Jump to content
The Wifcon Forums and Blogs
Guest Vern Edwards

Small Business policy Is based on a lot of hooey

Recommended Posts

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.

Share this post


Link to post
Share on other sites

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.

 

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites
2 hours ago, 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

2 hours ago, 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.

Share this post


Link to post
Share on other sites

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?

  

Share this post


Link to post
Share on other sites
54 minutes ago, 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?

Share this post


Link to post
Share on other sites
Guest Vern Edwards

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?

Share this post


Link to post
Share on other sites

“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. 

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites
14 hours ago, 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? 

Share this post


Link to post
Share on other sites
Guest Vern Edwards
8 minutes ago, FrankJon said:

But don't most small businesses fail anyway?

Yes.

8 minutes ago, 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.

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites
19 hours ago, 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.  

14 hours ago, 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?

 

2 hours ago, 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?

Share this post


Link to post
Share on other sites
23 hours ago, 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.

Share this post


Link to post
Share on other sites

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. 

 

Share this post


Link to post
Share on other sites
Guest Vern Edwards

@joel hoffman

22 hours ago, 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.

Share this post


Link to post
Share on other sites
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:

Quote

But don't most small businesses fail anyway? 

 

Share this post


Link to post
Share on other sites
Guest Vern Edwards

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.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×