Questionable Effectiveness of the 8(a) Procurement Program, Small Business Administration: Report to the Congress

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Page 1 - We are launching today a major test program to mobilise the resources of private industry and the Federal government to help find jobs and provide training for thousands of America's hard-core unemployed . . . To initiate this effort, the resources of the Department of Commerce, Defense, Labor, Health, Education and Welfare, and Housing and Urban Development, the Office of Economic Opportunity, the General Services Administration, and the Small Business Administration will be combined to provide...
Page 1 - Cities program announcement proposing to "mobilize the resources of private industry and the Federal Government to help find jobs and provide training for thousands of America's hard-core unemployed.
Page 53 - ... socially or economically disadvantaged persons to achieve a competitive position in the market place. (c) Eligibility— (1) Social or economic disadvantage. An applicant concern must be owned and controlled by one or more persons who have been deprived of the opportunity to develop and maintain a competitive position in the economy because of social or economic disadvantage.
Page 18 - SBA does not routinely review or monitor the activities of sponsored 8(a) firms to determine if they control the business. Also, SBA lacks criteria to define the extent to which sponsors can collect fees from 8(a) firms for services provided during the performance of a contract. For example, the sponsors included in our review charged their 8(a) firms fees ranging from about 6 percent to about l7 percent of the firms
Page 53 - SBA's Business Development program to assist in the expansion and development of existing, newly organized, or prospective profitoriented small business concerns owned and controlled by eligible socially and economically disadvantaged persons.
Page i - Act of 1953 gives the Small Business Administration (SBA) the authority to enter into procurement contracts with Federal agencies and departments and to subcontract the work to small businesses.
Page 2 - Present day set-aside programs authorizing preferential treatment in the award of government contracts to "socially and economically disadvantaged" small businesses originated in 8(a) of the Small Business Act of 1958. Initially, the Small Business Administration (SBA) utilized its 8(a) authority to obtain contracts from federal agencies and subcontract them on a noncompetitive basis to firms agreeing to locate in or near ghetto areas and provide jobs for the unemployed and underemployed.
Page 1 - The concept of channeling contracts to small businesses through an intermediate Federal agency was an emergency measure to insure that small businesses were not bypassed in wartime. SBA, however, never used the section 8(a) authority for that purpose. Section 8(a) lay dormant for about 15 years because SBA believed that the efforts to start and operate an 8(a) program would not be worthwhile in terms of developing small business.-6 In many ways, this was a prophetic statement.
Page ii - SBA encourages nondisadvantaged businesses (sponsors) to provide management services, training, and capital to 8(a) firms.
Page 23 - Sale of ownership SBA required two of the sponsors who acquired stock in eight firms to sell their stock on or before a specified date. The sponsors did so, and by agreement with the other stockholders of the firms, the sale price of the stock was based on the projected value of the stock at a future date. This increased the sale price of the stock and provided the sponsors with substantial capital gains. For example, one sponsor acquired 3,l00 shares of an 8(a) firm's stock in l97l for $3,l00.

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