SBA 8 (a) Fact Sheet
What’s the purpose of the 8(a) program?
Congress established the Small Business Administration’s 8(a) program to help small disadvantaged businesses compete in the American economy and access the Federal procurement market. The program is aimed at businesses “owned and controlled by socially and economically disadvantaged individuals.”
SBA offers these businesses a range of development resources, such as marketing, managerial, technical, and financial and procurement assistance. The 8(a) program makes it possible for small businesses to seek government contracts on a negotiated or limited competition, basis, allowing SBA 8 (a)-certified companies to gain entry into the marketplace.
The 8(a) program helps emerging disadvantaged businesses by offering assistance to eligible businesses for a limited time -nine years – unless the company grows substantially and can compete on an even playing field. After nine years, businesses “graduate” from the program. So do businesses whose success enables them to outgrow the size limits.
Why do Alaska Native Corporations have SBA 8 (a) status?
The 8(a) program helps disadvantaged businesses owned—not just by individuals—but also by Federally recognized Native American groups:
- Native American tribes
- Alaskan Native Corporations (ANCs)
- Organizations of Native Hawaiians
It is for this reason that Alaska Native Corporations have a broader purpose than normal American corporations. ANCs are expected, through business, to improve the lives of their owners by successfully managing thousands of acres of land and creating economic opportunities.
As an Alaska Native Corporation (ANC), the money that NANA makes has a direct positive impact on the lives of the more than 12,500 Iñupiat of Northwestern Alaska who own the company. When companies do business with NANA, they’re doing more than ensuring the success of their next business venture – they’re helping to create training and educational opportunities for NANA villages, preserving an important American culture, investing in NANA communities and ensuring the future of a people.
Why are ANCs and other Native American groups in the 8(a) program?
Native Americans are among the poorest and most under-employed groups in our society, with many still living in third world conditions. Among American Indians and Native Alaskans, the poverty rate is over 25%. Some 27% have no health insurance.
The Alaska Native Claims Settlement Act, commonly abbreviated ANCSA, was signed into law by President Richard M. Nixon on December 18, 1971, and is the largest land claims settlement in United States history. The intent of ANSCA was to resolve the long-standing issues surrounding indigenous land claims in Alaska, as well as to stimulate economic development throughout Alaska.
The settlement extinguished Alaska Native claims to the land by transferring titles to twelve Alaska Native regional corporations and over 200 local village corporations. A thirteenth regional corporation was later created for Alaska Natives who no longer resided in Alaska.
Alaska Native corporations exist solely to provide for their shareholders. NANA is like the traditional Inupiat hunter, working hard to provide for the community.
How does the 8(a) program differ for ANCs as opposed to other groups?
In 1986, legislation passed that allowed ANCs to participate in the SBA 8(a) program. Since then, Congress has extended special procurement advantages to 8(a) ANCs including the following:
- ANCs have the ability to negotiate contracts without restriction on the size of the contract
- ANCs can own more than one 8(a) business.
Why did Congress put in place these special ANC provisions?
Most 8(a) business owners are individuals or families. For these companies, the 8(a) program offers mentoring and other assistance. For these businesses, the program limits the size of negotiated Federal contracts to $3 million.
The extended procurement advantages awarded to ANCs were made for the following reasons:
- ANC’s do not represent a single person, a single family or a small group of disadvantaged individuals, but hundreds or thousands of Alaska Native owners. NANA represents more than 12,500 Iñupiat of Northwest Alaska.
- With a $3 million contract limit, benefits to individual Alaska Native shareholders would be disproportionately small and would not allow the ANCs to fulfill the mission they were created for – to create an economically viable stream of revenue for future generations of Alaska Native peoples.
Here’s a good example of why ANCs have been permitted to participate in the SBA 8 (a) program in a different way:
On a $3 million contract, a single-owner 8(a) business produced a net income of 5%; the owner would receive $150,000 profit. However, if the business was created for and legally bound to distribute that $150,000 to its 7,000 owners, each owner would only receive $21.43. As you can see, that does not fulfill the purpose of ANSCA.
Furthermore, most ANCs mature within the nine-year 8(a) timeframe, growing large and stable enough to handle large contracts and graduate from the program. These businesses tend to grow larger, faster than individually owned 8(a) s. Many are well managed and better financed. The most successful have been able to build the managerial and financial stability to provide a large range of quality services to the government. For these reasons, ANCs and other Native American and Hawaiian groups are allowed to own more than one 8 (a) businesses. Typically, these companies have the management capacity to oversee multiple 8(a) subsidiaries. The ability to develop multiple businesses with 8 (a) help offers a large ownership group the possibility of providing its shareholders with a reasonable rate of return.
What has including ANCs in the SBA 8 (a) Program achieved?
The program has been very successful for ANCs and for the Federal Government.
- The program is graduating a number of substantial, well-financed and well managed Alaska Native companies that continue to contribute to the economic development of their disadvantaged populations and communities.
- Native American owners benefit from their business’ participation in the program. Their 8(a)-assisted businesses are contributing profits, jobs and much-needed business know-how to disadvantaged communities.
- For disadvantaged Alaska Native populations, increased economic self-sufficiency reduces dependency on the Federal Government for welfare-type assistance.
Alaska Native Corporations are making their own way in the world for their communities.