The SBA's 8(a) Program
and why you should support it
The Small Business Administration runs something called the 8(a) Business Development Program. Basically, it is a federal initiative designed to help small businesses owned by socially and economically disadvantaged individuals compete in the government contracting marketplace. (The 8(a) are not the only small businesses that the government patronizes.)
“Disadvantaged” is interpreted loosely, and—contrary to a popular narrative about it—there are many white people who own businesses that are members, including veterans, the disabled, and those operating in HUB (historically underutilized for business) zones. The program provides qualifying businesses with access to sole-source contracts, set-aside opportunities, mentorship, and training to help them grow and succeed. The goal is to promote economic opportunity and level the playing field for historically underrepresented entrepreneurs by giving them a fair chance to secure government contracts. Participation lasts up to nine years, during which businesses receive support to become competitive in the broader market.
I recently did a data science project looking into the program, and specifically comparing it to contracts that go through what is called “Full and Open Competition,” abbreviated FOC.
I have put this project into a Google Colab notebook so that anyone who wants to do so can look at it and see how I got to my conclusions. You will find the link below.
Here’s part of the introduction:
Why I Looked Into This
The 8(a) Business Development Program is a federal initiative designed to help small, disadvantaged businesses compete in the American economy by providing access to government contracts and specialized business training. It's extremely successful -- 8(a) graduates have a significantly higher survival rate than most small businesses do.
There were multiple reasons for my investigation, but just one of those reasons is relevant to publishing it: I did this, in part, because I know a lot of good things about the 8(a) program and feared that people would want it gone, since America is kind of having a Federal-cost-cutting orgy at the moment, taking a chainsaw to everything possible that gets any government money.
I'm right there with those people on nonsense like transgender opera in Ecuador and some of the other stupidity -- but I support the government supporting small businesses because I want a small government.
If the government stops patronizing small businesses, guess what? It's still going to need uniforms for Marines, IT services, tanks, expert advice, VA doctors, and the rest of the things it pays for.
I prefer private companies to do business with the government, rather than the government trying to build its own factories, train its own doctors, and otherwise do all its own stuff.
But Americans are not in a mood for nuance at the moment.
We are doing surgery with butcher knives.
So, if I was going to defend the 8(a), in writing or otherwise, I wanted to be able to back it up.
Obviously, this constitutes a bias on my part in favor of the 8(a) programs. I compensated for this by loading the dice in favor of its opponents.
To maintain objectivity and strengthen the case for 8(a) contracts, I employed extremely pro-FOC assumptions throughout, as you will see.
The Appendix shows that I gave the FOC process an $8,200,000,000 benefit of the doubt. This implies that the case for 8(a) is significantly stronger than I have laid out, but I decided to err on the side of the FOC process to make the strongest and most robust case possible.
My goal was to do it well enough that most honest brokers would say I probably went at least a little too far in the direction of favoring FOC over 8(a).
Thank You To the Testers
After posting on Notes asking for testers for the notebook — I wanted to make sure that it would work for people on different devices, of different tech-expertise levels, etc. — I got an overwhelming response, with multiple volunteers for every type of tester/device I was looking for. Some of them hadn’t responded yet when I published this, and I want to apologize for not waiting — I knew it would take a long time to go through and some people couldn’t just jump on the project, so I accepted multiple offers at every spot.
It’s a fairly long read for most people, making Saturday night/Sunday morning the ideal time to publish. Your willingness to help is noted and appreciated, especially given what a rough time I’m having these days. Thank you.
Here’s the link. PLEASE read the instructions; following them will prevent every conceivable problem of which I am aware.
Enjoy!
Comments are closed; I’m both too tired and too busy today to read and respond.
Comments are turned off now; I'm just very busy and tired today, sorry.
First off, I have a bit of experience in this, 20 years of operational (AF Wing and below) contracting experience although I did retire a few years ago. I am one hundred percent in favor of small business programs. Competed small business programs have been proven time and time again to be the absolute best value available to the government for a huge percentage of the buys the government is involved with.
I do believe however that this substack article is unclear. Federal government small business procurement is covered under FAR Part 19 (https://www.acquisition.gov/far/part-19) and includes several subcategories that while still relate to small businesses are not 8(a) programs. These include the aforementioned 8(a) program, HUBZone, Women Owned Small Business, and Service Disabled Veteran Owned Small Business.
With an 8(a) contract the government is not actually contracting with an individual small business it is government contracting letting a contract to the Small Business Administration and the SBA guarantees, with a large number of caveats, the 8(a) business's performance. The Small Business Administration also has a huge amount of say in whether or not the 8(a) company's price is fair and reasonable. Essentially you have one branch of the government arguing with another branch of the federal government and a lot of times that doesn't equate to anything like best value. Part of the reason why is that Congress establishes goals where certain percentages of acquisitions must be to 8(a), a different percentage to HUBZone, yet a different percentage o WOSB or SDVOSB. Since contracting units and the SBA are rated on how well the government contracting organizations meet those goals there is a large incentive to reach those goals regardless of whether the price is fair and reasonable or not.
With HUBZone, WOSB, and SDVOSB the government actually does contract with an individual small business and there is a much better chance of actually getting a fair and reasonable cost for a good or service.
This is a convoluted subject that is, in my opinion, mostly drive by Congress layering one set of preferential treatment over another and I do apologize for the 50 thousand foot overview. I didn't even got into ay of the exceptions.