Fraud Prevention or Harassment? SBA Enforcement of 8a Program Rules Toes the Line in Some State Districts
In recent months the Small Business Administration (SBA) has publicized its intent to root out all fraud, waste, and abuse in the 8(a) Business Development program, a laudable goal; however, some SBA staff members are taking this effort too far, treating each and every 8(a) company as if it is a fraud.
Some of the SBA district offices are misunderstanding the spirit with which these policies were implemented by taking fraud, waste and abuse prevention to such an extreme that they treat each and every 8(a) company in their portfolio as if it is already guilty and needs to prove its innocence to remain in the 8(a) program.
Here are a few examples of this misapplied SBA 8(a) fraud, waste, and abuse prevention program, all of which occurred during the most recent 3 years:
- In Virginia, an 8(a) business owner increased his company ownership and control from 51% to 100%, becoming the sole owner in charge of the firm. His local SBA office threatened to remove his company from the 8(a) program simply because he did not ask for prior permission from the SBA to take over more of the company that he had co-founded with his wife.
- In Maryland, a Business Development Specialist (BDS) would open her 8(a) orientation sessions for newly certified businesses by gleefully proclaiming herself to be “the Terminator” (because she loved to terminate 8(a) companies from the program so much).
- In Arkansas, a BDS re-investigated a newly certified 8(a) firm that had already been thoroughly questioned and vetted by the Department of Program Certification and Eligibility (DPCE) a few weeks prior just because she had a random “hunch” (read: unsubstantiated opinion) that a Black American business owner with a white co-owner was secretly being controlled by the white co-owner (which he was not, as the DPCE had already proven during the very thorough and lengthy application process.)
Some SBA districts are distinguishing themselves by becoming publicly known for hounding, persecuting, and harassing 8(a) business owners more so than actually helping them, using punitive measures like excessive documentation requests with unreasonably short turnaround times as a means of discouraging 8(a) firms from participating in the program.
It seems that some SBA staff members at the state level have lost sight of their core mission to help, support, and guide small 8(a) business owners through the federal contracting process.
The SBA 8(a) program is, after all, designed to assist small, disadvantaged companies with business development such that these companies learn proper federal contracting processes and grow into medium and large-sized businesses.
Also, in this era of high unemployment across America, shouldn’t the SBA be bending over backwards to help these small minority, woman, and veteran owned 8(a) companies expand and hire more full-time workers, rather than investing so much time, labor and effort hunting for excuses to toss more companies out of the program?
Perhaps the SBA should consider fraud, waste and abuse prevention from another angle entirely: educate our populace better about what is expected of 8(a) businesses and their owners so that unintentional rule violations cease.
By better publicizing and explaining the often-confusing, verbose and rapidly changing rules of the 8(a) program (which evolve annually due to SBA Office of Hearings and Appeals court case outcomes), the SBA will help companies understand what is permissible and achievable within the 8(a) program versus what is not, which will in turn result in fewer unqualified companies trying to join the program.
The SBA should also invest more time in training its Business Development Specialists as to proper fraud, waste and abuse prevention methods and should stop incentivizing prosecutorial behavior against 8(a) certified firms.
SBA district offices should treat 8(a) certified business owners with more respect and accord them the dignity they deserve as small, disadvantaged executives who have already faced chronic bias in the marketplace; these individuals do not need even more bias from an SBA that operates with a preconceived notion that all small firms are cheats and frauds.
Government Certification Specialists Inc. of Leesburg, Virginia, is proud to author the longest running 8(a) certification blog on the web, Get8aCertified.Wordpress.com, which is 5 years old today!
Thank you to all of our clients and readers for sticking with us and inspiring our blog posts for half a decade. We appreciate your comments, criticisms, and involvement.
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We still have 204 days left in the federal fiscal year 2013–best of luck with all of your federal contracting efforts over the next 200+ days!
Whether you are already SBA 8(a) certified or you are in the process of obtaining your SBA 8(a) certification, you are probably concerned about potential service disruptions or time delays at the SBA, should sequestration take effect on Friday, March 1, 2013.
The good news is you can relax—at least over the near term, sequestration should not have a negative effect on your 8(a) certification or 8(a) application.
Government Executive magazine reports that the Small Business Administration does not anticipate any furloughs of its employees, and any required budget cuts will be made by trimming loans first rather than cutting back on other essential SBA services.
Although you do not have to worry about sequestration from an SBA 8(a) paperwork perspective, which is certainly a relief, you should touch base with any existing federal clients you currently possess at other agencies to determine whether or not sequestration will affect your contract activity or your payments.
There are multiple obvious reasons why your small business should invest in general liability insurance–continuity of operations in case of a disaster, for example–but another good reason to purchase a basic business insurance policy is to demonstrate stability and trustworthiness to the federal government when you apply for SBA 8(a) certification.
The Small Business Administration will ask you to provide it with a Certificate of Insurance or insurance policy declaration pages as a part of the baseline 8(a) application.
If you are a home-based business, the SBA will ask you for a copy of your homeowner’s insurance policy or renter’s insurance policy in lieu of a business insurance policy if you do not have one.
There are multiple different types of business insurance available such as general liability policies, key employee coverage (in case of death or disability of a principal of the business), business automobile and vehicle insurance, etc., so you might want to seek the help of a broker or insurance professional who can tell you about the different options and perhaps bundle some of them together for a customizable, affordable rate.
To locate a reputable professional who is knowledgeable about insurance for small businesses (not for consumers), the following trade association website is a good starting point:
Most 8(a) applicants are already familiar with SBA 8(a) program rules such as the personal net worth limitations and the categories of individuals who are deemed socially disadvantaged; however, there are a variety of other lesser known SBA 8(a) rules and qualifying factors that are equally important to consider.
Here is a quick rundown about three such rules you should know before applying for this federal business development certification:
- The 70 Percent Rule. If your company only has one commercial B2B (business-to-business) client or if the bulk of your gross revenue (meaning 70 percent or more) comes from one commercial client / prime contractor, your company is not eligible for 8(a) certification—yet. Diversify your client mix, take on some other projects from other sources, and get the ratios balanced so that no single client equates to 70%+ of your gross revenue and you can apply. The only exception to this rule is if your major client is the federal government itself; the contract must be direct meaning you are the prime, though.
- The Full Time Devotion Rule. You probably already know that 51% or more of your company must be controlled by one or more socially and economically disadvantaged individuals, but did you know that the 8(a) qualifier(s) must work full time during normal business hours for the company, too? Outside employment, being a full time student, or devoting too many hours during the business day towards charitable or outside work violates the SBA’s full time devotion rule. The SBA will not only measure full time devotion by checking if the 8(a) applicant works 40 or more hours for the company per week; the SBA will also check to make sure these 40 hours are during standard business hours for the industry.
- The Affiliation Rule. The government’s affiliation rule is actually a cluster of related rules and regulations so complex they deserve their own separate blog post, so we will only scratch the surface here in discussing affiliation. In a nutshell, the federal government defines what constitutes an “affiliated” company or entity linked and associated with your company. So, an entity you might regard as a mere teaming partner, mentor, or supplier might get labeled by the SBA as an “affiliate” of your company, which might in turn hurt your 8(a) application by rendering your company “other than small” in size through this affiliation. A future post will dissect affiliation further; in the mean time, to learn more about the affiliation rule or rules, we recommend you take a look at the SBA publication entitled “An Overview on Affiliation.”
For more information about SBA 8(a) rules and regulations we recommend you look at our website www.8aapplication.com where you can read excerpts from the 8(a) rules and regulations as well as download templates, forms, kits and tip sheets for prices ranging from zero dollars to $60.
Now that contract size caps have been lifted for contracts awarded under the Small Business Administration Woman Owned Small Business (SBA WOSB) program, small business advocates expect a new wave of interest in this federal contracting option.
Just in time to help answer small business owners’ questions about this rapidly expanding program, Government Certification Specialists Inc. presents a new informative website: http://www.wosb.co
This new site will:
- Explain why you don’t need a consultant to get WOSB certified or EDWOSB* certified–you can do it yourself at no cost
- List all the documents you need to prove your WOSB or EDWOSB status to the government
- Provide you an easy, step-by-step walk through of the self-certification process so anyone can do it
The site also provides basic downloadable templates for commonly missing (yet mandatory) documents you will need to get WOSB / EDWOSB certified.
The main goal of the site is to be informative and give woman owned small businesses all the tools they need to self-certify themselves without relying on consultants for help.
If you have additional questions after visiting the site, GCS Inc. can be reached at firstname.lastname@example.org
best of luck to you and your business in the WOSB / EDWOSB program!
*EDWOSB = Economically Disadvantaged Woman Owned Small Business
The 2013 National Defense Authorization Act–signed into law by President Barack Obama earlier this month–formally removed the contract size caps for federal contracts awarded under the Woman Owned Small Business (WOSB) Federal Contracting Program, also referred to as the 8(m) program.
The previous WOSB/EDWOSB set aside contract limits of $4 million for goods and services and $6.5 million for manufacturing have been eliminated in part because federal agencies have consistently failed to award 5 percent of federal contracts to women owned small businesses as they are mandated to do.
The Obama administration’s hope is that by lifting these contract limits, more federal dollars can be allocated towards projects to be fulfilled by WOSB and Economically Disadvantaged WOSB (EDWOSB) companies.
The SBA reports that in 2011, the year the WOSB program made its debut, 3.98 percent of federal contract dollars were awarded to woman owned, woman controlled companies, which equates to about $16.8 billion in contract opportunities for small companies owned and operated by women.
The outlook for federal fiscal year 2013 spending on WOSB contract activity is positive with the elimination of the contract size limits.