SBA issues final rules on 8(a) ushers in new generation for successful program
March 11, 2011
The Small Business Administration (SBA) issued new rules that significantly changes the Native 8(a) program, addresses criticisms raised by the media and some members of Congress and improves transparency.
The rules makes major changes to SBA rules governing joint ventures; the mentor/protégé program; the non-manufacturer rules; participation of Tribes, Alaska Native Corporations (ANCs) and Native Hawaiian Organizations in the 8(a) program; size issues; economic disadvantage and other eligibility issues.
It also makes some technical changes to the regulations and implements several of SBA’s current policies that are not currently expressed in its regulations.
Sen. Lisa Murkowski issued a statement supporting the regulations, which go into effect March 14.
“The SBA’s revision of its regulations governing the 8(a) Business Development program, the first significant revision of these rules in a decade, is thoughtful and comprehensive,” the senator said. “It bears noting that the final rules characterize the 8(a) program as ‘a much-needed and beneficial program,’ adding that ‘the tribal and Alaska Native Corporation component of the program serves a valuable economic and community development purpose in addition to its business development purpose.’”
The new rules require firms owned by ANCs, Tribes and Native Hawaiian to report the financial benefits flowing back to their communities. Several recent news reports and Congressional investigations have questioned whether the profits from ANCs are reaching disadvantaged Native Alaskans, a charge ANCs vigorously challenge.
“We welcome this requirement because the story we have to tell is one of hope and success,” said Will Anderson, president and CEO of Koniag, Inc. As a direct result of participation in the 8(a) program, ANCs have been able to provide a wide array of benefits to Shareholders and descendants, including college scholarships, apprenticeships, internships and cultural preservation programs.
The final rules make several significant changes to the rules guiding joint ventures, which are created when a small business partners with a non-8(a) firm, typically a larger business. Some of the joint ventures have led to media charges that “small, inexperienced companies handle giant government contracts.”
“The truth is that joint venturing opens the door of economic opportunity for dozens of disadvantaged companies from areas where opportunities are few and challenges are many. This provision gives these companies the toehold they need to compete for meaningful contracts, gain the experience they need to develop the skills that allows them to go it alone, develop their shareholder skills – and provide good value to the American taxpayer,” said Anderson.
Under the new rules, the 8(a) partner of the joint venture must now perform at least 40 percent of the work, including those awarded through a mentor-protégée agreement. The previous statutory language required only that the small business perform a “significant portion” of the work.
“We see this as a positive because it forces us to develop the skills we need to stand on our own,” said Anderson.
Joint ventures awarded to an 8(a) firm also will not be allowed to win more than three contracts during a two-year period, and these entities cannot subcontract work to a non-8(a) joint venture partner. Plus, mentors who do not provide assistance to their protégée could face consequences ranging from stop-work orders to debarment.
Other proposed changes limit the type and amount of fees an agent or representative can charge for assisting an 8(a) firm (the rules prohibits unreasonable fees as well as arrangements in which the fees are a percentage of the contract award or revenue). This addresses one of the most common criticisms leveled against ANCs.
“The really good news is that the 8(a) program is giving ANCs the ability to train a new workforce who will be working in our subsidiaries and contributing to our success,” said Robin Kornfield, vice president of communications for NANA Development Corporation (NDC).
Media and Congressional reports also raised issues of shareholder hire, overlooking shareholder hire preference policies adopted by every ANC. “We already devote considerable resources to find – and train – every shareholder who wants a job,” said Kornfield. “A big issue is that most Alaska-based shareholders want to stay in Alaska and many of our jobs are located elsewhere.”
Another area of contention is SBA oversight. ANCs, Tribes and Native Hawaiian Organizations support increased funding for SBA to add additional staff.
“Through public meetings held in cities throughout the country, SBA gained valuable input from members of the small business community on ways to strengthen the program to provide the best opportunities for eligible firms, ” said SBA Administrator Karen Mills.
For more information visit Native 8(a) Works.