8a Firms Declining Numbers

Over the last 12 months the Federal government has awarded the least number of new 8a certifications in the past decade. Only 631 new 8a firms entered the federal market place during this period. 8a firms graduate after nine years of program participation.

Cause of Decline – Sequestrations Negative Effect

The most likely cause of this decline is from the negative effects people have of federal contracting due to the sequestration. From talking to people that have eligible companies the reason they are not applying for 8a is because they feel there is a lack of contracting dollars due to the sequestration. This is not surprising reaction as news for federal contractors has been tough over the last nine months, with news of budget cuts. According to the WSJ spending cuts due to sequestration will be approximately $85 billion or 2.4% of the federal budget. This number does not paint the full picture with certain programs being exempt from sequestration on an agency by agency basis. The real figure is around a 5-12% cut depending on the federal agency.

8a Reduction Next 12 Months

The trend for less firms applying/receiving their 8a certification 8a will cause a reduction in the number of 8a firms by 9.5% over the next 12 months (8a firms share approximately $30 billion in federal contracting dollars). If this trend continues there will be a 14.2% reduction in 8a firms in the next 24 months. So the federal budget is declining, however this perception is causing an even greater decline in the number of 8a firms applying therefore overall revenue on a per 8a firm basis is likely to increase over the next 12-24 month period.

Localized Information

Certain states are generating lower 8a replacement rates than other states. The following table shows on a state by state basis the rate of decline of 8a firms. This is especially relevant for onsite service oriented businesses like construction and custodial services.