8(a) PROGRAM INFORMATIONAL BROCHURE

INTRODUCTION

This publication provides basic information concerning the 8(a) program of the Small Business Administration (SBA), including benefits of participation, eligibility requirements, the application and approval process, and program completion and termination. Specifically, this publication answers these questions:

What is the 8(a) program?

What are the benefits of participation in the program?

What are the eligibility requirements for participation?

What is the procedure for applying for the program?

How are applications evaluated?

How long is a business allowed to participate in the program?

This publication is not intended to be a complete and comprehensive description of the operational aspects of the 8(a) program. It is intended to assist you to determine whether you are eligible for and might benefit from participation in the program and to describe the application process.

WHAT IS THE 8(a) PROGRAM?

The 8(a) program is SBA's effort to promote equal access for socially and economically disadvantaged individuals to participate in the business sector of the nation's economy. Socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. Individuals not members of these minority groups who can demonstrate that they are socially and economically disadvantaged also may be eligible (see "Eligibility" for expanded definition).

SBA provides assistance to all small businesses. Socially and economically disadvantaged individuals represent a significant percentage of U.S. citizens yet account for a disproportionately small percentage of total U.S. business revenues. The program recognizes the historical lack of equal access that minorities and other disadvantaged individuals have had to the resources needed to develop their small businesses. The program assists 8(a) approved firms to participate in the business sector and to become independently competitive in the marketplace.

Following are various types of assistance available from the program.

A. BUSINESS DEVELOPMENT ASSISTANCE

SBA may provide participating firms with procurement, marketing, financial, management or other technical assistance.

Some of the resources available include:

Counseling resources

SBA financial assistance

Training and publications

Surety bond guarantees

B. GOVERNMENT CONTRACT OPPORTUNITIES

SBA may enter into prime contracts with departments and agencies of the U.S. government to provide goods and services and subcontract the actual performance on the contracts to 8(a) approved firms.

C. MAJOR BUSINESS SUPPORT

To assist 8(a) firms to develop self-sufficiency and successfully compete in the commercial market, SBA provides a series of marketing tools to help participants obtain the support of major businesses.

BENEFITS OF 8(a) PARTICIPATION

A. BUSINESS DEVELOPMENT ASSISTANCE

A Business Opportunity Specialist (BOS) will be assigned to each firm that participates in the 8(a) program. This person is responsible for providing the 8(a) firm with access to assistance that can help the firm fulfill its business goals. The BOS can provide access to assistance in the following areas:

Procurement

Marketing

Financial

Management

Surety bonding

SBA’s major counseling resource that may be used to analyze the operations of the 8(a) business and to recommend solutions to problems is the Service Corps of Retired Executives (SCORE). Many other outside resources can also be identified to assist the 8(a) firm.

A Surety bond is often a prerequisite for government and private sector contracts. This is particularly true when the contract involves construction. SBA can assist 8(a) firms to obtain surety bonding for contracts that do not exceed $1,250,000. SBA is authorized, when appropriate circumstances occur, to guarantee as much as 90 percent of losses suffered by a surety resulting from breach of terms of a bond by an 8(a) firm.

B. GOVERNMENT CONTRACT OPPORTUNITIES

SBA undertakes an extensive effort to provide contracting opportunities to participating businesses. SBA maintains close contact with federal agencies to keep government personnel informed of the 8(a) program goals and procedures and to request that contract opportunities be reserved for the 8(a) program.

Firms approved for 8(a) participation are expected to conduct independent marketing activities for contract opportunities in the public and private sectors. When an 8(a) firm soliciting business with U.S. government departments and agencies identifies contractual opportunities, it may attempt to convince the department or agency that it is qualified to undertake the work and that the firm's name should be submitted to SBA as the recommended contractor for 8(a) subcontract performance.

SBA cannot guarantee any specific amount of government business for each 8(a) firm. However, SBA officials do maintain data on government requirement trends to anticipate the nature and volume of business opportunities.

C. MAJOR BUSINESS SUPPORT

The goal of the 8(a) program is to support and assist small businesses to develop to the point that they can compete successfully in the marketplace without government assistance.

To reach this goal, SBA encourages and assists 8(a) businesses by referral or other methods to enter into contracts with major businesses.

1. ProNet: Each 8(a) business is registered in ProNet, which is used by major business and government procurement officials to identify small businesses capable of providing required goods and services.

2. Direct Marketing: SBA undertakes activities designed to promote business relationships between 8(a) businesses and major businesses. These activities include (1) establishing preliminary contact with major businesses on behalf of the 8(a) firm and (2) providing necessary follow-up assistance to the 8(a) firm in the development of this relationship.

3. Indirect Marketing Through SBA Specialists in Contact with Major Business: SBA officials maintain contact with representatives of major businesses and inform these representatives of the capabilities of the 8(a) businesses in their areas.

4. Self-Marketing with Support and Guidance from SBA Specialists: SBA will encourage 8(a) firms to market their products or services directly with major businesses. The SBA Business Opportunity Specialist can arrange for counseling on effective sales presentations and in any management or technical area that would enhance the firm's ability to market the product or service.

REQUIREMENTS FOR 8(a) PROGRAM PARTICIPATION

A. BASIC REQUIREMENTS

There are four basic considerations that determine admission to the 8(a) Program:

1. Ability of firm's owners and management to meet individual eligibility requirements.

2. Ability of firm to meet business eligibility requirements.

3. Nature and structure of the business.

4. Ability to perform on a significant portion of contracts awarded with the business's own labor forces, and the firm's potential for success.

B. INDIVIDUAL ELIGIBILITY

To be eligible for admission to the 8(a) program, a business must be owned, controlled and operated by one or more persons who are:

· Socially disadvantaged · Economically disadvantaged

· Citizens of the United States (Aliens, including permanent residents, are excluded)

· Able to meet other eligibility requirements

1. Definition of "Socially Disadvantaged": Individuals considered to be socially disadvantaged must meet one of the following definitions:

a. People who have been subjected to racial or ethnic prejudice or cultural bias because of their identification as a member of certain groups without regard to their individual qualities. This includes Black Americans, Hispanic Americans, Native Americans (including American Indians, Eskimos, Aleuts and Native Hawaiians), Asian Pacific Americans, (persons with origins from Japan, China, Philippines, Vietnam, Korea, Samoa, Guam, U.S. Territory of the Pacific Islands, Northern Marianas, Laos, Cambodia, Taiwan, Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the Marshall Islands, Micronesia, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, Nauru), Subcontinent Asian Americans (India, Pakistan, Bangladesh, Sri Lanka, Bhutan, Maldives Islands, Nepal) and members of other minority groups designated by SBA.

A person does not qualify automatically as socially disadvantaged because he belongs to one of the named groups. SBA may challenge an individual's claim of social disadvantage if there is substantial evidence that the individual has not experienced or has overcome the traditional discriminatory social attitudes, racial prejudice and stereotyping that have created serious obstacles for many members of these groups when they attempt to obtain equal access to financing, markets and resources necessary to establish, maintain or expand small businesses.

2. Definition of "Economically Disadvantaged": To be eligible for participation in the 8(a) program, the applicant must be economically disadvantaged. Individuals who are considered economically disadvantaged must meet the following definition:

Socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities compared with others in the same line of business and competitive market area who are not socially disadvantaged.

To determine whether a person has suffered diminished credit and capital opportunities, SBA will consider the following:

Personal and business assets

Personal and business net worth

Personal and business income and profits

Success in obtaining adequate financing

Success in obtaining adequate bonding

Success in obtaining outside equity credit

Other economic disadvantages

The 8(a) program is not intended to benefit individuals who have accumulated wealth and have unlimited growth potential, who have not had difficulties obtaining equal access to financing, market and resources, and who otherwise can provide for themselves the type of assistance available through the 8(a) program.

Individuals whose personal net worth exceeds $250,000, excluding the individual's ownership interest in the applicant concern and the equity in their primary residence, will not be considered economically disadvantaged for purposes of 8(a) program entry. This determination is made on the individuals and not jointly if spouses are involved. Separate personal financial statements on spouses are required.

C. OWNERSHIP

1. Considerations of Ownership

of each class of voting stock and at least 51 percent of the combined total of all classes of stock (outstanding shares). They must also receive at least 51 percent of dividends.

b. In the case of a partnership, the person or persons upon whom eligibility is based must own unconditionally at least 51 percent of the partnership interest and must receive at least 51 percent of the benefits of ownership.

c. In the case of a proprietorship, the person upon whom eligibility is based must own 100 percent of the business.

2. Ownership by Non-disadvantaged Individuals and Organizations: Non-disadvantaged individuals are not excluded from participation in 8(a) business ownership. However, there are basic rules to insure that non-disadvantaged individuals do not have primary ownership or control of the business and that the 8(a) program benefits those for whom it is intended. These rules are as follows:

a. Non-disadvantaged individuals may have part ownership, not to exceed 49 percent, in an 8(a) business, provided the individuals, their spouses or immediate family members are not:

(1) Former employers of the disadvantaged owners without prior approval of SBA

(2) Be part of management and affiliated or associated with other businesses operating the same or similar types of businesses (more than 10% ownership)

(3) Be part of management and have other interests in any other 8(a) business of more than 10%

(4) In a position to exercise negative control over the business

(5) Receiving compensation for personal services from business concern as director or employee which is deemed to be excessive by SBA

b. More than 10% ownership in an 8(a) business by concerns engaged in the same or a similar line of business is prohibited. Except that a former 8(a) firm may have ownership up to 20%.

c. One 8(a) concern may not hold more than 10% interest in any other 8(a) concern.

d. A business applying for admission in the 8(a) program may be owned in part by certain types of organizations, rather than individuals, subject to the following qualifications:

(1) Nonprofit organizations: Nonprofit organizations may assist a business to participate in the 8(a) program but may not own a controlling interest in or exercise management control of an otherwise eligible 8(a) business. (See exception below, Investment Corporations.)

(2) Investment corporations: State, local and community development corporations, MESBICs and SBICs, profit or nonprofit, may own as much as 49 percent of the interest or voting stock in a business applying for 8(a) admission.

e. An ownership interest held by another concern cannot be used toward establishing 51% ownership by disadvantaged individuals. Therefore, a concern which is a wholly-owned subsidiary of another concern is not eligible.

f. A concern which is owned in trust on behalf of a beneficiary is not eligible.

3. Change in Ownership: Prior to any sale, exchange or transfer of ownership of a participating 8(a) business, eligibility of the new owner or owners is subject to SBA approval.

If the sale, exchange or transfer is executed without prior SBA approval, the business's participation in the 8(a) program will be terminated.

D. CONTROL & MANAGEMENT

1. Full-Time Involvement by Disadvantaged Owner: The individuals upon whom eligibility is based must be engaged full time in the daily management and operation of the business.

a. The individuals must have managerial or technical experience and competency directly related to the concern's primary industry.

b. The individuals must not be involved in outside employment or have other active business interests which conflict with the management of the business.

c. The individuals must not be "absentee" owners.

d. At least one of the disadvantaged individuals upon whom eligibility is based must be the full-time manager and hold the position of President or Chief Executive Officer.

2. Control by Non-disadvantaged Individuals: An application for 8(a) participation will not be approved if it is determined that non-disadvantaged individuals are in control or have the power to control the daily business operation. Rules concerning control or the power to control include the following:

a. A firm will not be accepted for participation in the 8(a) program if it is determined that the board of directors is controlled by non-disadvantaged individuals.

b. Part ownership by non-disadvantaged individuals is not prohibited. Control of the business's management and operations, however, is prohibited.

c. An 8(a) application will not be accepted if any arrangement or situation exists involving a disadvantaged 8(a) applicant and a non-disadvantaged individual involving loans, apparent "straw men" (fronts), family relationships or any other circumstances that, in the judgment of SBA, intend to circumvent the letter of the law or the purpose of the program by placing any degree of control in a non-disadvantaged individual.

d. Property, equipment, supplies, services, financial assistance or other resources other than their own personal services which are sold, rented or donated to an 8(a) concern by non-disadvantaged individuals must be reported to SBA. Compensation for these services must be limited to reasonable wages, bonuses and directors' fees.

3. Ownership by more than one disadvantaged owner is permissible so long as the ownership portion of the disadvantaged individuals who control the management and daily operations of the applicant concern is a greater percentage of the business entity than any other owners. The total percentage of ownership of all the disadvantaged managers combined must be at least 51 percent.

4. The disadvantaged individual(s) upon whom eligibility is based must also control the Board of Directors of the applicant concern, either in actual numbers or through voting rights.

5. For a partnership, the decision making process must be controlled by the socially and economically disadvantaged partner(s) upon whom eligibility is based.

6. Individuals who are not socially and economically disadvantaged may be involved in the management of an applicant concern, and may be stockholders, officers, directors, or employees of such concern. However, such individuals shall not exercise actual control or have the power to control the operations of the applicant or section 8(a) business concern.

E. OTHER INDIVIDUAL ELIGIBILITY REQUIREMENTS

In addition to being a socially and economically disadvantaged citizen of the United States, applicant must meet the following 8(a) program eligibility requirements.

1. Management and practical experience: An applicant must demonstrate:

a. Present ability to manage the business,

b. Adequate business experience, abilities and/or educational background directly related to the applicant concern's business activity.

c. Potential for Success.

SBA will make this determination based on the review of personal resumes and, if necessary, independent verification of the applicant's education, skills and past experience.

An applicant is not required to have expertise in all functional aspects of the business operations but should have important relevant technical or administrative skills.

If SBA determines that the lack of management and technical skills reasonably cannot be expected to be remedied by the 8(a) program or other assistance programs, the applicant will not be accepted for 8(a) program participation.

2. Good character: An applicant must be of good character. If SBA receives negative information regarding the applicant's character, no action will be taken on the application until SBA receives clearance from the Office of the SBA Inspector General.

3. Education: An applicant who has acquired a quality education will not be disqualified from consideration for the 8(a) program. A quality education, in fact, may be a prerequisite to the development of a successful business operation.

4. Employment experience: Past or present employment alone will not be used as a basis to deny admission to the 8(a) program.

5. Length of Time in Business: In order to be considered to possess the requisite "potential for success" needed to be eligible to participate in the section 8(a) program, an applicant concern must have been in business for two full years as evidenced by income tax returns.

An applicant can be considered to have demonstrated reasonable prospects for success and a waiver of this two-year period of operation may be provided, only if all the following criteria apply:

a. the individual or individuals upon whom eligibility is to be based have substantial and demonstrated business management experience;

b. the prospective Program Participant has demonstrated technical expertise to carry out its business plan with a substantial likelihood for success;

c. the prospective Program Participant has adequate capital to carry out its business plan;

d. the prospective Program Participant has a record of successful performance on contracts from governmental and non-governmental sources in the primary industry category in which the prospective Program Participant is seeking Program Certification; and

e. the prospective Program Participant has, or can demonstrate its ability to timely obtain, the personnel, facilities, equipment, and any other requirements needed to perform such contracts.

6. Going Concern: Applicant must be a going concern, being in operation with a sales history.

F. 8(a) PROGRAM BENEFITS:

The person or persons upon whom eligibility is based must be the person or persons primarily receiving the business assistance benefits provided by the program.

G. LIMITATIONS ON ELIGIBILITY

An individual's eligibility for the 8(a) program may be used only once and to qualify only one business for 8(a) participation except as noted below:

1. Immediate family members living in the same household cannot use their individual eligibility to qualify more than one business per household for 8(a) participation if the concerns are in the same or similar line of business.

2. An individual upon whom the eligibility of one business was based cannot use his or her eligibility to qualify a new business for 8(a) participation even if the old business ceased its operations or otherwise left the 8(a) program prior to the expiration of its program term.

H. APPLICANTS WHO ARE NOT ELIGIBLE

A business ordinarily will not be eligible for 8(a) program participation if a sole proprietorship, partner, officer, director or stockholder with a 10 percent or more interest in the business falls in one or more of the categories listed below. Applications for these people will be submitted to the Standards of Conduct Committee for a decision. Categories of ineligible applicants area as follows:

1. Officers or employees of the United States government, including the executive, legislative and judicial branches, and their immediate family members living in the same household.

2. Appointed consultants of the administration.

3. Investors in a licensed small business investment corporation.

4. Former employees of the United States government, for a period of two years after the employee is separated from government employment.

5. Volunteers from Service Corps of Retired Executives (SCORE).

6. Members of the SBA Advisory Council (national, regional or state), except chief executive officers or approved 8(a) program advisory panel members who serve at the request of the Office of Minority Enterprise Development or a regional or district director of SBA.

7. Applicants who are spouses or adult children living in the same household as persons in categories 1-6 above.

8. Persons or businesses that have been debarred or suspended from eligibility for award of government contracts or subcontracts for the period of debarment or suspension.

I. BUSINESS ELIGIBILITY

In addition to individual eligibility requirements, there are several requirements of the business itself. The business must:

1. A business concern's eligibility may be used only once in qualifying for 8(a) participation.

2. Qualify as a "Small Business" as Defined by SBA Rules and Regulations: There is no single definition of "small business." The size requirement varies depending on the type of operation or industry in which the business is engaged. For size requirements to qualify for SBA programs, refer to Title 13, Chapter 121, of the Code of Federal Regulations, or call your local SBA office.

3. Manufacturers and regular dealers must qualify as such in accordance with the Walsh-Healey Public Contracts Act.

4. Be a Business Organized for Profit: The business must be organized as a profit rather than a nonprofit entity. Therefore a non-profit organization is ineligible for the 8(a) program..

Nonprofit organizations may assist approved concerns to participate in the program but may now own a controlling interest in or exercise management control over an otherwise eligible 8(a) firm.

5. Brokers, Packagers and Franchises are ineligible.

APPLICATION AND APPROVAL PROCESS

A. informational session WITH SBA OFFICIAL

Any person interested in the 8(a) program must attend an informational session with an official in the SBA field office in your area. The SBA representative will provide information about the 8(a) program and explain the application process. Informational sessions are held in the Pittsburgh District Office on the last Tuesday of each month. Please call to reserve a space for your firm. Address and telephone numbers are provided below.

B. Application

Will be provided at informational session, with filing instructions.

C. Notification of Eligibility

1. If the application meets all eligibility requirements, the applicant will be notified by mail that the firm has been approved to participate in the 8(a) program.

2. If the application fails to meet eligibility requirements, the applicant will be:

a. Notified by mail that the firm is ineligible to participate in the 8(a) program and the reasons why the application was declined.

b. Given 45 days to request a reconsideration of the decision. If the application is reconsidered and declined again, the applicant must wait twelve months to reapply.

PROGRAM COMPLETION AND TERMINATION

A. PROGRAM COMPLETION

A firm's term of 8(a) program participation will be for nine (9) years. The term commences on the date of program approval. The term will consist of a developmental stage of four years and a transitional stage of five years.

B. PROGRAM TERMINATION:

At any time during a firm's term, the SBA may terminate a firm's participation in the 8(a) Program for non-compliance with program requirements and regulations.

PROGRAM RULES AND REGULATIONS: Code of Federal Regulations, 13 CFR Part 124

U.S. Small Business Administration

Pittsburgh District Office

Federal Building, 1000 Liberty Avenue, Room 1128

Pittsburgh, PA 15222

412/395-6560 FAX 395-6562

Barbara Fisher

Business Opportunity Specialist

412/395-6560, Ext 119

Yvonne E. Dowe

Business Opportunity Assistant

412/395-6560, Ext 121