What is it?
The 8(a) Business Development program was founded to level the playing field for businesses owned by individuals who have been socially and economically disadvantaged. If you are a small business owner who fits into this category, this is an asset that you cannot miss out on. It can put your business first in line for getting awarded contracts and give you access to the Mentor-Protégé Program. On this page we're going to explain:
- The Benefits of the 8(a) Program
- Qualifications for the Program
- 8(a) Program Length
- Third Party Certification
8(a) Program Benefits
Your 8(a) certification lasts 9 years and you can earn up to $100 million or five times your SBA size limit. Most 8(a) vendors reach the cap.
As a government contractor with an 8(a) certification, you will get preferential treatment in getting awarded. There will be solicitations with the 8(a) designation in which you, along with other 8(a) businesses, will have exclusive bidding rights. For 8(a) exclusive opportunities, you could be earning up to $4 million for goods and $6.5 million for manufacturing. Sometimes you might be the only business that bids on the opportunity.
What’s also noteworthy is that contracting officers have quotas to meet for their set-aside awards. Even if the opportunity doesn’t have a declared set-aside, you will still have a competitive advantage. The government’s goal is to award at least 5% of all federal contracting dollars (roughly $25 billion) toward small disadvantaged businesses. This gives contracting officers the incentive to work your business since they have a quota to meet.
Here's a breakdown of the numbers:
- Total Number of 8(a) Businesses in FY 2018: 6,139
- Total Amount Earned in Contracts by 8(a) Businesses: $22,706,754,593
- Average $$ Awarded for 8(a) contracts: $3,698,770
8(a) is called a business development program because the set-aside is only one part of it. If your entity is enrolled, you can also participate in the Mentor-Protégé Program. This designates a mentor business to help yours develop and grow. It includes:
- Technical and management assistance
- Financing through equity investments and/or loans
- Trade education
- Assistance with government contracting
- Forming joint ventures to compete together for small business set-aside contracts
First, you're going to want to check the Small Business Administration's (SBA) size standards. No matter what you do, there's going to be a North American Industry Classification System (NAICS) code associated with your business. The SBA determines your size by your annual receipts or human capital.
The NAICS code for Cutting Tool and Machine Tool Accessory Manufacturing is 333515. To be considered a small business, you can have no more than 500 employees.
The next biggest factor pertains to the business owner's identity. The business applying for the 8(a) program has to be at least 51% owned by a socially and economically disadvantaged individual. They also have to be part of the business’s daily operation and long-term planning. So what does it mean to be socially and economically disadvantaged? It’s officially designated in FAR §124.103 and §124.104.
In general, FAR describes being socially disadvantaged as:
“. . . individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control.”
Designated groups who have experienced social disadvantages due to prejudice and cultural bias in the United States include:
- Black Americans
- Hispanic Americans
- Native Americans
- Asian Pacific Americans
- Subcontinent Asian Americans
- Members of groups designated from time-to-time by the SBA
There can also be non-members of these designated groups who have faced social disadvantages in the United States. Factors for this discrimination can include:
- Physical handicaps
- Long-term residence in an environment isolated from the mainstream of American society
- Any quality outside of your control that has been targeted for prejudice and discrimination
The second part of this qualification is being economically disadvantaged. FAR defines this as:
“. . . 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 who are not socially disadvantaged.”
So in order to be considered economically disadvantaged, you have to fit into the socially disadvantaged category. There also has to be a major disparity of credit or capital between your business and ones owned by non-socially disadvantaged individuals.
Other factors that need to be taken into account for the 8(a) Business Program have to do with your own income, net worth, and value in personal assets. Here’s the rundown of these requirements:
- Owner’s personal net worth is $250,000 or less
- Their adjusted gross income for three years is $250,000 or less
- Owner’s assets have to be worth $4 million or less
8(a) Program Length
Before you enter the program, you should know its limits. The first is the total amount you can earn from sole-source contracts. As an 8(a) business, you can only earn a total of $100 million or five times your SBA size limit (if it applies to standard given to your NAICS code). The second is how long you can be enrolled in the program.
The longest you can be certified as an 8(a) business is 9 years.
Think of the program as a type of ramp to launch your business into a thriving and independent force. The first four years are solely meant for development. This is when you're going to learn the tools of the trade through the Mentor-Protégé Program. It's when you start to get well-versed in the government contracting process. Then, in the last five years, you're going to loosen up your training wheels and work more and more independently.
Although your graduation seems far down the line, you're going to want to think of these things ahead of time:
- Developing a network for future joint-ventures or subcontracting opportunities
- Finding your niche in the federal marketplace
- Making sure your streams of revenue are diversified (not too dependent on federal contracts)
Get Certified with USFCR
The 8(a) Business Development Program, like other set-asides, has many bases that a business owner needs to cover in order to get certified. It can be time-consuming and any mistakes could delay you from its many benefits. So why not save yourself the trouble, and get certified properly with US Federal Contractor Registration? We have plenty of clients like you who we’ve helped get started and succeed in the federal marketplace.