This pandemic has changed life as we know it, financial ruin is on the horizon for many of us and businesses were struggling. It just seemed important to support new business opportunities as I’m grateful that The Westmoreland Group (TWG) has survived. And as luck would have it, I came upon the Small Business Administration’s (SBA) 8(a) Business Development Program.
Per sba.gov, “The federal government’s goal is to award at least 5 percent of all federal contracting dollars to small disadvantaged businesses each year.”
Well, my employer is definitely a small business but were we disadvantaged?
While there’s no definition on sba.gov for the term, disadvantaged business, one could easily infer that defining a disadvantaged businesses is largely based on the business owner(s), are they socially or economically disadvantaged? In the interest of time – being socially disadvantaged is belonging to certain racial or ethnic group and being economically disadvantaged is being a socially disadvantaged person who may have been subjected to racial, ethnic or cultural bias.
Well, that seemed like a good fit, TWG is an African-American, Woman – Owned business.
The benefits of the 8(a) program sounded stellar.
“Disadvantaged businesses in the 8(a) program can:
- Compete for set-aside and sole-source contracts in the program
- Get a Business Opportunity Specialist to help navigate federal contracting
- Form joint ventures with established businesses through the SBA’s Mentor-Protégé Program
- Receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development.”
That sounds like a winner but were we eligible?
Effective July 15, 2020, to qualify for the 8(a) program, follow this eligibility checklist:
- Be a small business
- Not have previously participated in the 8(a) program
- Be at least 51 percent owned and controlled by U.S. citizens who are socially and economically disadvantaged
- Have a personal net worth of $750K or less, adjusted gross income of $350K or less and $6 million or less in assets
- Demonstrate good character and potential to perform on contracts
Ha! TWG was winning … we are chock-full of good character and potential – we were on our way. Not that we’ve met the requirements, I was off and running. This seemed like a simple information gathering exercise, piece of cake, right? But I halted. If this process is easy and simply an information-gathering exercise, why is the general consensus (of business owners that I’ve personally polled) that obtaining the actual 8(a) Certification is a myth, like the proverbial unicorn?
I’ve spoken with countless owners and all of them have said ‘Good luck, getting it yourself.” Most recommended outsourcing and others thought it may not be worth it in the end as being accepted to the program is no guarantee that your business will win an award. Firms still have to complete, the program was only a seat at the table.
After researching via our good friend, google – most information was several years old Oh, there were blogs, very similar to this one, wishing people the best but no one seemed to have any real insight on success. One article in particular suggested that the 8(a) may not be the best course of action for growing your business. Interestingly enough, that article was penned by a consulting-firm whose service is …. you guessed it, 8(a) Application Preparation.
Well maybe there’s something to this “the 8(a) a mythical creature.” But, I’m no slouch – I’ve watched enough Law & Order: SVU to pride myself on my detective skills, so I would begin with the data gathering exercise.
So, I set off gathering the required information in August 2020. Things were looking good. The website was a plethora of information, with nice diagrams, outlines, checklists, DIY videos, replete with questionnaires and guides all designed to assist, right? Right.
The process seemed straight forward; the application was rudimentary looking at best. The questions were very specific and easy to follow. Now, there were some nuances, I’d discovered. There was a section requiring business owners to submit a statement regarding their ‘criminal activity.’ That was a no brainer, TWG leadership has no criminal activity. But there was only one option, a document was to be uploaded. There was no method for marking ‘not applicable’ so I literally, uploaded a document with a single sentence “The business owner has no criminal activity.” That was strange but I proceeded; feeling quite comfortable about answering every question and my budding detective skills. I submitted the application and anxiously awaited the results.
I didn’t have long to wait. My application was rejected. A ‘letter of good standing’ needed to be more recent than the one I submitted from the State of Maryland. And, proof that the business owner was ‘current on their student loans was needed. Not a problem, I could easily rectify those items but … those items weren’t in the application nor on the checklist. No worries, I resubmitted the application and once again I didn’t have to wait long. My application was rejected yet again.
Now the stakes were even higher. This last reviewer asked for even more documentation: (1) proof that all Federal taxes had been paid. Hmm, that wasn’t requested in the application either (2) a statement explaining why the Prime Contract to which I supported had a different NAICS code than my employers NAICS code. Perhaps because the contract provided a number of services not just the one service my employer provided. And the list continued. A resume listed the actual client as my place of business which raised a red flag. Providing three (3) years of tax returns and accompanying W-2s didn’t allay their fears. They were requesting that I provide invoices along with a statement from the Prime that my company did indeed provide those services. And the list went on and on.
There were several requests for additional documents; but these items were never mentioned nor referenced in the application or accompanying guidance. I checked the website again, it did look like it was being updated but the application process had not changed at all. The checklist and guides were now ‘graphically enhanced’ but the information along with the actual application remained the same. Yes, I’d have to upload the more recent balance sheet as another four weeks has ticked by but I wasn’t worried, I got this.
However, there was one snafu.
Since these requests seemed to be outside the scope of the original application, there was no apparent place to include this additional required documentation. It couldn’t be mailed in, all information was to be uploaded. But where? Most questions were radio buttons for ‘Yes’ or ‘No’ and not all sections had a feature to upload supporting documentation. That’s fine, I would contact them and inquire about where or how to add this additional documentation.
Here’s where things got real interesting… I COULD NOT GET ANY ASSISTANCE. Emails to firstname.lastname@example.org, email@example.com, OCEActions@sba.gov, and firstname.lastname@example.org didn’t provide any useful information. I did receive a confirmation regarding my ticket. And I’ve even had someone follow up to ask me if the ticket could be closed. Closed, I thought? No one had responded. And those that did respond, were sent weeks later but none were helpful. Here are a few of the responses I received: “It’s against policy to reply to questions regarding a specific application.” “Did you look at the FAQ?” “Did you contact your regional office?” “Just put it in the Personal Section.” ASIDE: There was no Personal Section. I even reached out to two (2) regional SBA offices to which my calls were never returned. The one time, a real, live person actually answered, they assured me someone would return my call and promptly hung up. Except they hadn’t asked for my contact information.
Here’s what I learned
- Maybe the 8(a) is a mythical creature – fact or fiction.
- The 8(a) isn’t just for any small business. Oversight, along with specific accountant practices, restricting all business to a single NAICS code could prove to be arduous and overbearing over time.
- Maybe it’s best to anticipate ‘other documentation’ to prove or support your responses, and include it in the application even when it’s not specifically requested.
- Business Owners, you must be current on both corporate and personal taxes as well as student loans. Criminal activity may be ok.
- Consult with other business owners who were successful, they are the real unicorns.
- When in doubt, outsource.
In preparing for this post, I consulted with google yet again and to my surprise, I discovered a relevant document from December 2020! It must have been posted recently as it wasn’t available during my initial draft of this here post. The report, entitled SBA’s “8(a) Program”: Overview, History, and Current Issues, updated December 17, 2020., is interesting and comprehensive. It’s lengthy but it lays out some very importation information regarding the entire 8(a) Program. Of particular interest were four recommendations on streamlining the program’s application process. I held my breath while I read it aloud.
1. Although regulatory guidance provides the SBA approximately 90 days to process a complete application, several firms endured delays that extended anywhere from six months to several years.
2. Nearly three-quarters of 8(a) applications are initially rejected due to incomplete or missing documentation.
3. Less than half of complete applications are approved.
4. The SBA’s low rate of approval has led to an industry of third party firms that charge 8(a) applicants from $5,000 to $75,000 to prepare the application and respond to the SBA’s processors. The SBA argued that some of these firms are taking advantage of applicants, and regardless of the amount paid, there is no guaranteed approval because the approval rate is consistently less than 50%”
If I needed some affirmation, there it was in print for all to read. That was my experience during this entire process. Enlightening for sure.
Outsource! Is the 8(a) fact or fiction? I don’t know but I’ll keep you posted.
ASIDE: This report coupled with some major changes to the sba.gov website could indicate that changes are on the horizon. The timing is most appropriate. Those updates to the website could have already been planned or perhaps it was fall-out over the SBA’s handling of the Paycheck Protection Program (PPP) during the pandemic. It wasn’t too long ago, that the SBA was in the news regarding how the PPP was being managed or how they attempted to withhold names of PPP participants.