8(a) Companies

8(a) companies are businesses that have been designated by the Small Business Administration (SBA) as a socially and economically disadvantaged business. This designation is given by the SBA after a rigorous application process. Once a company is certified as being 8(a), the company holds that designation for nine years. There are annual reviews for progress, but the standard is nine years. And the business or its owner can only be certified as 8(a), once in its lifetime.

8(a) companies can enjoy government contracts that are set aside for them, that is to say there are certain contracts that only 8(a) companies can apply for. Or a contracting/purchasing officer can decide to utilize an 8(a) company without putting that purchase out to bid, where open bidding is typically required for any purchase over $25,000. That sole sourcing option for federal procurement to use an 8(a) company has a cap of $3 million. They can be quite nice for the right business.

While there are a number of qualifications for an 8(a) company I will provide the highlights.

First, a company must be economically disadvantaged. This economic disadvantage is determined by two standards- the business size and the owners net worth. A business must fall under the parameters for a small business in its industry. The federal government has tables for different industries which determines a business's size. The size is typically determined by annual revenues and/or the number of employees. There are typically three size categories of small, midsized, and large companies. So, within the table for its industry a business must be determined as a small business.

A companies economic disadvantage is also shown by the owner's net worth. The owner cannot have a net worth more than a $250,000.

Second, a business must be considered socially disadvantaged. The determination of the business being socially disadvantaged is harder to determine than economic disadvantage. With economic disadvantage it is simply a matter of math. So, the SBA starts out by listing certain racial and ethnic groups (African-American, Hispanic, Native American, etc.) as being in socially disadvantaged. That means if the principal owners (owner or owners that own more than 51% of the company) are members of the racial or ethnic groups listed then they can be determined as being socially disadvantaged. That is why the 8(a) program is often thought of as a federal program for minorities.

And this is where it gets a little bit fuzzy. See, the federal government by law cannot have programs set aside for any one group of people because of the laws of equality. That is why the 8(a) program is considered by the United States federal government a program for socially and economically disadvantaged businesses, not for minority businesses. Officially, there is no minority 8(a) program, but it is a program for socially and economically disadvantaged small businesses. However, it is true that most 8(a) companies by a large margin are minority owned companies. That is why the 8(a) program is considered by everybody else to be a program for minority owned businesses. And in practical application it is a program for minority owned small businesses.

Still, there are other 8(a) companies that have been certified that are not minority owned. They just went a longer route to prove that they were socially disadvantaged like being women owned.