Why Has Participation in 8(a) Program Declined Recently?

According to a recent article in FedScoop, there has been a recent decline in the number of companies that are participating in the Small Business Administration’s 8(a) and HUBZone set-aside programs, and the SBA is planning some targeted recruitment efforts to increase the number of companies in the programs.

That’s not necessarily all bad news, though. John Shoraka, the SBA’s associate administrator of government contracting and business development, told the publication that one of the reasons for the decline may be the improving economy.

Shoraka said that the number of companies enrolled in the programs tends to have a reverse correlation with the strength of the economy. When the economy is worse, more companies tend to participate. In addition, he said, the 8(a) Business Development Program loses between 800 and 1,000 companies per year after they “graduate” from the nine-year program. Hopefully, this means that these businesses are now on a par to compete with others without the set-asides.

We don’t find it surprising that number of applications for admission to the 8(a) program increases when there is a downturn in the economy. First, many company leaders look to the 8(a) program as a means of capturing new federal business to offset losses they may experience elsewhere. Second, some company owners who were once ineligible may find that they are suddenly eligible given the economic downturn and its impact on their personal holdings. (A disadvantaged owner’s personal net worth at time of admission to the 8(a) program may not exceed $250,000, excluding specified key assets, such as his or her equity in a primary residence or the company itself.)

Shoraka, the SBA official, says he’s particularly interested in finding companies that can qualify for the women-owned small business (WOSB) program. A very recent rule change may induce more companies to try to qualify for that program.

Effective May 7, 2013, the SBA amended its regulations to implement a new law that removed the legal limits on the dollar amount of contracts that women-owned small businesses can compete for under the WOSB program. As a result, contracting officers may now set aside contracts under the WOSB Program at any dollar level, as long as the other requirements for a set-aside under the program are met.

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