Changing for the Better?

For the first time in several years, the Small Business Administration has conducted a comprehensive review of its 8(a) program and will announce regulation changes this summer. Created to help small, economically disadvantaged firms grow their businesses and access government contracting opportunities, the program has frequently come under fire for being inadequate and out of touch with current economic realities.

SBA is proposing to strengthen the Mentor-Protégé program by requiring that 8(a) firms receive business development assistance and perform at least 40%

of the work on joint-venture projects. It also would prohibit mentor firms from acting as subcontractors to protégés in joint ventures. The goal is to ensure that small firms truly benefit from the relationship and aren’t taken advantage of to help large firms win contracts.
Size standards would be increased for 71 different types of businesses, mostly retail, trade, hospitality, and food services. This purportedly would open up the program to thousands more businesses.

SBA also proposes to require that 8(a) firms

adhere to the size limit for their primary industry or face early graduation from the program if they exceed the limit for two consecutive years. Other proposed changes would clarify income requirements used to determine program eligibility. IRAs would be excluded from net worth calculations. Gross income and total assets could not exceed $200,000 and $3 million, respectively, to enter the program or $250,000 and $4 million to remain in it. “What we’re doing is clarifying, and amending  our regulations to strengthen the 8(a) Business Development Program,” explained SBA deputy associate administrator Calvin Jenkins.

Black business owners and advocates applaud SBA’s efforts, but lament that they don’t go far enough. “They need to focus on how to grow larger minority businesses because changing demographics will require a strong minority business class,” says Ralph G. Moore, president of Ralph G. Moore & Associates, a Chicago-based management consulting firm. Moore, a graduate of the 8(a) program, believes the agency has put more focus on accountability and policing than on building stronger businesses. “The limitations government continues to place on minority businesses, such as net worth and size standard limitations, are counterproductive to growing a larger pool of viable minority businesses.” He’s not alone. According to National Minority Supplier Development Council Vice President Steve Sims, the proposed changes are “useful and constructive, but don’t get at the heart of the major issues that impede or restrict minority business growth.”

This article originally appeared in the March 2010 issue of Black Enteprise magazine.