Is the 8 process worth all the trouble? - a - minority set-aside program of the Small Business Administration

Black Enterprise, August, 1992 by Kevin D. Thompson

Ultimately, yes. However, musical-chairs leadership and a lack of direction have blunted the effectiveness of an important program for black business.

Want to stage a high-stakes, big-city version of "The Hatfields vs. The McCoys"? Line up several African-American business owners on one side of a room and a group of U.S. Small Business Administration (SBA) officials on the other and ask: "What's wrong with the 8(a) program?"

Then duck.

Although the controversial minority set-aside program hasn't touched off any

deadly shootouts, it has been known to provoke a heated war of words between disgruntled 8(a) entrepreneurs and defensive SBA administrators. The fact that both sides remain at odds is no surprise. The hard truth is that this legislatively mandated federal government program - which falls under section 8(a) of the Small Business Act - has never live up to its advanced billing. Since its establishment in 1968, charges of mismanagement, lack of direction and limited resources have topped the laundry list of criticisms and complaints leveled at the program. And who can forget the Wedtech scandal? It was a dark day at the SBA in 1987 when it was learned that the Bronx, N.Y.-based defense contractor posed as a minority-owned firm and bribed government officials to gain set-aside contracts.

It seems like everyone has something negative to say about the 8(a) program. A January report submitted by the U.S. General Accounting Office (GAO) to the House and Senate Committees on Small Business, charged that the lack of data on many program activities has hurt the SBA's ability to effectively manage the program. After extensive interviews with program officials, congressional leaders and current and former 8(a) participants, BLACK ENTERPRISE agrees that the 24-year-old program remains seriously flawed and deeply troubled.

An increasing number of the program's black business owners are tired of toughing out a lengthy certification process, fed up with receiving insufficient management assistance and disenchanted with the SBA's musical chairs management record. Above all many black chief executives are questioning the value of a program designed to make fledgling minority business competitive in the private sector. Since black-owned firms make up 48.3% of the 3,919 companies in the nine-year program (see chart, "The 8(a) Breakdown"), their words carry considerable weight.

"The SBA in and of itself is inefficient," contends Jimmie Taylor, president of Alaska Quality Control & Technical Services Ltd., an Anchorage-based professional engineering and testing services firm that received its 8(a) certification six years ago. "When Reagan talked about getting rid of it, that wasn't such a bad idea."

Adds John Robinson, president of Black Diamond Enterprises Ltd., a Capitol Heights, Md., manufacturing and engineering firm: "Going to the dentist is probably better than going to 8(a). It's mind-boggling what they asked you to do."

Existing 8(a) business owners are not the only people complaining. "The 8(a) process is arcane and quite bizarre," says Robert T. Lhulier, the SBA's one-time chief of staff. "The agency doesn't have the resources to help these companies through the program."

Now the president of Robert T. Lhulier & Associates, a Newark, Del.-based consulting firm, Lhulier is trying to change that. As a consultant, it is his job to make it easier for entrepreneurs to successfully get into the program and to teach them how to make it work for them. Considering the number of companies often trapped in the 8(a) labyrinth, he shouldn't have a time finding clients.

The Birth Of 8(a)

Having its origins in 1968, the SBA's 8(a) program was designed to give socially and economically disadvantaged owners access to lucrative government contact dollars. The goal was simple: After receiving several years of management and technical assistance, 8(a) firms were expected to have the necessary skills and contacts to make it on their own in the mainstream.

However, a not-so-funny-thing happened on the road to fostering minority business development. Instead of creating a host of multimillion-dollar success stories, the program consistently graduated companies that were not sufficiently prepared to compete for contracts with the big boys in the private sector. The result? A large number of former 8(a) companies have gone - and continue to go - out of business shortly after leaving the development program.

Want proof? In 1991, the district offices of the SBA looked at 645 former 8(a) companies that left the program between Oct. 1, 1987 and Sept. 30, 1990. Of those firms, an astounding 42% went out of business. The study also revealed that 48% were still in business, 7% had seriously curtailed operations, and 3% were acquired by other firms. Although the SBA says it doesn't know the ethnicity of those firms, it's safe to say that many of those closed up shop were black-owned. Since 8(a) was launched, 9,340 companies have participated in the program. And 57% of those were owned by blacks.