SBA 8(a) BUSINESS DEVELOPMENT PROGRAM What You Need To Know To Get Certified & Stay Compliant

Transcription

1 SBA 8(a) BUSINESS DEVELOPMENT PROGRAM What You Need To Know To Get Certified & Stay Compliant March 11, 2015

2 INTRODUCTION Shannon Edie President & Senior Consultant Daphne Tong-Pave Vice President & Senior Consultant Holomua Consulting Group, LLC (Holomua) is a small, woman-owned business located in Honolulu, Hawaii. Our full-service, solution-oriented consulting firm focuses on assisting businesses with maximizing small business opportunities, navigating the complex legal and compliance landscape of federal government contracting, and developing its tools and knowledge to excel at government contracting.

3 AGENDA PRE-APPLICATION PERIOD: Benefits of being an 8(a) BD program participant 8(a) BD program requirements Strategies for getting ready to apply for the program THE 8(a) APPLICATION: Elements of and forms required for the 8(a) application Tips for addressing SBA's questions and concerns Steps to take if your 8(a) application is initially denied AFTER ACCEPTANCE IN THE 8(a) PROGRAM: Ongoing requirements NATIVE HAWAIIAN ORGANIZATION (NHO) 8(a) PROGRAM: Benefits and requirements RESOURCES AND TOOLS: Realities of federal contracting Overview of available resources

4 PRE-APPLICATION Purpose of the 8(a) BD Program [13 CFR 124.1] to assist eligible small disadvantaged business concerns compete in the American economy through business development. Section 8(a) of the Small Business Act of 1953, as amended Established a set-aside program for socially and economically disadvantaged individuals 8(A) BUSINESS DEVELOPMENT PROGRAM Provides mentoring, training, technical assistance, financial assistance, and procurement assistance Maximum 9 year program participation 4-year developmental stage and 5-year transition stage Goal to help firms successfully compete in the market place

5 PRE-APPLICATION GOVERNMENT-WIDE CONTRACTING GOALS: SMALL BUSINESS 23% WOSB 5% SDB 5% HUBZone 3% SDVOSB 3% SMALL BUSINESS GOALING REPORT FISCAL YEAR 2013 CATEGORY DOLLARS PERCENTAGE Small Business $83,142,807, % Small Disadvantaged Business $30,616,176, % 8(a) Business $13,997,559, % Veteran Owned Small Business $17,810,543, % Service Disabled Veteran Owned Small Business $12,023,167, % Woman Owned Small Business $15,364,841, % Certified HUBZone Small Business $6,244,980, % Data from the Federal Procurement Data System

6 PROGRAM BENEFITS PRE-APPLICATION Sole-Source Opportunities Contracts up to $4 million for goods and services and $6.5 million for manufacturing (exceptions for Native-owned firms) Set Aside Opportunities Joint Ventures & Teaming Procurement opportunities, total or partial, in which only certain businesses may compete Provides 8(a) firms with the opportunity to compete for large contracts Mentor-Protégé Program Mentor provides mentorship, and technical, management, and financial assistance Mentor can own up to 40% in Protégé firm Mentor can enter into joint-venture arrangements with Protégé and compete as a small business

7 PRE-APPLICATION ELIGIBILITY REQUIREMENTS: Business must be majority owned and controlled by socially and economically disadvantaged individual(s) that are U.S. citizens Business must be small Business must demonstrate potential for success Principles must show good character

8 PRE-APPLICATION SOCIALLY DISADVANTAGED [13 CFR ] - Individuals who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. Designated groups include, but are not limited to: - Native Americans - Asian Pacific Americans - Black Americans - Hispanic Americans Individuals not included in the presumed groups can participate in the program, but must demonstrate social disadvantage by a preponderance of the evidence

9 PRE-APPLICATION ECONOMICALLY DISADVANTAGED [13 CFR ] - Socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged. For initial eligibility, the net worth of an individual claiming economic disadvantage must be less than $250,000. For continued eligibility, net worth must be less than $750,000. Not economically disadvantaged if: - Average three year adjusted gross income exceeds $250,000 - Fair market value of all assets exceeds $4 million for an applicant and $6 million for continued eligibility

10 PRE-APPLICATION DISADVANTAGED INDIVIDUAL(S) MUST*: Control the firm (must be unconditional and direct) Manage the firm on a full-time basis during normal business hours Have the necessary management experience Establish policies Hold the highest position and be the highest compensated Be an American citizen, by birth or naturalization One time eligibility - Firm and individual for which eligibility is based, are only eligible for the 8(a) program once* *Exceptions apply for firms owned by Native Hawaiian Organizations or other Native entities

11 PRE-APPLICATION Must be small [13 CFR 121 & 13 CFR ] Based on SBA size standards (i.e. primary NAICS) Affiliation is applicable* *Exceptions apply for firms owned by Native Hawaiian Organizations or other Native entities

12 PRE-APPLICATION SBA's size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for small business concerns. [13 CFR (a)] Size standards are established by industry, generally under the North American Industry Classification System (NAICS) SBA primarily uses two measures of business size: Number of employees Annual receipts NAICS CODES NAICS U.S. INDUSTRY TITLE SIZE STANDARDS IN MILLIONS OF DOLLARS SIZE STANDARDS IN NUMBER OF EMPLOYEES Electrical contractors and other wiring installation contractors $ Radio and television broadcasting and wireless communications equipment manufacturing Engineering Services $ Research and development in the physical, engineering, and life sciences

13 PRE-APPLICATION If two businesses are AFFILIATED, SBA will consider the combination of both firms receipts or employees to determine the size status of the business EXAMPLE: BUSINESS A Small Business Prime Contractor Economically Dependent on B BUSINESS B Large Business Subcontractor Power and Control of A BUSINESS A & BUSINESS B ARE: AFFILIATES for size purposes and, thus, other than small INELIGIBLE for small business programs

14 PRE-APPLICATION Potential for Success [13 CFR ] Be in business for at least two full years in the firm s primary industry, as demonstrated on firm s Federal tax returns* Must demonstrate both technical knowledge in its primary industry, and management experience sufficient to run its day-to-day operations Financially sound, access to credit and capital *SBA may waive the two years in business requirement if ALL of the following requirements are met: Have substantial business management experience Demonstrated technical experience Have adequate capital Record of successful performance on contracts from governmental or nongovernmental sources in its primary industry Able to obtain the personnel, facilities, equipment, and any other requirements needed to perform contracts

15 PRE-APPLICATION Good Character [13 CFR ] Criminal conduct Violations of SBA regulations Debarred or suspended firms Debarred or suspended persons Submission of false information Lack business integrity (i.e. indictments, guilty convictions, civil judgments, or settlements) Currently incarcerated or on parole or probation (either pretrial or following conviction for felony or any crime involving business integrity)

16 PRE-APPLICATION STRATEGIES FOR GETTING READY TO APPLY FOR THE PROGRAM: Confirm Eligibility Conduct Research (i.e. 8(a) program research and market research) Establish a solid business structure Review ALL eligibility requirement Ensure you meet ALL eligibility requirements Determine if the program is a right fit Ensure your business organization is strong and will not require changes Obtain a DUNS Number Register in SAM & DSBS Register in SBA General Login System Gather required information and documents Required information and documents include: Business Governing, corporate, and financial documents Individual Personal and financial

17 8(a) APPLICATION 8(a) Application Overview: Applications are completed online via the SBA General Login System All data is input online, generating all required forms Entire application needs to printed and signed Signed application and supporting documents must be mailed to SBA Only two (2) SBA Offices of Certification and Eligibility: 1. San Francisco, CA 2. Philadelphia, PA SBA will have questions and/or make requests for additional documents

18 8(a) APPLICATION APPLICATION COMPONENTS: Business Information and Documents Individual Information and Documents

19 8(a) APPLICATION BUSINESS INFORMATION AND DOCUMENTS What forms does a business need to submit for its 8(a) application? SBA Form 1010-BUS SBA Form Representative used and compensation paid for services in connections with obtaining federal contracts SBA Form Certification Regarding Debarment, Suspension, and other Responsibility Matters IRS Form 4506-T In addition to these forms, a business must submit supporting documents with its application.

20 8(a) APPLICATION SBA FORM 1010-BUS Name Contact Information Type of Business Date Business Established EIN DUNS Corporate Structure Identify individuals who are owners, directors, management members, partners, and officers 1-20 Yes/No questions Ensure information is accurate Provide detailed explanation for all YES responses

21 8(a) APPLICATION SBA FORM 1010-BUS (CONTINUED): Primary NAICS Code (i.e. industry) Average number of employees over the past 12 months Percentage of revenue earned in primary NAICS during past 12 month Don t confuse calculating primary NAICS with calculating business size REVENUES AVERAGED FOR THREE (3) YEARS NUMBER OF EMPLOYEES BUSINESS SIZE MAJORITY OF BUSINESS OPERATIONS PRIMARY NAICS NEED TO BE SMALL IN PRIMARY NAICS CONTRACT SPECIFIC How does SBA determine a concern's primary industry? [ ] In determining the primary industry in which a concern or a concern combined with its affiliates is engaged, SBA considers the distribution of receipts, employees and costs of doing business among the different industries in which business operations occurred for the most recently completed fiscal year. SBA may also consider other factors, such as the distribution of patents, contract awards, and assets.

22 8(a) APPLICATION COMPANY SUPPORTING DOCUMENTS Governing documents will depend on business structure. Examples include: Article of Organization/Incorporation and any amendments Operating Agreement/By-laws Meeting Minutes Buy/Sell & Voting Agreements Stock Certificates (Front and Back) Stock Register/Ledger Partnership Agreements Certificate of Good Standing List of current and past contracts for past two (2) years Lease agreement(s) and/or proof of ownership Business narrative Business insurance declaration pages Statement of Bonding (if applicable) SAM and DSBS Profiles Ensure governing documents are accurate and consistent (i.e. if LLC is member managed, operating agreement should indicate as such) Ensure minutes are complete and consistent. Need to include approval for seeking 8(a) BD participation. Ensure insurance for all locations Ensure SAM and DSBS profiles are complete and accurate

23 8(a) APPLICATION COMPANY FINANCIAL DOCUMENTS Current balance sheet and profit and loss statement, including an aging of accounts, receivable and payable, no older than 90 days Balance sheet and profit and loss statement for each of the three preceding fiscal year-end periods Business tax returns for last three (3) years, including schedules and attachments Signature cards for all business bank accounts Copies of loan agreements (i.e. lines of credit, shareholder loans, SBA loans) IRS 4506-T Balance sheets must be signed, certified and dated by the business s highest officer, CEO or President Don t forget to submit A/R and A/P aging schedules Taxes must be signed and dated

24 8(a) APPLICATION INDIVIDUAL INFORMATION AND DOCUMENTS Who is required to submit information and documents to the SBA? Each person owning more than 10% of the business Each director, management member, partner, and officer of the business What are individuals required to submit? SBA Form 1010-IND SBA Form 912 IRS Form 4506-T Federal tax returns Resume SBA Form 413 Only individual claiming economic and social disadvantage Supporting documents

25 8(a) APPLICATION SBA FORM 1010-IND Ownership interest in other businesses (including shell or inactive companies) Information regarding any transfer of assets (within last two years) Information and documentation concerning any tax liens, unsatisfied judgments, loans in default Outside employment Bankruptcy details and copy of court s final order or discharge Present or pending lawsuits Any SBA loans Narrative statement of economic disadvantage Do not withhold any information that is requested Make sure your statements can be supported (i.e. documents)

26 8(a) APPLICATION SBA FORM PERSONAL FINANCIAL STATEMENT Personal net worth = Assets Liabilities (does not include personal residence) Federal Tax Returns Previous three years, include all W-2 forms, 1099, schedules, and other attachments Form 413 needs to be 30 days current Complete all applicable sections on the Form 413 Make sure to include all assets and liabilities (i.e. value of business, household furnishings, computers) on the 413 Tax return need to be signed and dated Include all W-2s, schedules, and other attachments SBA will request proof of taxes paid (i.e. cancelled checks)

27 8(a) APPLICATION SBA FORM 912 Form FD-258 (Fingerprint Card) Completed by individual(s) reflecting an arrest record on the SBA Form 912. Proof of citizenship (i.e. birth certificate) Read all questions accurately and answer honestly Initial all 4 boxes and sign the 912 Include all names used, including birth and married names Include fingerprint card with application, if applicable

28 8(a) APPLICATION ADDRESSING SBA'S QUESTIONS AND CONCERNS: Don t be surprised - SBA will come back with questions Make sure you meet all deadlines Be honest and don t make things up Don t take it personal Ask questions

29 8(a) APPLICATION STEPS TO TAKE IF YOUR 8(A) APPLICATION IS INITIALLY DENIED You may file a request for reconsideration You must submit a request for reconsideration within 45 days Thoroughly review the reason(s )for denial and determine if/how you can address them Provide SBA with any additional information and documentation to address/overcome reason(s) for the initial decline (whether or not available at the time of initial application) including information and documentation regarding changed circumstances SBA will issue a written decision within 45 days

30 POST-ACCEPTANCE GENERAL REQUIREMENTS: Sign Participation Agreement [SBA Form] Submit Business Plan [13 CFR ] Submit Annual Review [13 CFR (b)] Remain small in primary NAICS [13 CFR (a)(2)] Report and seek approval for any Ownership/Management Changes [13 CFR (i)] Non-8(a) Business Activity Targets [13 CFR ]

31 GENERAL REQUIREMENTS POST-ACCEPTANCE Sign Participation Agreement [SBA Form] - Requires 8(a) participant to acknowledge that it will abide by the program requirements set forth in the regulations and to acknowledge the consequences of failing to comply Submit Business Plan [13 CFR ] - Must be submitted prior to receiving any 8(a) contracts. If SBA determines (prior to expiration of the 9-year term) that the firm has achieved the Development Goals set forth in the Business Plan, the SBA will graduate the firm Submit Annual Review [13 CFR (b)] - Requires the firm to provide information demonstrating that the firm meets all of the 8(a) program eligibility requirements.

32 GENERAL REQUIREMENTS POST-ACCEPTANCE Remain small in primary NAICS [13 CFR (a)(2)] - A firm can request that its primary NAICS be changed if it can show that the majority of its total revenues during a 3-year period evolved from one NAICS code to another Report Ownership/Management changes to the SBA prior to making changes [13 CFR (i)] - SBA must approve any ownership/management or structure changes prior to making the change

33 GENERAL REQUIREMENTS POST-ACCEPTANCE Non-8(a) Business Activity Targets [13 CFR ] - Firms must make efforts to obtain business outside the 8(a) program. Monitoring begins in the first year of the Transitional Stage and is expressed as a percentage of total revenue Participant s year in the transitional stage Non-8(a) Business Activity Targets (required minimum non-8(a) revenue as a percentage of total revenue)

34 POST-ACCEPTANCE Consequences of Noncompliance with SBA 8(a) BD Program Regulations (including size misrepresentations) - Inability to receive sole-source contracts [13 CFR ] - Suspension and/or debarment from government contracting [13 CFR ] - Termination from the 8(a) BD program [13 CFR ] - Civil lawsuits and penalties under False Claims Act [13 CFR ]

35 POST-ACCEPTANCE Term Completion Graduation Early Graduation Voluntary Withdrawal Termination Expiration of 9-year term The firm has substantially achieved targets, goals and objectives set forth in the business plan and demonstrated the ability to compete in the marketplace Achievement of targets, goals and objectives prior to expiration of program term The firm elects to voluntarily withdraw from the program SBA may terminate a firm for good cause Examples of good cause: Submission of false information; Failure to maintain eligibility requirements; Failure to obtain prior approval from SBA for management/ownership changes

36 POST-ACCEPTANCE GENERAL AREAS OF CONTRACTOR COMPLIANCE Business Ethics Code of Business Ethics and Conduct Anti-kickbacks, gratuities, conflict of interest OFCCP Compliance Nondiscrimination in employment Affirmative action and recordkeeping Limits on Subcontracting Prime contractor performance requirements Be aware of upcoming changes Affiliation Can impact a company s size Affiliation principles apply to many government programs

37 POST-ACCEPTANCE 8(a) Fraud: Guilty Plea in Pass-Through Case (10/2014) From , various 8(a) companies were awarded government contracts but passed them through to a non-eligible company in order to get a percentage of the value of the contract. SDVOSB Fraud: Guilty Plea in False Claim of Service- Disabled Veteran (9/2014) A company received more than $6.8 Million in government contracts based on falsely representing that one of the owners was a service-disabled veteran when he was in fact not a service-disabled veteran. 8(a) Fraud: Guilty Plea in Fraudulent Control Case (3/2014) A company obtained 8(a) certification and subsequently received government contracts based on that certification; an investigation revealed that the company was actually controlled by an individual that did not qualify as socially or economically disadvantaged under the 8(a) program.

38 NHO 8(a) PROGRAM NATIVE HAWAIIAN ORGANIZATION (NHO) - any community service organization serving Native Hawaiians in the State of Hawaii which is a not-for-profit organization chartered by the State of Hawaii, is controlled by Native Hawaiians, and whose business activities will principally benefit such Native Hawaiians. [13 CFR 124.3] NHO For-profit firm 8(a) firm For-profit firms owned by NHOs are eligible for the 8(a) BD program, under different rules Unlike businesses owned by individuals, proceeds from businesses owned by NHOs go back to the Native Hawaiian community

39 NHO 8(a) PROGRAM SPECIAL RULES FOR NHOS [13 CFR ] STRUCTURE: NHO must be majority owner (i.e. 51%) NHO must control for-profit firm (i.e. NHO must control the for-profit Board of Directors) NHO cannot own 51% or more of another business (either at the time of application or for the previous two years) that is in the 8(a) program under the same primary NAICS code of the applicant NHO-owned business must be small and meet standards under 13 CFR 121 o Exceptions to affiliation rules apply for o NHOs and its for-profit firms. In general, affiliation will not be found based on common ownership, management, and common administrative services Day-to-day operations do not need to be managed by socially and economically disadvantaged individual(s)

40 NHO 8(a) PROGRAM SPECIAL RULES FOR NHOS [13 CFR ] ELIGIBILITY: NHO must establish disadvantage: o A majority of NHO members/directors must be Native Hawaiian AND economically disadvantaged under 13 CFR o NHO needs to re-establish eligibility every time a new firm seeks certification NHO must demonstrate that its activities will benefit Native Hawaiians No one-time individual eligibility limitation POST-ACCEPTANCE: No thresholds for ONLY Department of Defense sole-source contracts o Section 811 of FY2010 NDAA requires J&A process for contracts over $20 million No follow on contracts

41 NHO(a) PROGRAM NHO 8(a) APPLICATION What is a NHO required to submit with an 8(a) application? SBA Form 1010-NHO Bylaws State filings (i.e. Article of Incorporation and any amendments) Minutes and all resolutions for the past two years Documentation showing the NHO s ownership of the applicant business Demonstrate how the NHO serves the Native Hawaiian community Financial statements (i.e. balance sheet and profit and loss statements) Federal tax returns Include complete and accurate information of all NHO-owned firms Ensure tax returns are signed and dated NHO minutes needs to show election of directors

42 NHO 8(a) PROGRAM NHO 8(a) APPLICATION ALL NHO Members/Directors Need to Submit Individual Information, including: SBA Form 1010-IND SBA Form 912 SBA Form 413 For individuals claiming economic disadvantage IRS Form 4506-T Resume Birth Certificate that demonstrates Native Hawaiian ancestry Ensure 413s are 30 days current Ensure all Board members/directors disclose all outside affiliations/business activities Ensure resumes include NHO Board position/responsibilities

43 RESOURCES & TOOLS LOCAL GOVERNMENT CONTRACTING AND BUSINESS RESOURCES SBA Hawaii District Office Hawaii PTAC Hawaii SBDC Business Action Center cca.hawaii.gov/bac SCORE hawaii.score.org Holomua Consulting Group

44 RESOURCES & TOOLS System for Award Management (SAM) Dun & Bradstreet U.S. Small Business Administration Dynamic Small Business Search USAspending.gov Federal Business Opportunities (FBO) Acquisition Central (Federal Agency Procurement Forecasts) Interagency Contract Directory GSA e-library Electronic Code of Federal Regulations U.S. Census Bureau NAICS Information NAICS Association

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