Explaining what the 8a program is, requirements to become an contractor within the program and how to obtain bonding as an 8a construction contractor.
In 2014, the the U.S. federal government spent over $14 billion on contracting. The Small Business Administration (SBA) is charged with the task of seeing that small businesses get their fare share of these contracting dollars. One of the tools at their disposal to accomplish this is the SBA’s 8(a) contractor program. Named for the section of the Small Business Act, this program is designed to help small, disadvantaged businesses complete for federal contracts. Many types of contracting are available in the program, supply, various service as well as construction. A portion of all federal contracting is set aside for contractors in the 8a program.
What are benefits of becoming 8(a) certified?
- Access to business training, counseling, assistance. Also development for business executives
- Eligible to receive sole-source contracts up to $4mm for goods and services and $6.5mm for manufacturing. These sole-source contracts means that they are set aside for 8(a) firms, without having to competitively bid.
- Eligible to bid on 8(a) set aside contracts. These contracts are only available to 8(a) firms, and the competition is drastically reduced.
- Ability to form joint ventures and teaming agreements to bid on contracts. An 8(a) firm would be interested in doing this to be able to secure larger contracts that it is otherwise unable to bid.
- Access to the 8(a) Business Development Mentor Protégé program.
Participation in the program is split between two phases over nine years. These are a four year developmental range and a five year transition period. The purpose is that after 9 years a graduated 8(a) firm is capable to compete on its own. There is no longer a need for a protected market.
Requirements to becoming an 8a contractor
The specific requirements to become an 8a contractor are vetted by the SBA. The application process can take a long time. It is not uncommon for the application to be returned with questions several times throughout the process. The Small Business Administration’s requirements include:
- An individual (versus a legal entity) must own at least 51% of the firm.
- The owner or owners must be United States citizens.
- The owner or owners must be socially and economically disadvantaged individual(s).
- The owner or owners must manage the company.
- Company must be a small business as defined by the SBA.
- The business must demonstrate potential for success.
- Owners must be of good character.
There different eligibility requirements for business that are owned by American Indians, Native Alaskans, Native Hawaiians or Certified Development Companies.
How to obtain performance and payment bonds
If 8a contractor is going to pursue construction, the rules of the Miller Act will apply. As such, the contractor will need to secure bid, performance and payment bonds to compete on federal construction projects. A construction contractor, even if not in the 8a, can access the SBA bond guarantee program. The basic principals of bonding apply to 8a contractors. The three tenets of bonding, capital, capacity and character will apply. Capital; does the contractor have the financial strength to complete the contract? Capacity; does the contractor have the experience necessary to complete the project? Character; does the contractor have a track record of showing good character. This means paying bills on time, good personal references and shown to be an honest person.
To get started with the bonding process, visit Surety1’s performance and payment bond page.
The 8a is one of the SBA’s most successful programs. thousands of contractors have graduated form the program with a firm understanding of what is required to be a successful 8a contractor.