The Small Business Administration (SBA) has a seemingly wonderful program under which certain federal contracts are supposed to be reserved for competitions among small businesses, called the “8(a) Business Development Program.” The SBA describes the program as “a business assistance program for small disadvantaged businesses” and states that the program “offers a broad scope of assistance to firms that are owned and controlled by at least 51% by socially and economically disadvantaged individuals.” The program is supposed to provide business for startups run by members of various racial minorities who have suffered from economic disadvantage. It does this in part by setting aside certain government contracts for small firms to compete over without having to compete against larger corporations. However, it turns out, the government contracts that are supposed to be handled by these small businesses are actually being handled by large corporations.
Problem with the 8(a) Program
The Washington Post reports that contracting officers from various federal departments are not ensuring that work awarded to small businesses under the 8(a) program is being performed by those small businesses. Historically the program has been abused, usually by the small business getting the contract and then passing much of the work (and a portion of the profits) along to a large corporation that did not have the right to bid on the contract. To stop this abuse, regulators put strict limits in place on how much of the work the small business awarded the contract can subcontract out. If the limits are violated, the small business can be fined $500,000.