The SBA 8(a) application process is lengthy, strict and rigorous. Many candidates for 8(a) certification are surprised by this because they initially expect a short and easy process. But did you know that you must undergo an FBI background check to get 8(a) certified? This is a little known and little publicized fact.
The SBA states the following on its website:
“All principals [of the firm] will undergo a Federal Bureau of Investigation background check before SBA can admit the firm into the SBA 8(a) Business Development program.”
Who is considered a “principal”?
- Each owner or member
- Each Board member
- Each shareholder
- Each officer
- Each fiduciary representative (employee who handles company money)
It is a good idea to query each principal before you embark on the journey towards 8(a) certification about his or her arrest record (including juvenile events and expunged events) and background (e.g., has the person ever been suspended or debarred from government contracting?)
If you uncover any adverse information during your preliminary check, you can ask the SBA for guidance as to how that adverse information might possibly harm your chances of getting certified.
GCS Inc. offers 8(a) applicants kits, templates and guides for getting 8(a) certified; you can view our current offerings on http://www.8aapplication.com.
“Super 8(a)” is a colloquial term for SBA 8(a) certified companies that are owned by Alaska Native Corporations (ANCs).
ANCs have special privileges in the 8(a) program that 8(a) companies owned by individuals do not. For example, ANCs do not have caps on how much money they can earn via sole source set aside awards. (Congress is currently mulling over establishing some caps, however, so this situation might change.)
These “Super 8(a)” entities are owned by organizations, not individuals. Congress designates entities as ANCs, meaning you cannot form an ANC just because you want to do so. The federal government controls how many ANCs there are, and there are very few of them.
If you are an Alaska Native, you cannot form a “Super 8(a)” business. You can, however, apply for a regular 8(a) certification, which has some pretty nifty benefits and is worth your while if you are interested in federal contracting.
Email us at firstname.lastname@example.org if you have other 8(a) questions.
The SBA released new proposed rules for Mentor Protege Programs for small businesses today, which is an exciting development for small federal contractors. Please bear in mind the following factors, however:
1. These new programs don’t actually exist yet. The document released today is a set of proposed rules to govern the new programs. The good news is you can comment upon the proposed rules and give the SBA your opinions, ideas and feedback on the proposed rules on regulations.gov here:
2. If you are currently 8(a) certified, there is an existing Mentor Protege Program for you that you can take advantage of now. The newly proposed Mentor Protege programs are for other classes of small businesses like veteran owned firms, HUBZone firms, women owned small businesses, etc. You can read more about the existing Mentor Protege option for 8(a) certified companies on the SBA website here.
3. Other federal agencies have Mentor Protege Programs too, but those are different. The proposed rules issued today are for upcoming Mentor Protege Programs that will be managed by the SBA only, not by other federal agencies. Because the Mentor Protege options at other federal agencies have different rules and functions, educate yourself to ensure you pursue the right Mentor Protege option(s) for your small enterprise.
Want more info about the SBA 8(a) Mentor Protege Program, or the paperwork needed to participate in it? Send GCS Inc. an inquiry email at:
We will aim to answer your questions as fast as possible.
To get SBA 8(a) certified, your 3-year average Adjusted Gross Income (AGI) must be under $250K.
If you are already 8(a) certified, your 3-year average AGI must be under $350K.
Think about your compensation from your company as one big package. This means you need to add up your base salary, your commissions or bonuses and any other earnings you get from your business and lump them all together as one number. Let’s call this one number “total compensation.”
AGI takes into account your total compensation from your business plus any other income you might have as an individual, such as, but not limited to:
- military pensions
- disability payments
- dividends earned from stocks
- real estate income (if you rent property to others)
- other money you might have earned as documented on a 1099 form
- proceeds from other investments
So in other words, when you calculate your 3-year AGI amount, you need to make sure all of these sources of income taken together amount to less than the 8(a) cap.
For example, say you are interested in applying to the 8(a) program and you pay yourself $240K in salary and $5K in owner draws every year. This makes your total compensation $245K per year, which gets you really close to the 8(a) AGI limit of $250,000 to get into the program. Now say you forget that in addition to $245K per year from your business, you also get $3K in rental income from an apartment you rent out to other people, plus $3K per year in dividends from your stocks. Uh oh. You now have a 3-year average AGI of $251K, meaning you are NOT eligible to join the 8(a) program because you are not “economically disadvantaged” after all.
If you are worried about the AGI cap, grab three consecutive years of your personal federal tax returns and scour them carefully to take note of all sources of income you possess. AGI is more than just salary–every dollar of income counts.
Need more 8(a) help? We can answer some quick questions via email at email@example.com and we offer dozens of downloadable 8(a) kits, templates, guides and examples costing from $0 to $60 on our site http://www.8aapplication.com.
Once your company gets 8(a) certified, it is time to focus on 8(a) program compliance. Be sure to read your entire Participation Agreement, which outlines the main things you have to do to remain compliant and active in the 8(a) program.
Here are some of the top reasons why companies get kicked out of the 8(a) program:
- Failure to submit a complete annual update on time
- Unauthorized changes to ownership that in turn create negative control problems
- Other unauthorized changes, such as moving your headquarters to another state without prior written approval from the SBA
- Ethics violations by company personnel
- Failure to meet Business Activity Targets (BATs)
- Refusal to submit documentation requested by the SBA
- Failure to acquire any commercial business
- Expiration of critical licenses or professional certifications
- Entering into joint ventures without prior SBA approval
- Failure to pay government financial obligations
- Taking excessive cash out of the company for personal gain
- Lack of contracts or business activity of any type over a prolonged period of time
Bear in mind the SBA 8(a) program is a federal government program (read: red tape), and it is a privilege, not a right, so you have to do some work to remain active in it. As with all other federal programs, there are rules and regulations that must be followed, and there are annual paperwork requirements that must be fulfilled.
Any time you are uncertain as to whether or not a business practice is in violation of the SBA 8(a) rules, contact your designated Business Development Specialist for advice in advance of engaging in the practice. It is better to ask for his or her advice than to accidentally violate an 8(a) rule and subsequently lose your precious certification. Once you have lost your 8(a) status for any reason, it cannot be reinstated.
For more information about SBA 8(a) compliance, GCS Inc. can be reached by email at firstname.lastname@example.org.
GCS Inc. clients are reporting delays in 8(a) application processing as of January 2015.
A variety of factors has contributed to this situation, including the recent holiday/vacation/cold and flu season, which has resulted in SBA staff member absences, and the fact that the federal government is heavily promoting the 8(a) program right now yet has not budgeted funds to hire additional SBA staff to handle the new influx of applications.
An 8(a) application is supposed to take 105 days to process, but that assumes all documentation is complete at the initial time of submission, and nearly every 8(a) application is deemed “incomplete” until the SBA staff reviewer in charge of vetting the application has his or her questions answered. This means the 105 day timeline is often exceeded.
Therefore, it is wise to presume that your 8(a) application will continue to take 6 or more months to undergo the full 8(a) application review cycle, so please bear this in mind when planning your company federal sales activities for the year 2015.
Do you have 8(a) certification questions? GCS Inc. can help answer your questions via email at email@example.com
The federal government claims each 8(a) application will be evaluated in 105 days or less, but this is a little bit of a game, and a time estimate you should ignore completely.
- The 105 day estimate is just that: an estimate. It’s not a guarantee, and it never was.
- This 105 day estimate assumes the SBA will declare your application to be complete nearly immediately. It won’t, no matter what you send the SBA the first time around. (Expect multiple rounds of correspondence. Just expect it.)
- There is no punishment if the government exceeds its own deadline–the agency is not really held to account by anyone. There might be a mild tongue lashing from Congress or the GAO once in a while, but nobody suffers a punishment if an 8(a) application takes more than 105 days to be processed. The metric is tracked, but failure to meet the metric comes without consequences; hence, there is no incentive to move faster.
- The department in the SBA that evaluates 8(a) applications is understaffed, and has been understaffed for a few decades now. There won’t be any new staff members added (in terms of numbers of staff) anytime soon because no dollars have been added to the budget to hire them. (Sure, a staff member might leave and be replaced now and again, but no new personnel get added into the system).
- The most recently passed annual budget required the SBA to promote its 8(a) program more and more to get more people interested and to churn up more 8(a) applications. But…see #4 above (lack of staff). The equation is very simple and very obvious:
More 8(a) applications + same number of people to process them as before = slower application process.
(This is a great example of an “unfunded mandate” from Congress–Congress tells the SBA to do something, but does not think through all of the financial consequences and costs before enacting the mandate. Sure, Congress threw some dollars over the fence for the SBA to host more “get 8(a) certified!” seminars, but Congress failed to fund the other piece of the equation: staff members to actually process these extra incoming documents. Oops.)
So, if an 8(a) consultant promises you stars, unicorns and a 30-day 8(a) application process, enjoy your laugh for the day and walk away now, because they are full of [censored].
What’s a realistic projection for the time is takes to get 8(a) certified in 2014?
Assume you won’t get certified until 6 or more months from today.
Assume half a year or more.
Don’t promise your customers you will be certified in a jiffy–you won’t.
8(a) certification is a slow process.
Really, really slow.
Just mentally prepare yourself for the slow process now so you won’t be disappointed and you won’t look like a jerk by over-promising and under-delivering to your customers.