The Small Business Administration’s (SBA’s) 8(a) Business Development program is a great way of assisting small and disadvantaged businesses (SDBs). In fact, more than $71 billion in Federal Contracts are available to 8(a) businesses each year. And yet very few businesses have even heard of 8(a) contracts, with less than 9,000 of an estimated 32.6 million businesses in the United States being certified. So what’s the catch to this lucrative and little-known program and is it something that you and your business should consider?
What is the 8(a) certification program?
First, we need to have a better understanding of what this certification means. The 8(a) program is designed to specifically help socially and economically disadvantaged businesses by giving them access to several key (and profitable) benefits.
It also helps aspiring entrepreneurs and business owners who meet the criteria to get a foothold in government contracting and the economic mainstream of American society. The goal is businesses that graduate from the 8(a) program will be able to participate and thrive in a competitive business environment and contribute to the economy.
Monetary benefits of 8(a) certification
The government’s aim with 8(a) government contracts is to award at least 5% of all federal contracting dollars to registered businesses in the program each year. The foundation of this is through set-aside and sole-source contracts that 8(a) businesses can compete for, many of which are reserved only for 8(a) businesses.
Small businesses that provide products and/or services can win contracts up to a ceiling of $4 million, while those who are manufacturers can receive contracts up to $6.5 million. However, while these huge contracts are uncommon, smaller contracts in the $25-50K range can still be monumental boosts for small businesses.
Developmental benefits of 8(a) certification
In addition to the monetary benefits of contracts given to 8(a) businesses, the program also provides services such as mentoring, training, procurement assistance, and more. This is to further help companies not only win contracts and improve their financial situation but also to develop and nurture them. One example of this is the SBA’s Mentor-Protégé Program, which allows 8(a) businesses to form joint ventures with more established companies and learn from them.
This developmental support that the program brings to disadvantaged businesses is arguably more impactful and longer-lasting than the contracts available. Overlooking this part of the program is also why 8(a) certification can often be disregarded by those who are eligible, but should be taken advantage of more often.
How long does 8(a) certification last?
An 8(a) business can keep its status for nine years, but most companies lose it much earlier by outgrowing the size and disadvantaged requirements of the program discussed below. This is also to facilitate the goal of the program to prepare and then send businesses into the marketplace, allowing other small businesses to take their place in the program and continue the cycle.
8(a) certification requirements & checklist
While there are many appealing benefits of the 8(a) program, there are also very specific certification requirements that applicants must meet and submit evidence of. They can be confusing or difficult to organize on your own, so we’ve compiled a checklist to help you better understand whether this program is a viable path for your business.
Business size
The business applying for 8(a) certification must meet the SBA’s standards for being a small business. If you aren’t sure whether you meet this requirement, you can use this tool to determine your eligibility.
Ownership
51% of the business must be owned by a U.S. citizen (or citizens), but they also have to be both socially and economically disadvantaged.
Socially disadvantaged
As outlined by the Small Business Act, people presumed to be socially disadvantaged by factors beyond their control include:
- African-Americans
- Hispanic Americans
- Asian Pacific Americans
- Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians)
- Subcontinent Asian Americans
If you don’t fall into one of these groups, disadvantage can also be proven due to race, ethnic origin, gender, physical handicap, long-term residence isolated from the mainstream of American society, etc.
Economically disadvantaged
The owner of an SBA 8(a) company must also meet the following certification requirements about their income and assets value:
- Personal net worth of $850K or less
- An average adjusted gross income of $400K or less over three years
- $6.5 million or less in assets (both personal and company combined)
Demonstrate potential
For a business to demonstrate potential, the common measurement used is simply being in business for two years or longer. If this can’t be met, a two-year waiver may also be applied for and submitted to continue with an 8(a) certification.
Good moral character
While this is a vague requirement, this primarily pertains to not having criminal, unlawful, or questionable activities that you have been involved in. It also goes hand in hand with the “demonstrating potential” requirement and showing the government that your business will perform on the contracts received. Permanent bars to good moral character include murder, aggravated felonies, and other severe activities.
First time receiving 8(a) certification
The last requirement on our checklist is simply that you or an immediate family member haven’t received an SBA 8(a) certification before, as the program is intended for one use only. Those who are considered immediate family members are:
- Father
- Mother
- Husband
- Wife
- Son
- Daughter
- Brother
- Sister
- Grandfather
- Grandmother
- Grandson
- Granddaughter
- Father-in-law
- Mother-in-law
How to find 8(a) contracts
While being an 8(a) business does mean that some government contracts are easier to win and that many of them have much easier application processes, it doesn’t mean that your phone is going to be ringing with new opportunities every day. You will still have to look for them yourself using tools such as SAM.gov. Procurement Technical Assistance Centers (PTAC) are also invaluable for the resources and advice they provide businesses with and you can find your nearest one here.
Reap the benefits without the headaches
But before you can start looking for 8(a) government contracts, you’ll need to go through the process of getting certified by the SBA. In addition to that, you also need to complete your System for Award Management (SAM) registration. Unfortunately, both of these can take hours, weeks, or even months and have frustrating complexities that make them difficult to get through without pulling your hair out. That’s the catch we mentioned at the beginning — it’s a difficult and rigorous certification that most applicants end up dropping out of.
That’s where we come in — we’re an independent consulting firm dedicated to helping you navigate the Federal marketplace. Our specialists take care of all the intricate details of registration, certification, and acquiring contracts for your business so you can focus on running it.
