Typical 8(a) Failure Pattern
The SBA reports that in 2013 the number of firms applying for 8(a) was 2,325. According to a Small Business Dynamic Search 548 firms were approved for 8(a) during this same time period. Therefore, 24% of firms that applied for the 8(a) Certification received approval. I personally find these numbers staggering. First of all that only 2,325 firms applied for 8(a) given the benefits of billions of dollar in federal contracts awarded to 8(a) firms annually and the approval rate associated with these applications is nothing short of anemic.
8(a) Applicants 2013
8(a) Approvals 2013
Failure Cause 1: Incomplete Application
A firm internally prepares its application completes the online application and mails in its hard copy. For most applicants the documentation is not provided to the SBA in the correct order or not enough documents are present to warrant the SBA’s review of the application. When this occurs the SBA will provide an instructional letter allowing the applicant to know a number of deficiencies in the application. To some this can make people believe that several runs at the trial and error approach and the application will be complete. Unfortunately it takes the SBA approximately 15 days to review the application for completeness, by the time the application is returned to the applicant and the applicant is able to fix the problems the financial information provided as part of the application in almost all cases has no longer been completed within the 90 day window and a large portion of the application must be redone. When an applicant has this occur one or more times typically they abandon the 8(a) process.
Failure Cause 2: Blowing your Foot Off
An example of blowing your foot off to the SBA would be an 8(a) prospect that is attempting to show that they are highly economically disadvantaged. In the processes of demonstrating this to the SBA inadvertently paint such a dire picture to the SBA that the SBA no longer feels like the company has the potential to complete Federal Contracts. Other mistakes people make is playing up other members of their management team to the SBA to show that they have the potential to complete Federal Contracts which then inadvertently creates a control issue for the applicant firm. The list of ways in which applicants “blow their feet off” is pretty endless and sometimes we as consultants are shocked by applicant’s creativity.
Failure Cause 3: Non-Presumed Group Socially Disadvantaged Applicants not doing Their Homework
It is true that not presumed group applicants, usually people of middle eastern descent, service disabled veterans and Caucasian women, can get 8a certified. However they have to spend the time to go over their lives and develop a compelling narrative with supporting documentation usually in the form of letters from people willing to attest to the person’s stories. Failure to properly structure a narrative will always result in a failed application as these applications are already difficult but not impossible to get approved by the SBA.
Failure Cause 4: Not Taking the SBA Seriously
The one thing we I always tell clients is that you can expect the SBA to read every page of your 300-500 page application. The SBA takes the award of an 8(a) certification to a business very seriously. Therefore if the SBA is going to review every page of your 300-500 page application, you need to do that yourself or have someone do it for you. The number of times I have heard applicants say “that is not accurate of the way things are at my firm today?” sure enough the SBA has reviewed a document that has portrayed exactly their rational for the denial of the application.
Failure Cause 5: Making a Misrepresentation to the SBA
We have had clients that have gotten into trouble in their youth, had business relationships that from the outside looking in look like affiliations but when explained in advance are not an issue and the list goes on. The old adage of “ask for forgiveness instead of permission” does not work with the SBA. A firm has one chance with its application and credibility. The burden of proof is on the applicant. Therefore problems that exist within the application should be explained to the SBA.
Using a consulting firm such as ours is expensive, as the normal fee for using an 8(a) consultant is usually around $4,000 for full service. From our experience applicants that have successfully completed the application from start to finish on their own usually have over 250 hours into the project and have on average between 2-3 attempts. Some information to consider if you are looking at applying for 8(a) in the next few months.