no more than 2 hours to complete the online portion. Then we go to work to produce your detailed 8(a) Business Plan which will be ready in 2 business days. Because of the efficiency of this system, we are able to charge a fraction of typical consultant fees. 

The online tool uses essentially the same process that professional consultants use. The client supplies company-unique information, which is then blended with previously formulated written segments - selected by the consultant for their appropriateness to the client's particular circumstances - to create a custom 8(a) Business Plan that will thoroughly address all of SBA's concerns. The online tool just does it more efficiently.

This approach offers a good alternative to spending weeks preparing the plan without help (and possibly wasting months going back and forth with SBA on multiple revisions) - or paying thousands to a consultant.

For more information on this alternative, click here: PREPARATION OF 8(A) BUSINESS PLAN USING ONLINE QUESTIONNAIRE