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

March 11, 2015

INTRODUCTION

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.

Shannon Edie President & Senior Consultant

shannon@holomuaconsulting.com

Daphne Tong-Pave Vice President & Senior Consultant

daphne@holomuaconsulting.com

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

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

PRE-APPLICATION

SMALL BUSINESS GOALING REPORT FISCAL YEAR 2013

CATEGORY DOLLARS PERCENTAGE

Small Business $83,142,807,957.99 23.39%

Small Disadvantaged Business $30,616,176,486.32 8.61%

8(a) Business $13,997,559,304.36 3.94%

Veteran Owned Small Business $17,810,543,400.01 5.01%

Service Disabled Veteran Owned Small Business $12,023,167,217.12 3.38%

Woman Owned Small Business $15,364,841,129.49 4.32%

Certified HUBZone Small Business $6,244,980,082.24 1.76%

Data from the Federal Procurement Data System

GOVERNMENT-WIDE CONTRACTING GOALS:

SMALL BUSINESS

23%

WOSB

5%

SDB

5%

HUBZone

3%

SDVOSB

3%

PRE-APPLICATION P

RO

GR

AM

BE

NE

FIT

S

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

Procurement opportunities, total or partial, in which only certain businesses may compete

Joint Ventures & Teaming

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

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

PRE-APPLICATION

SOCIALLY DISADVANTAGED [13 CFR 124.103] - 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”

PRE-APPLICATION

ECONOMICALLY DISADVANTAGED [13 CFR 124.104] - “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

PRE-APPLICATION

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

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

PRE-APPLICATION

Must be small

[13 CFR 121 &

13 CFR 124.102]

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

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 121.101(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

238210 Electrical contractors and other wiring

installation contractors $15.0

334220 Radio and television broadcasting and wireless

communications equipment manufacturing 750

541330 Engineering Services $15.0

541712 Research and development in the physical,

engineering, and life sciences 500

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

PRE-APPLICATION

Potential for Success

[13 CFR 124.107]

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

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

*SBA may waive the two years in business requirement if ALL of the following

requirements are met:

PRE-APPLICATION

Good Character

[13 CFR 124.108]

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 pre-trial or following conviction for felony or any crime involving business integrity)

PRE-APPLICATION

STRATEGIES FOR GETTING READY TO APPLY FOR THE PROGRAM:

Confirm Eligibility • Review ALL eligibility requirement

• Ensure you meet ALL eligibility requirements

Conduct Research (i.e. 8(a) program research

and market research)

• Determine if the program is a right fit

• https://www.fbo.gov

Establish a solid business structure • Ensure your business organization is strong and will

not require changes

Obtain a DUNS Number • https://iupdate.dnb.com

Register in SAM & DSBS • https://www.sam.gov

Register in SBA General Login System • https://eweb.sba.gov/gls/dsp_login.cfm

Gather required information and documents

• Required information and documents include:

• Business – Governing, corporate, and financial

documents

• Individual – Personal and financial

• https://www.sba.gov/content/8a-application-checklist

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

8(a) APPLICATION

APPLICATION COMPONENTS:

• Business Information and Documents

• Individual Information and Documents

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 1790 - Representative used and

compensation paid for services in

connections with obtaining federal

contracts

• SBA Form 1623 - 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.

8(a) APPLICATION

• 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

SBA FORM 1010-BUS

Ensure information is accurate

Provide detailed explanation for all YES responses

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

How does SBA

determine a concern's

“primary industry”?

[13 §121.107]

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.

PRIMARY NAICS

MAJORITY OF BUSINESS

OPERATIONS

BUSINESS SIZE

REVENUES AVERAGED FOR THREE (3) YEARS

NUMBER OF EMPLOYEES

NEED TO BE SMALL IN PRIMARY

NAICS

CONTRACT SPECIFIC

Don’t confuse

calculating

primary NAICS

with calculating

business size

8(a) APPLICATION

• 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

COMPANY SUPPORTING DOCUMENTS

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

8(a) APPLICATION

COMPANY FINANCIAL DOCUMENTS

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

• 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

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

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)

8(a) APPLICATION

SBA FORM 413 - 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)

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

8(a) APPLICATION

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

ADDRESSING SBA'S QUESTIONS AND CONCERNS:

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

POST-ACCEPTANCE

GENERAL REQUIREMENTS:

• Sign Participation Agreement [SBA Form]

• Submit Business Plan [13 CFR 124.402]

• Submit Annual Review [13 CFR 124.112(b)]

• Remain small in primary NAICS [13 CFR 124.102 (a)(2)]

• Report and seek approval for any Ownership/Management Changes [13 CFR 124.105(i)]

• Non-8(a) Business Activity Targets [13 CFR 124.509]

POST-ACCEPTANCE G

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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 124.402] - 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 124.112(b)] - Requires the firm to provide information demonstrating that the firm meets all of the 8(a) program eligibility requirements.

POST-ACCEPTANCE G

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Remain small in primary NAICS [13 CFR 124.102(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 124.105 (i)] - SBA must approve any ownership/management or structure changes prior to making the change

POST-ACCEPTANCE G

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Non-8(a) Business Activity Targets [13 CFR 124.509] - 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)

1 15

2 25

3 35

4 45

5 55

POST-ACCEPTANCE

Consequences of Noncompliance with SBA 8(a) BD Program

Regulations (including size misrepresentations)

- Inability to receive sole-source contracts

[13 CFR 124.509]

- Suspension and/or debarment from government contracting

[13 CFR 124.305]

- Termination from the 8(a) BD program

[13 CFR 124.301]

- Civil lawsuits and penalties under False Claims Act

[13 CFR 121.108]

POST-ACCEPTANCE

Term Completion

Expiration of 9-year term

Graduation The firm has substantially achieved targets, goals and objectives set forth in the business plan and demonstrated the ability to compete in the marketplace

Early Graduation

Achievement of targets, goals and objectives prior to expiration of program term

Voluntary Withdrawal

The firm elects to voluntarily withdraw from the program

Termination 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

POST-ACCEPTANCE

GENERAL AREAS OF CONTRACTOR COMPLIANCE

• Code of Business Ethics and Conduct

• Anti-kickbacks, gratuities, conflict of interest Business Ethics

• Nondiscrimination in employment

• Affirmative action and recordkeeping OFCCP Compliance

• Prime contractor performance requirements

• Be aware of upcoming changes

Limits on Subcontracting

• Can impact a company’s size

• Affiliation principles apply to many government programs

Affiliation

POST-ACCEPTANCE

• From 2008 – 2014, 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.

8(a) Fraud: Guilty Plea in Pass-Through Case (10/2014)

• 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.

SDVOSB Fraud: Guilty Plea in False Claim of Service-Disabled Veteran (9/2014)

• 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.

8(a) Fraud: Guilty Plea in Fraudulent Control Case

(3/2014)

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

NHO 8(a) PROGRAM

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

NHOs and its for-profit firms.

o 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)

SPECIAL RULES FOR NHOS [13 CFR 124.110]

NHO 8(a) PROGRAM

ELIGIBILITY:

• NHO must establish disadvantage:

o A majority of NHO members/directors must be Native Hawaiian

AND economically disadvantaged under 13 CFR 124.104

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

SPECIAL RULES FOR NHOS [13 CFR 124.110]

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

NHO 8(a) PROGRAM

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

NHO 8(a) APPLICATION

RESOURCES & TOOLS

LOCAL GOVERNMENT CONTRACTING AND BUSINESS RESOURCES

SBA Hawaii District Office

www.sba.gov

Hawaii PTAC

www.hiptac.org

Hawaii SBDC

www.hisbdc.org

Business Action Center

cca.hawaii.gov/bac

SCORE

hawaii.score.org

Holomua Consulting Group

RESOURCES & TOOLS

System for Award Management (SAM) www.sam.gov

Dun & Bradstreet www.dnb.com

U.S. Small Business Administration www.sba.gov

Dynamic Small Business Search http://dsbs.sba.gov

USAspending.gov http://usaspending.gov

Federal Business Opportunities (FBO) www.fbo.gov

Acquisition Central (Federal Agency Procurement Forecasts) www.acquisition.gov

Interagency Contract Directory www.contractdirectory.gov

GSA e-library www.gsaelibrary.gsa.gov

Electronic Code of Federal Regulations www.ecfr.gov

U.S. Census Bureau – NAICS Information www.census.gov/eos/www/naics

NAICS Association www.naics.com

QUESTIONS & NEXT STEPS

Make an appointment with us before you leave

Think about it and call us with any questions

Tell a friend about our valuable services

QUESTIONS

THANK YOU FOR ATTENDING TODAY’S WORKSHOP!

For more information about Holomua Consulting Group, LLC

and future workshops, please visit: www.holomuaconsulting.com