Transcript 8(a) Business Development Training Transition and Exit webinar

THE SMALL BUSINESS ADMINISTRATION’S OFFICE OF
NATIVE AMERICAN AFFAIRS
8(a) BUSINESS DEVELOPMENT
TRAINING: TRANSITION STAGE AND
EXIT STRATEGIES
Presented by Cherokee Nation Technology Solutions under contract #SBAHQ-13-C-0021 with the
U.S. Small Business Administration Office of Native American Affairs. (SBA ONAA)
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OVERVIEW
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Our Mission
 SBA Mission: The U.S. Small Business Administration (SBA) was created in
1953 as an independent agency of the federal government to aid, counsel, assist
and protect the interests of small business concerns, to preserve free
competitive enterprise and to maintain and strengthen the overall economy of
our nation. We recognize that small business is critical to our economic recovery
and strength, to building America's future, and to helping the United States
compete in today's global marketplace. Although SBA has grown and evolved in
the years since it was established in 1953, the bottom line mission remains the
same. The SBA helps Americans start, build and grow businesses. Through an
extensive network of field offices and partnerships with public and private
organizations, SBA delivers its services to people throughout the United States,
Puerto Rico, the U. S.Virgin Islands and Guam. http://www.sba.gov
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Our Mission
 ONAA Mission: The Office of Native American Affairs (ONAA) mission is to
ensure that American Indians, Native Alaskans and Native Hawaiians seeking to
create, develop and expand small businesses have full access to the necessary
business development and expansion tools available through the Agency's
entrepreneurial development, lending and procurement programs.
www.sba.gov/naa
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Our Mission
 CNTS Mission: The mission of Cherokee Nation Technology Solutions (CNTS)
under this contract is to provide training services to Tribal Corporations, Alaska
Native Corporations, and Native Hawaiian organizations in the developmental
and transitional stage of the 8(a) Business Development Program. CNTS is a
Native American operated technical assistance firm that helps transform and
build strong tribal nations, enterprises and organizations.
Through CNTS’s experience, we will provide advice, resources, and
practical tools to help your organization meet the challenges facing tribal
communities today.
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Session Overview
 Purpose: Provide operational and leadership strategies to
build capacity, foster growth and expansion, and ensure
sustainability of entity-owned businesses in Native American
communities throughout the United States.
 Focus: 8(a) Business Development Program Transition
Phase and expanding Tribal 8(a) businesses.
 Objective: Understand processes and strategies for
establishing multiple 8(a) businesses for Tribes and ANCs.
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SBA 8(a) Program Mission
 The focus of the 8(a) Business Development Program is to
provide business development support including:
 Mentoring
 Procurement assistance
 Business counseling
 Training
 Financial assistance
 Surety bonding
 Other management and technical assistance
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Considerations for a Tribal 8(a)
 “The 8(a) program for Native Enterprises is working exactly as Congress
intended – a way to help disadvantaged Native peoples improve their lives
through developing self-sustaining companies that positively impact Native
communities.”
- Native8(a)works
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Growth Potential for SBA 8(a) Tribally Owned, ANCs
and NHOs
Tribes/ANCs/NHOs
Non-Tribal (Native Owned) 8(a)
 No individual or cumulative
 Sole Source individual contract
contract value cap for
Tribal/ANC Ownership of
unlimited number of 8(a) firms
 Procurement over $25M requires
Agency authorization
 Unlimited Sole-Source Awards
(i.e. non-competed or direct)
 (NHO – Defense contracts only)
values are capped
 $6.5M for Manufacturing & $4M for
Other Contracts
 Maximum 8(a) award total
$100M [including sole-source
and/or competitive 8(a)] or 5
times the value of its primary
NAICS code
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8(A) PROGRAM TRANSITION STAGE
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Requirements for a Transitioning Firm
 Non-8(a) Business Activity/Competitive Business Mix Targets
(expressed as percentages of total revenue)
Participant's Year in the
Transitional Stage
Non-8(a) business activity
targets
1 (Program year 5)
15%
2 (Program year 6)
25%
3 (Program year 7)
35%
4 (Program year 8)
45%
5 (Program year 9)
55%
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Requirements for a Transitioning Firm
 For the period of certification, 8(a) firms are required to:
 Maintain their eligibility
 Make maximum efforts to obtain business outside the 8(a) program
 Make substantial and sustained efforts to attain the targeted dollar levels of
non 8(a) revenue established in its business plan
 Attempt to use the 8(a) Business Development program as a resources to
strengthen the firm for economic viability when program benefits are no
longer available
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Considerations for a Tribal 8(a)
 Summary of Tribal 8(a) Firms That Have Left the Program
Firms completing full 9 years of program
Firms that withdrew or graduated early
Firms that were terminated*
Total firms
ANC
60
64
5
129
Indian tribe
22
6
5
33
NHO
3
0
0
3
Total
85
70
10
165
* SBA may terminate a firm’s participation in the 8(a) program for a number of reasons, including submitting false information in its 8(a)
application and failing to maintain eligibility for program participation.
Analysis:
 51% of Tribal, ANC or NHO 8(a) companies graduate after 9 years
 42% of firms graduate early, meaning they exceed their primary NAICS code and are
no longer eligible for 8(a) contracts
Source: GAO analysis of SBA data. (as of 2012)
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Considerations for a Tribal 8(a)
 For tribal 8(a) firms that do continue to the transition phase, some have difficulty
meeting non-8(a) revenue requirements because they were awarded large 8(a)
sole-source contracts in their early years in the program.
 In one example, a tribal firm reported to SBA that large 8(a) sole-source
contracts were taking up a lot of its existing labor pool, not allowing it to seek
non-8(a) contract opportunities
 Another firm did not meet its non-8(a) revenue requirements in the transition
years, and SBA district officials eventually recommended that this firm voluntarily
withdraw as officials believed the firm had not complied with the “spirit” of the
8(a) program.
Source: GAO-12-84 Tribal 8(a) Contracting
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Considerations for a Tribal 8(a)
 For tribal 8(a) firms that do continue to the transition phase, some have difficulty
meeting non-8(a) revenue requirements because they were awarded large 8(a)
sole-source contracts in their early years in the program.
 In one example, a tribal firm reported to SBA that large 8(a) sole-source
contracts were taking up a lot of its existing labor pool, not allowing it to seek
non-8(a) contract opportunities
 Another firm did not meet its non-8(a) revenue requirements in the transition
years, and SBA district officials eventually recommended that this firm voluntarily
withdraw as officials believed the firm had not complied with the “spirit” of the
8(a) program.
Source: GAO-12-84 Tribal 8(a) Contracting
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Planning for Competitive Business Mix
 Understand how to establish your business for long term
growth beyond the 8(a) program
 Establish contracting vehicles that will allow your business to
remain accessible to the government
 Establish teaming relationships with larger contractors that
allow for long term strategic growth
 “Win-Win” relationships: Large businesses partner with you
and benefit from 8(a) status. After graduation, you can partner
with them to keep contracts going.
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When do I need a Strategic Plan for Transition?
 It is never too early to plan for transition from the 8(a) Program
 Start planning for transition as soon as you receive certification
 Your goal upon entering the program is to be competitive when you exit the
program by maximizing the benefits of the program during participation
 Goals:
 Develop strong relationship for the long-term
 Develop a great reputation that will follow you to the full and open market
 Maintain a healthy competitive business mix
 Acquire capital and infrastructure to sustain and grow
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Developing Transitional Stage Strategies
 Hire a full time marketing and sales (business development)
person and/or team with experience in your desired industry
 Recent retirees/former key players at the agencies you target
 Establish alternative contracting vehicles and beginning to utilize
these prior to 8(a) graduation
 Open competition, propose to both large and small business pools on
multi-award contracts
 Transition 8(a) contracts to other contracting vehicles
 Develop Subcontractor relationships with sister entities
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Developing Transitional Stage Strategies
 Hire a full time marketing and sales (business development)
person and/or team with experience in your desired industry
 Recent retirees/former key players at the agencies you target
 Establish alternative contracting vehicles and beginning to utilize
these prior to 8(a) graduation
 Open competition, propose to both large and small business pools on
multi-award contracts
 Transition 8(a) contracts to other contracting vehicles
 Develop Subcontractor relationships with sister entities
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8(A) PROGRAM EXIT
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What are the ways a business may leave the 8(a) BD
program?
 According to CFR124.301 A concern participating in the 8(a) BD
program may leave the program by any of the following means:
 Expiration of the program term established pursuant to §124.2;
 A Participant receives a program term of nine years from the date of
SBA's approval letter certifying the concern's admission to the program.
 The Participant must maintain its program eligibility during its tenure in
the program and must inform SBA of any changes that would adversely
affect its program eligibility.
 The nine year program term may be shortened only by termination, early
graduation (including voluntary early graduation) or voluntary withdrawal
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Graduation vs. Early Graduation? (13 CFR 124.302)
 Graduation: The firm has reached the end of it’s nine-year term
 Early Graduation: (1) The concern has successfully completed the 8(a)
BD program by substantially achieving the targets, objectives, and goals
set forth in its business plan, and has demonstrated the ability to
compete in the marketplace without assistance under the 8(a) BD
program; or
 (2) One or more of the disadvantaged owners upon whom the
Participant's eligibility is based are no longer economically disadvantaged.
 This applies to individual 8(a) company principals, not to Tribal 8(a) companies, as the
tribe does not need to redefine it’s economic disadvantaged status
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Early Graduation (13 CFR 124.302)
 Criteria for determining whether a Participant has met its goals and objectives.
 Degree of sustained profitability;
 Sales trends, including improved ratio of non-8(a) sales to 8(a) sales since
program entry;
 Business net worth, financial ratios, working capital, capitalization, and access
to credit and capital;
 Current ability to obtain bonding;
 A comparison of the Participant's business and financial profiles with profiles
of non-8(a) BD businesses having the same primary four-digit SIC code as the
Participant;
 Strength of management experience, capability, and expertise; and
 Ability to operate successfully without 8(a) contracts.
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Early Graduation? (13 CFR 124.302)
 Exceeding the size standard corresponding to the primary NAICS code.
 Firm exceeds the size standard corresponding to its primary NAICS code, as
adjusted during the program, for three successive program years
 For an Employee based size standard, the SBA considers the average number
of employees for each of the pay periods for the preceding 12 months
 UNLESS the firm has taken steps to change its industry focus to another
NAICS code that is contained in the goals, targets and objectives of its
business plan.
 Excessive withdrawals. see §124.112(d)(3)),
 SBA determines that the Participant has demonstrated the ability to compete
in the marketplace without assistance under the 8(a) BD program.
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What is Termination from the program?
 SBA may terminate the participation of a concern in the 8(a) BD program for
good cause. Examples include:
 Submission of false information in the concern's 8(a) BD application.
 Failure to maintain eligibility for program participation, including failure by an
owner/manager to continue to meet the requirements for economic
disadvantage (§124.104 for individuals).
 Failure to maintain ownership, full-time day-to-day management, and control by
individuals for whom disadvantaged status was based.
 Failure to obtain prior written approval from SBA for any changes in ownership
or business structure, management or control pursuant (§§124.105 and 124.106).
 Failure to disclose to SBA the extent to which non-disadvantaged persons or
firms participate in the management of the Participant business concern.
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 Failure to maintain good character.
What is Termination from the program?
 A pattern of failure to make required submissions or responses to SBA in a
timely manner,
 Cessation of business operations by the concern.
 Failure to pursue competitive and commercial business in accordance with its
business plan, or to make reasonable efforts to develop and achieve competitive
viability.
 A pattern of inadequate performance by the concern on 8(a) contracts.
 Failure to pay or repay significant financial obligations owed to the Federal
Government.
 Failure to obtain and keep current any and all required permits, licenses, and
charters, including suspension or revocation of any professional license required
to operate the business.
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What is Termination from the program?
 Excessive withdrawals that are detrimental to the achievement the Participant's
business plan (see §124.112(d)).
 Unauthorized use of SBA loan proceeds or violation of an SBA loan agreement.
 Submission by or on behalf of a Participant of false information to SBA,
 Debarment, suspension, voluntary exclusion, or ineligibility of the concern or its
principals pursuant to 2 CFR parts 180 and 2700 or FAR subpart 9.4
 Conduct a lack of business integrity.
 Willful failure to comply with applicable labor standards and obligations.
 Material breach of any terms and conditions of the 8(a) BD Program
Participation Agreement.
 Willful violation by a concern, or any of its principals, of any SBA regulation
pertaining to material issues.
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DEVELOPING NEW 8(A) ENTITIES
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Considerations for establishing a new Entity-Owned
8(a) Firm
 Begin planning for additional 8(a) companies when:
 You determine you have a capability in a particular area or foresee a
contracting opportunity in something in which you can develop a capability.
 Your existing 8(a) company, is 2-3 years from graduation, or possibly early
graduation
 The Tribe should begin to consider the following:
 Will the tribe need a new 8(a) company in this line of business? If so, is there
a primary NAICS available?
 Does this NAICS conflict with any existing 8(a) companies, or one that
graduated less than 2 years before?
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Considerations for establishing a new Entity-Owned
8(a) Firm
 Use effective strategies to maintain multiple companies under one
umbrella
 Share resources from the parent company to the subsidiary through
Administrative Services Agreements.
 Across subsidiaries - act as subcontractors to each other
 Develop a long term business plan that incorporates succession planning
 Determine organizational structure and hierarchy in order to
accommodate succession
 Cross train employees and management in order to prepare of attrition
and maintain business success
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Considerations for establishing a new Entity-Owned
8(a) Firm
 Will the tribe acquire a company or use organic growth?
 In what NAICS will the primary revenue stream for the new
business/acquisition?
 There are strict rules regarding the acquisition of a prior/current 8(a)
firm
 NOTE: A firm owned by a tribe or ANC may not receive an 8(a) contract
that is a follow-on contract to an 8(a) contract performed by another
Participant (or former Participant that has left the program within two
years of the date of application) owned by the tribe or ANC for a period
of two years from the date of admission to the program
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Considerations for establishing a new Entity-Owned
8(a) Firm
 Will the current managers stay with the graduating firm or will they
move to a new 8(a) firm?
 Does the tribe have any personnel with any experience in the new business line, or to
replace managers who may shift to the new 8(a) company?
 If not, does the tribe have any tribal members who would be in training to run the
company?
 Remember: any tribal member may participate in the management of a tribally-
owned firm and need not individually qualify as economically disadvantaged
 Also: Members of the management team, business committee members, officers,
and directors are precluded from engaging in any outside employment or other
business interests which conflict with the management of the concern or
prevent the concern from achieving the objectives set forth in its business
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development plan.
SUMMARY
 8(a) Business Development Program Graduates…
 Are committed to winning government contracts and willing to
do their homework
 Have established bid and proposal practices
 Have been a successful competitive bidder
 Are financially capable of performing on multiple contracts
simultaneously
 Have an established pipeline for continued efforts after current
8(a) contracts expire
 Are positioned for growth and have the infrastructure to
support it
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Resources and References
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Tribally-Owned Concerns Resources and References
Resource
Tribal Business Structure Handbook
Reference
http://www.irs.gov/pub/irs-tege/tribal_business_structure_handbook.pdf
http://oecbd.org/sites/default/files/Tribal%20Enterprise%20Developer's%20Guide.pdf
Tribal Enterprise and Business Structure
Guides
http://www.irs.gov/pub/irs-tege/tribal_business_structure_handbook.pdf
http://aiebc.org/-/wp-content/uploads/2012/07/Tribal-Enterprise-Developers-Guide.pdf
http://www.michiganbusiness.org/cm/Files/Tribal_Business_Development/Tribal%20Business%20
Structures%20Guidebook.pdf
Tribal FAQs
http://www.sba.gov/sites/default/files/files/TriballyOwnedConcernFAQ0812revised.pdf
ANC FAQs
http://www.sba.gov/sites/default/files/files/ANC%20FAQ_final.pd
NHO FAQs
Tribally Owned Business Checklist
http://www.sba.gov/sites/default/files/files/NHO%20FAQs-rev20120802.pdf
http://www.sba.gov/sites/default/files/files/TriballyOwnedConcernFAQ0812revised.pdf
ANC Checklist
http://www.sba.gov/sites/default/files/files/ANC%20Checklist%20(final)_Conference%202012.pdf
NHO Checklist
http://www.sba.gov/sites/default/files/files/NHO-Checklist.pdf
Tribal Enterprise Business Guide
http://www.sba.gov/tools/sba-learning-center/training/tribal-enterprise-business-guide-8abusiness-development-program
ANC Business Guide
http://www.sba.gov/tools/sba-learning-center/training/anc-business-guide-8a-businessdevelopment-program
NHO Business Guide
http://www.sba.gov/tools/sba-learning-center/training/nho-business-guide-8a-businessdevelopment-program
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Contact Us
Thank you for taking the time to review this course on 8(a) Business Development
Transition Stage and Exit Strategies for Entity- Owned Firms.
For more information or to register for additional webinars please visit:
www.Native8aTraining.com
Please contact me with any additional questions you may have.
Marcia Watson, Program Manager
Cherokee Nation Technology Solutions
[email protected]
410-350-4903
Copyright 2015. Cherokee Nation Technology Solutions. All Rights Reserved.
This activity is funded by the U. S. Small Business Administration (SBA) under contract number SBAHQ-13-C-0021. SBA’s funding is not an endorsement of the
contractor or any products, opinions or services. All SBA programs are extended to the public on a non-discriminatory basis.
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