Small Business policy Is based on a lot of hooey

Sounds like an interesting read. Thanks for the recommendation, Vern. And I'm sure many on here sympathize with your disgust for FAR 19 (and a power-hungry SBA)!

For the past 9 years I've been searching for some shred of actual empirical evidence showing that FAR 19 provides a net macroeconomic benefit to the American economy.  All I've ever heard is conjecture.

I don't think a longitudinal study isolating for the right things is in the cards...there are too many exit ramps, scenic vistas and pretty snapshots to take along the way, so we won't know much about the real impact of small business however long we ask such question of ourselves.

Take for example the authors' observation about small business failure. Anybody can reckon small business failures, in the same way that anyone can count the number of seeds in an apple...but that's a snapshot at an instant...even when the same statistic is gathered in serial fashion every year...it is a series of snapshots and does not tell us what becomes of any given failure or set of failures. 

Instead, what will we imagine if we ask ourselves how many apples in a seed? Similarly, does anyone know the real impact of small business failure and even the prospect of small business failure over time for even one business or in the aggregate, all businesses? We might as well try to discern the Invisible Hand taught by Adam Smith in all the goods and services that surround us.  Attempt to banish the twin horribles of failure and the prospect of failure and society will find out quickly that is does not have the wherewithal to underwrite all success. What does that tell us about failure? What phoenix rises from these ashes we call failure, time and again? What is in the economic DNA of almost every success you and I know?...We will find a lot owing to failure, if for no other reason than that failure tends to be such a generous teacher.

@FAR-flung 1102

So...  does all that that mean you think the current small business policy bog is the cat's meow? (Sorry for the mixed metaphors.)

I once interviewed candidates for a job and asked each "what regulations would you change?" - FAR 19 was the consensus favorite.  

Even if you take the supposition that small business concerns should be favored as a way to drive the economy, I'm not sure the current regs actually help that...and maybe they do the opposite.   Take the notion that many NAICS code thresholds are based on number of employees - the rules encourage companies to stay UNDER those thresholds; to limit the number of jobs they create.   I knew of one company that did sweeping annual layoffs each fall (after busy season) just to ensure they stayed under the headcount caps.   That's the behavior that results from the rules - is that in line with the underlying intent of the rules?   It seems quite the opposite. 

I've not considered pure neutrality (i.e., no economic preferences) as proposed in the book description.   I've thought of lots of tweaks and alternatives to FAR 19, but they all suffer from flaws.   And maybe that's the best case for neutrality.   Besides, build a better mousetrap and the government won't care what size you are.   

The book sounds interesting.

Vern Edwards said:

@FAR-flung 1102

So...  does all that that mean you think the current small business policy bog is the cat's meow? (Sorry for the mixed metaphors.)

No definitely it's not the cat's meow...and I want it to become it to become a thing of the past, but I am afraid of what comes next if we do not reign in a few tendencies first. The "Severeid Effect" (So many of today's problems started out as yesterday's solutions) permeates Washington's political process like an oor. Almost nobody in power is willing to look for inconvenient truth.    Its not mine to play kingmaker or Lord of the Realm, but I really do believe that if we kill the FAR Part 19 process right  now, we also create a vacuum that small businesses are largely unable to fill.  It's just that we create in our current bureaucracy so many problems that only large business has the ability to understand or solve.

My main problem with how we treat small business lies in our byzantine systems and processes (which defy reasonable expectations and common sense)...it stifles so much initiative and often makes it very  difficult to get a business on board and PAID timely for services or supplies rendered without the need for silver bullets or heroic measures.     If a small business cannot get paid timely then THEY are financing government's ponderous machinations...it's wrong but in the current big picture almost inevitable that some will fall prey and their aspirations fade away accordingly.

People's expectations are so low,, we should be able to meet them in making meaningful real improvements in doing the government's business and help many... if only we can manage to work with with an even, steady, and competent hand.  There was a famous Federal Jurist with my all time favorite name: "Learned Hand"...a name for all time to live up to...metaphorically, we need more of those.. .Thank you for your part Vern.  You pull much more than your own weight. Sorry, I think I have mixed a few metaphors, too.

On 6/7/2018 at 1:01 PM, jayandstacey said:

Even if you take the supposition that small business concerns should be favored as a way to drive the economy, I'm not sure the current regs actually help that...and maybe they do the opposite

I sometimes shake my head at the incentive structure that leads small business to argue *in public* that they are not responsible:

/legacy/reg/0f3db0e9dc7138a4.html

Prime contractors' costs to develop and administer small business reporting programs is not insignificant. And the costs associated with mistakes can be expensive as well.

http://www.asbca.mil/Decisions/2017/59876 BAE Systems Southwest Shipyards Mayport LLC 7.13.17.pdf

PepeTheFrog said:

Where are the medium-sized businesses? It's all giant companies and artificially small businesses. Nothing in the middle. Where is the "middle class" of federal contractors?

This one is particularly perplexing. 

The current system is pretty much like a run up to a cliff.   You're advantaged to drive success, then the advantages are pulled away at a point where you may be too small to effectively compete against the big guys, and you're disadvantaged (or even not allowed to compete) with companies that have only 10 less employees than you do.   

So the path becomes, almost invariably, to grow the business to the line then cash out.  Forget about the fact that at the line, you might be the type of business that can REALLY be an economic engine under a more level playing field, generating increasing growth in jobs and revenues.  

Nope - you sell out to one of the big guys, or simply close the doors at that point.    

The only thing keeping this from being a disaster for some companies seems to be the inconsistency of the application of small vs large.   As a company becomes larger, it begins to tick off various NAICS codes it can't bid under as small, until it runs out.   Likewise, contracts have various re-certification schedules, where the company might be able to maintain their small status for some time on some contracts.   So the cliff isn't exactly sheer, but it is pretty steep.   Which in some ways is worse.   

As I said above, I've considered what fixes I'd make.  I've thought about patches to the current system, whole new systems, and ditching the system entirely.   The latter seems to make the most sense, yet is least likely politically.    

Which leaves us with a vending machine that everyone seems to know how to shake to get free stuff.

On ‎6‎/‎11‎/‎2018 at 8:18 AM, PepeTheFrog said:

They say it's economics but it's really social policy. "Socio-economic."

Well doesn't the FAR in total fall into this category as one could conclude that it as a policy like anything that comes out of the front doors of Congress is a lot of hooey.

 Not saying that FAR Part 19 is perfect but lost in the rhetoric of this thread is a discussion of the whole picture.  A specific not even being discussed is that of unfunded mandates of Congress and the ability of, for instance, the SBA to provide the oversight and assistance necessary to insure something like the 8(a) program works. 

I for one believe that of the $442,486,733,745.14 pie in Federal procurements available for possible participation by all contractors in 2017 that small businesses would have received a whole lot less than their $105,660,294,868.78 piece without FAR Part 19.   And that includes the XYZ small businesses that someday might be the Nike, Apple, Dell, Google, Amazon, H-P, etc. of tomorrow.

Could be that I have drank the Kool-Aid but I think there is something to say in helping give businesses a leg up and at some point cutting them loose to fend for themselves.  So I get lost in the dialog to add even more socio-economic engineering to the Federal acquisition monster by creating "medium size" businesses    Lordy  we are sometimes our own worst enemy!

On ‎6‎/‎6‎/‎2018 at 9:50 AM, Vern Edwards said:

I'm going to buy it, even though I understand that the members of Congress will pay no attention to it.

As to the book no doubt a great read.  The authors are innovative thinkers and at times accomplish inroads.   Congress does pay attention to them individually and through the entities they have strong association with.  My concern is that they themselves and through the NGO's that they can effect change through have their own agenda's  that may not be in the best interest of real improvement to Federal acquisition policy in whole or even in part.

C Culham said:

I for one believe that of the $442,486,733,745.14 pie in Federal procurements available for possible participation by all contractors in 2017 that small businesses would have received a whole lot less than their $105,660,294,868.78 piece without FAR Part 19.

That is possible, but impossible to prove without Part 19.

Maybe Part 19 and its predecessors are the problem. Perhaps the policy has infused the minds of acquisition personnel with the notion that "small businesses" are a distinct class of business entities that need special consideration and help in order to compete. Perhaps that has suggested to many that "small businesses" are less competent than "large businesses," otherwise, why would work have to be set aside for them. Once you create such an impression, it's very difficult to convince people that the little guys who need the special help are just as good as the big guys. By creating the special program you are creating, or reinforcing, a prejudice.

So it may be true that Part 19 ensures that small businesses get something that they would not have gotten without Part 19. But maybe Part 19 ensures that they won't get more than they are "entitled" to. We meet the quota and then we're done. Right?

Anyway, don't worry. Small business programs aren't going away. Ever.

By the way, anyone interested in the origin of small business contracting policy see Small Business and Strategic Sourcing: Lessons from Past Research and Current Data (RAND 2014), Chapter Two. https://www.rand.org/pubs/research_reports/RR410.html

Vern Edwards said:

We meet the quota and then we're done. Right?

I haven't seen that when the goal is met that folks are done, whether coerced by regulation or because they want to continue on.  But then again folks might say I have blinders on.

Vern Edwards said:

Anyway, don't worry. Small business programs aren't going away. Ever.

I was reminded of my much younger days - "What,  me worry?"   "Not!" as couple of favorites of mine would say a few decades later.  

C Culham said:

I haven't seen that when the goal is met that folks are done, whether coerced by regulation or because they want to continue on.

Wasn't that essentially the root issue in the Kingdomware decision?   That the VA stopped doing SDVOSB set-asides once the goals were met?  

Only one example, I know...and this was a bit of a corner case due to the uniqueness of the VA and SDVOSBs...but the practice seemed to be there.

jayandstacey said:

Wasn't that essentially the root issue in the Kingdomware decision?

No expert on the case in total but yes it was part of the argument by the VA/Government but they did not hold to using goal accomplishment as reason when the case got to the Supreme Court.   Makes me wonder if they knew it would not hold water as I suspect again by experience with other agencies where I have never was told or knew by statements by others in  agencies  that set-asides would be or have been abandoned for full and open competition when goals were met, SDVOSB or otherwise.  Or maybe the VA just picked the wrong thing to convince the Supreme Court on why their actions regarding their "rule of two" was the right approach.

On 6/11/2018 at 11:18 AM, PepeTheFrog said:

On 6/11/2018 at 11:18 AM, PepeTheFrog said:

On 6/14/2018 at 10:00 AM, FrankJon said:

I don't know how you reached your conclusion, that the 8(a) Program is "explicitly" based on race. In order to be eligible for 8(a) status a firm must be a small disadvantaged business (SDB). The eligibility rules are in 13 CFR 124.

In order to an SDB a small firm must be at least 51 percent unconditionally owned by a socially and economically disadvantaged person. According to the rules, a socially disadvantaged person is:

Quote

Socially disadvantaged individuals are those 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. The social disadvantage must stem from circumstances beyond their control.

Race is only one source of social disadvantage. Other sources are ethnic identity and culture. The census bureau considers race and ethnicity to be "two separate and distinct concepts." According to the American Heritage Dictionary, ethnic means:

Quote

Of, relating to, or characteristic of a group of people sharing a common cultural or national heritage and often sharing a common language or religion.

According to SBA regulations:  

Quote

(b) Members of designated groups.

(1) There is a rebuttable presumption that the following individuals are socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (Alaska Natives, Native Hawaiians, or enrolled members of a Federally or State recognized Indian Tribe); Asian Pacific Americans (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by SBA according to procedures set forth at paragraph (d) of this section. Being born in a country does not, by itself, suffice to make the birth country an individual's country of origin for purposes of being included within a designated group.

(2) An individual must demonstrate that he or she has held himself or herself out, and is currently identified by others, as a member of a designated group if SBA requires it.

(3) The presumption of social disadvantage may be overcome with credible evidence to the contrary. Individuals possessing or knowing of such evidence should submit the information in writing to the Associate Administrator for Business Development (AA/BD) for consideration.

Note that groups like Asian Pacific Amercans are not racially defined. They are "persons with origins" in places like Vietnam and Nepal are not racial in nature. The regulation then goes on to say:

Quote

(c) Individuals not members of designated groups.

(1) An individual who is not a member of one of the groups presumed to be socially disadvantaged in paragraph (b)(1) of this section must establish individual social disadvantage by a preponderance of the evidence. Such individual should present corroborating evidence to support his or her claim(s) of social disadvantage where readily available.

(2) Evidence of individual social disadvantage must include the following elements:

(i) At least one objective distinguishing feature that has contributed to social disadvantage, such as race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged;

(ii) The individual's social disadvantage must be rooted in treatment which he or she has experienced in American society, not in other countries;

(iii) The individual's social disadvantage must be chronic and substantial, not fleeting or insignificant; and

(iv) The individual's social disadvantage must have negatively impacted on his or her entry into or advancement in the business world. SBA will consider any relevant evidence in assessing this element, including experiences relating to education, employment and business history (including experiences relating to both the applicant firm and any other previous firm owned and/or controlled by the individual), where applicable.

(A) Education. SBA considers such factors as denial of equal access to institutions of higher education, exclusion from social and professional association with students or teachers, denial of educational honors rightfully earned, and social patterns or pressures which discouraged the individual from pursuing a professional or business education.

(B) Employment. SBA considers such factors as unequal treatment in hiring, promotions and other aspects of professional advancement, pay and fringe benefits, and other terms and conditions of employment; retaliatory or discriminatory behavior by an employer; and social patterns or pressures which have channeled the individual into nonprofessional or non-business fields.

(C) Business history. SBA considers such factors as unequal access to credit or capital, acquisition of credit or capital under commercially unfavorable circumstances, unequal treatment in opportunities for government contracts or other work, unequal treatment by potential customers and business associates, and exclusion from business or professional organizations.

An economically disadvantaged person is:

Quote

Economically disadvantaged individuals are 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.

Anyone interested in this topic should read 13 CFR 124 in its entirety.

In short, Pepe and FrankJon, you guys aren't reading the rules very carefully, if at all. 8(a) Program eligibility is not "based on" race. 8(a) eligibility can be established on any of a number of bases, not just race.

I don't mind discussing things like this, but if we are going to discuss it let's do it like pros, not like amateurs.

Vern Edwards said:

The census bureau considers race and ethnicity to be "two separate and distinct concepts."

FrankJon said:

racial and ethnic classes of people.

On 6/14/2018 at 11:02 AM, Vern Edwards said:

I don't mind discussing things like this, but if we are going to discuss it let's do it like pros, not like amateurs.

To be clear, my post wasn't meant to take a position on the merit of the 8(a) Program. I simply learned something about the 8(a) Program that I was shocked I hadn't learned before.

In my post, I mentioned ethnicity in addition to race. I thanked Pepe for calling my attention to the topic.

Anytime we stray into this area, I must review the discussion word for word as a matter of policy.  I will do that at a future date.  I am not claiming that anyone wrote anything improper but I will say that my version of strict scrutiny makes the SCOTUS or any other court look like kittens.

😳

I don't think any of Pepe's last post was funny, and I'm not talking about what he said about me. He cannot prove his assertions. Everything is innuendo. They are expressions of feelings that don't belong in this forum.

On 6/14/2018 at 1:19 PM, PepeTheFrog said:

Where are all the white men with 8(a) contracts? Oh, right. They're not "socially disadvantaged."

Pepe, while it is a small sample size, I have an 8(a) client who is a white male from Appalachia.  I guess a (very) few poor white males do qualify.  As for Hispanics, right after graduating from college, I taught high school in Texas.  One of the Spanish teachers was a blond blue eyed Spanish man.  There are many people like him from Latin America who would be eligible for 8(a) status.

Vern posted Big Is Beautiful: Debunking the Myth of Small Business, by Robert D. Atkinson and Michael Lind to begin this topic.  I thought it would be opinion-based but I think it may be supported by facts.  One of the authors is President of the Information Technology and Innovation Foundation.  The author has made the book circuit and lists reviews and interviews on the linked page that add information.  I found an interview interesting.

I hid some language in some posts and hid other posts altogether. However, I did not ban anyone.  There are studies on the internet that will either support or not support just about any program in Part 19 of the FAR.  If you want to discus these programs, use one of the studies based on factual data to support your case.  Don't use your opinons or gut feelings.

On 6/16/18, I revisited the posts in this forum.  I made more deletions.  I anticipate making more.

PepeTheFrog's analysis and opinion of the 8(a) program was entirely deleted. Oh, well. It's a private forum. 

It seems like the 8(a) program, a government contracts program, is too controversial to be discussed in a government contracts forum. Could it be because the 8(a) program is explicitly based on race?

Read Vern Edwards' accurate quotations of the regulations, especially the rebuttable presumption part, which in his opinion, somehow disproves that the 8(a) program is based explicitly on race. "Identity and culture" can also be considered, not just race. Ah! That clears things up. Nothing to see here, folks. The Emperor's clothes are magnificent. 

PepeTheFrog's position is that the 8(a) program is explicitly based on race and is carried out in reality based on race, and that anyone who disagrees is [censored].

On 6/14/2018 at 11:02 AM, Vern Edwards said:

I don't know how you reached your conclusion, that the 8(a) Program is "explicitly" based on race. In order to be eligible for 8(a) status a firm must be a small disadvantaged business (SDB). The eligibility rules are in 13 CFR 124.

In order to an SDB a small firm must be at least 51 percent unconditionally owned by a socially and economically disadvantaged person. According to the rules, a socially disadvantaged person is:

Quote

Socially disadvantaged individuals are those 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. The social disadvantage must stem from circumstances beyond their control.

Race is only one source of social disadvantage. Other sources are ethnic identity and culture. The census bureau considers race and ethnicity to be "two separate and distinct concepts." According to the American Heritage Dictionary, ethnic means:

Quote

Of, relating to, or characteristic of a group of people sharing a common cultural or national heritage and often sharing a common language or religion.

According to SBA regulations:  

Quote

(b) Members of designated groups.

(1) There is a rebuttable presumption that the following individuals are socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (Alaska Natives, Native Hawaiians, or enrolled members of a Federally or State recognized Indian Tribe); Asian Pacific Americans (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by SBA according to procedures set forth at paragraph (d) of this section. Being born in a country does not, by itself, suffice to make the birth country an individual's country of origin for purposes of being included within a designated group.

(2) An individual must demonstrate that he or she has held himself or herself out, and is currently identified by others, as a member of a designated group if SBA requires it.

(3) The presumption of social disadvantage may be overcome with credible evidence to the contrary. Individuals possessing or knowing of such evidence should submit the information in writing to the Associate Administrator for Business Development (AA/BD) for consideration.

Pepe:

Your comments were deleted because they are inconsistent with this forum.  However, I didn't feel they required your immediate banishment.  Leave it at that. 

If the 8(a) program is race-based, try it in court.  If you are correct, you can make it temporary and then end it.  Don't just whine about it. 

Vern was correct in his appraisal of your knowledge of this issue.

Quote

Oh, well. It's a private forum.

This is not a private forum.  It is private property but it is open to all who have contracting experience and who abide by its rules.

bob7947 said:

If the 8(a) program is race-based, try it in court.

As Bob knows, Rothe already did, in the narrow sense of challenging the statute rather than the implementing regulations discussed in this thread.

The dissenting opinion by Judge Henderson is worth reading:  

https://www.cadc.uscourts.gov/internet/opinions.nsf/8E679E72D2D0E57C85258029004DCFFF/$file/15-5176-1634830.pdf

bob7947 said:

I didn't feel they required your immediate banishment.  Leave it at that.

This will be PepeTheFrog's last post in this thread, and PepeTheFrog gets the message, loud and clear.

I think the question of SB's contribution to the economy, etc., is irrelevant to the issue of Part 19 and socioeconomic contracting programs in general.  This belief is based on the fact that federal contracting is not, and never has been, solely about obtaining the lowest price, which is the implication behind saying LB's are more efficient, innovative, etc.  If efficiency was the metric for who receives Federal contracts, there would be exactly 3 contractors receiving all Federal procurement dollars (gotta' get your 3 prices after all).

The issue is the equitable distribution of taxpayer funds.  The fact is that regardless of their objective merit, SB's exist in large numbers in this country, and there is no justification for them not receiving some of the public monies spent in the commercial marketplace.  Hence the 'socio' prefix before 'economic'.   

Do SB programs in general achieve their stated goal of growing SB's into stable, successful, going business concerns?  Probably not, because as we all know, they tend to rely on their SB status until they graduate, at which point they wander around the open-market contracting wilderness, threadbare and clueless,  until they stumble off a cliff.  But when has effectiveness ever mattered in government?

REA'n Maker said:

Probably not, because as we all know, they tend to rely on their SB status until they graduate, at which point they wander around the open-market contracting wilderness, threadbare and clueless,  until they stumble off a cliff.

I didn't know this. Do you mean SB or 8(a)? Are you basing this on anecdotal evidence, or are there statistics on this?

Back in the 1970s, I worked for a year as a contract specialist in the Procurement Assistance Division of the Los Angeles District Office of the SBA. My office was in the downtown World Trade Center. My job was helping 8(a) contractors.

One of the things that I noticed about the 8(a) Program was that nobody wanted to graduate. They would fight graduation tooth and nail. And once graduated, firms generally did not survive for long, much less succeed, although there were exceptions.

The program helped 8(a) firms win contracts, but it did not teach them to be successful business persons and to succeed on their own. We couldn't teach them, really. We were government employees, and no one in the office that I worked in had ever run a successful business. What did we know about it?

“If efficiency was the metric for who receives Federal contracts, there would be exactly 3 contractors receiving all Federal procurement dollars (gotta' get your 3 prices after all).”

With respect to construction contracting, I respectfully disagree. Most projects couldn’t afford the three biggest large business contractors who would have the capacity to handle that much business.  Same goes for the biggie A-E firms.  That is based upon my experience in A-E and construction contracting and my involvement in over 90 source selections involving varied services and construction contracts. Many small and medium business A-E and construction contractors can successfully compete with the premier firms for most projects other than the most complex or huge ones.  Those are not the most common projects. The small and medium sized firms are also generally a heck of a lot cheaper when pricing extra work, changes, claims, etc. 

An office that I supervised also negotiated all of our District’s sole source and Sole source 8(a) construction contracts. I’m not going to comment on their capabilities or the programs other than to say I won’t disagree with Vern’s recent post.

Back in the late 80's to mid 90's I worked for the 8(a) Program as the contract specialist/contracting officer for the Portland District Office.  In this position as a government employee I gained significant experience into the view of the business world and the mind set of 8(a) firms specifically.   Experience included not only assisting firms in understanding Federal contracting but experience in reviewing required business plans, monitoring the hoped for success of firms, internal audits of firms to ensure compliance with program goals and even assisting the business development of small businesses in total that wanted to do business with the Federal government.  All the while working with Federal agencies as well and gaining experience in understanding their own mission needs and stated biases against small business set-asides and the 8(a) Program, much of which have been voiced here.   

During this period the 8(a) regulations were refined to help promote success.  Pointing to at least two changes there was the stricter application of the 9 year term of participation in the program for a contractor and specific goals of business activity targets (aka competitive mix).  These remain today.

In my experience with the 8(a) Program there was the 1% of firms who could not or would not adhere to prudent business standards let alone the 8(a) Program requirements.   For these firms they were removed from the program at the least and at the most referred to the USDOJ for specific criminal activity and or failure to comply with statute that fell within the DOJ authority to deal with.  The other 99% really tried and some made it and many did not.

There were failures in general but more importantly successes as well.  Even today a couple of decades later I can point to at least three firms that exist to this day.  With deliberate thought I could probably come up with more but I see these firms names actively involved in their line of work in my travels in the PNW.   Benge Industries, Ohno Construction and Dirt and Aggregate Interchange.   I suspect that like any small business that has succeeded their evolution makes them look different than when they were in the 8(a) Program but all the same they are successful.  

I will readily admit neither the 8(a) Program or the small business programs in total of the Federal government are perfect but following my line of thinking provided in my previous post I will take the less than perfect and the successes (which never get the lip service they deserve) over the horror stories that folks like capitalize on.  With this noted and as I do with anyone I encounter in my small portion of the professional acquisition world if you want my full view just personal message me and I am glad to share my story, my experience, and my assistance on how to make the 8(a) Program work for you and for the sake of the program itself.

Vern Edwards said:

Back in the 1970s, I worked for a year as a contract specialist in the Procurement Assistance Division of the Los Angeles District Office of the SBA. My office was in the downtown World Trade Center. My job was helping 8(a) contractors.

One of the things that I noticed about the 8(a) Program was that nobody wanted to graduate. They would fight graduation tooth and nail. And once graduated, firms generally did not survive for long, much less succeed, although there were exceptions.

The program helped 8(a) firms win contracts, but it did not teach them to be successful business persons and to succeed on their own. We couldn't teach them, really. We were government employees, and no one in the office that I worked in had ever run a successful business. What did we know about it?

But don't most small businesses fail anyway? To Carl's point, isn't the relevant question here whether the 8(a) Program (or any SBA Program) has a statistically relevant impact on small business success rates?

FrankJon said:

But don't most small businesses fail anyway?

Yes.

FrankJon said:

isn't the relevant question here whether the 8(a) Program (or any SBA Program) has a statistically relevant impact on small business success rates?

That's one relevant question. Let us know when you have the numbers.

Remember too, that a high percentage of small businesses, in general,  fail or otherwise go out of business, too. 

And the construction business is fairly high risk, regardless of the size of the business.  

Many of y contemporaries and co-workers in USACE and I often did a lot of unofficial handholding to get such small firms through performance of their contracts.  Of course, that could be good or bad for them.  But there was always a sense that we wanted the job to be acceptably completed. I remember providing technical assistance, even to the point of demonstrating how to perform construction surveys, leveling and installing columns and bases, electrical control systems, leveling valves, pipe laying, well pump and pressure testing, etc. they weren’t all 8(a) firms, either. 

Edit: I was composing this post during the time that the two most recent responses above were posted.

FrankJon said:

I didn't know this. Do you mean SB or 8(a)? Are you basing this on anecdotal evidence, or are there statistics on this?

I base my opinion  more on anecdotes and experience, some of it direct, and some of it current....  I heard an SBA trainer mention it in a WOSB presentation as well.  In regard to this discussion, I don't distinguish between 8(a) and SB's in general because the ostensible goals of both programs are the same.  

joel hoffman said:

With respect to construction contracting, I respectfully disagree.

Fair point; construction has always been a special animal in the procurement world. Just out of curiosity, what percentage of the average federal construction project goes to small business, in your experience? 

Your post also brings an obvious question to mind: would SB programs be more effective if they were more focused on sectors like construction?

C Culham said:

I will readily admit neither the 8(a) Program or the small business programs in total of the Federal government are perfect but following my line of thinking provided in my previous post I will take the less than perfect and the successes (which never get the lip service they deserve) over the horror stories that folks like capitalize on.

I think your comment kind of supports what I said - efficacy isn't really the SB metric, it's the fact that these businesses exist in large numbers, and even if a small percentage succeed, it's hard to justify not spending procurement dollars to help further that success.  The alternative is basically to enrich shareholders and the investor class.

Do you think it's a coincidence that all the successes you cite appear to be in the construction sector?

Here is a article from Journalist's Resource you might find interesting.  The cost of the study is $40.

REA'n Maker said:

Do you think it's a coincidence that all the successes you cite appear to be in the construction sector?

REA - As I noted only a coincidence because I see their name on equipment, project boards, etc. as I travel around the PNW.   Your question peaked my interest and I dug into my memory and the Dynamic Small Business Search (DSBS) website and SAM.gov a little deeper.  Admittedly not scientific data analysis but all the same provided.  You be the judge....

DSBS - Searched on active and previously certified 8(a) Program and Oregon buttons.   Resulted in 191 profiles shown. I do not know nor did I look to see how far back all 191 profiles dated to, nor do I know how long DSBS has been around so not sure how far the archival information goes back but it did go back to the period I was with the 8(a) Program.

I then looked at 47 profiles that I recognized names.   Of the 47, profiles I looked to confirm whether they were in 8(a) in the time I was with the program.  Of the 47 I found 18 that still had active registrations in SAM (within the last year so active in 2017/2018).  Of the 18, 4 had a primary industry classification of construction and 14 had services that included reforestation, welding, A-E or other professional services, employee staffing, etc.

I then turned to  SAM I was intrigued that I did not see Ohno Construction or Benge Industries in the DSBS so I looked at SAM.  Both are active but Ohno is from Washington (sorry the memory for exact data from a couple of decades must not work real well, I guess) and Benge uses a dba of Veraz Construction.  SAM showed them as still active and I then found them in DSBS.  Interestingly looking at Ohno they are considered not small business for some construction NACIS codes.   Ohno's website is an interesting look into their current state and success of 50 years.     

Anecdotal number crunching absolutely, but my personal experience seems to follow the real data crunchers numbers where in my quick analysis showed me that of 47 firms 39% of the firms I recollected (confirmed) as being in the Portland District 8(a) Program when I was a staff member remain businesses today.  Remember these are only the firms I remember so the exact numbers are I am sure a little different in a detailed analysis.

PS - Once again I want to acknowledged this is a quick analysis on my part so please don't beat my data analysis abilities up.  Just simply note that at least 18 firms that were in the 8(a) Program in the late 80's to mid-90's are still active today and are sprinkled with I will term very successful and recognized businesses.

As to the some of the generalized arguments here, such as big business is more efficient, lesser cost, that’s not necessarily true in all cases. The biggies priced themselves out of several source selections that I led. On some others, they were unaffordable or exorbitant in pricing modifications. 

And I have seen a fair share of large business firms go out of business or otherwise fail to complete construction projects and be replaced. Have dealt with several of the top ten construction companies who are no more.  In one instance, I endured three years of total misery and near extortion by a top five Defense Contractor who thought they could branch into design and construction - buying up several successful design and construction companies.  They were losing hundreds of millions of dollars on FFP contracts, which were contrary to the parent firm’s corporate culture, mentality and core business. They dumped that business off on another successful A/E/C firm, which caused that firm to soon declare Chaper Eleven bankruptcy, although they  recovered. They sued the big aerospace firm that sold them the A/ E/C business for not disclosing the magnitude of losses on the big FFP projects. 

I don’t buy into the nation’s labor force practically having to work for one of those big businesses, either.

@joel hoffman

joel hoffman said:

As to the some of the generalized arguments here, such as big business is more efficient, lesser cost, that’s not necessarily true in all cases.

Joel, please bear with me. Please quote the post in this thread in which someone argued that big business is more efficient and less costly.

On 6/6/2018 at 11:50 AM, Vern Edwards said:

...According to the description of the book [Big Is Beautiful: Debunking the Myth of Small Business, by Robert D. Atkinson and Michael Lind, published in March by MIT Press.at ]Amazon.com:

.....Pointing to the advantages of scale for job creation, productivity, innovation, and virtually all other economic benefits, Atkinson and Lind argue for a "size neutral" policy approach in both the United States and around the world that would encourage growth rather than enshrine an anachronism. If we overthrow the "small is beautiful" ideology, we will be able to recognize large firms as the engines of progress and prosperity that they are.

REA'n Maker posted on June 21:

Quote

Quote

I think the question of SB's contribution to the economy, etc., is irrelevant to the issue of Part 19 and socioeconomic contracting programs in general.  This belief is based on the fact that federal contracting is not, and never has been, solely about obtaining the lowest price, which is the implication behind saying LB's are more efficient, innovative, etc.  If efficiency was the metric for who receives Federal contracts, there would be exactly 3 contractors receiving all Federal procurement dollars (gotta' get your 3 prices after all).

...Do SB programs in general achieve their **stated goal of growing SB'**s into stable, successful, going business concerns?  Probably not, because as we all know, they tend to rely on their SB status until they graduate, at which point they wander around the open-market contracting wilderness, threadbare and clueless,  until they stumble off a cliff.  But when has effectiveness ever mattered in government?

From Frankjon June 22:

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But don't most small businesses fail anyway?

Thanks, Joel. I don't think those quotes argue what you say they do. But if you see that in them, so be it.

Thanks again.