THE SMALL BUSINESS ADMINISTRATION`S OFFICE OF NATIVE

Transcription

THE SMALL BUSINESS ADMINISTRATION’S
OFFICE OF NATIVE AMERICAN AFFAIRS
8(a) BUSINESS DEVELOPMENT TRAINING: TRANSITION STAGE
AND EXIT STRATEGIES
© 2014 – 2015 Cherokee Nation Technology Solutions. Contract #SBAHQ-13-C-0021-002, U.S. Small Business
Administration Office of Native American Affairs. (SBA ONAA)
8(a) Business Development Program: Transition Stage and Exit Strategies
Page 1
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)
1
This webinar is presented by Cherokee Nation Technology Solutions (CNTS) under contract
#SBAHQ-13-C-0021 with the U.S. Small Business Administration Office of Native American
Affairs. (SBA ONAA).
The purpose of this workshop and the follow-on technical assistance we offer is to 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.
Page 2
OVERVIEW
2
The focus is on 8(a) Business Development and the unique rules and considerations for tribally
and Native owned corporations and organizations including:
• Enhancing your understanding of the program rules regarding Tribal and Alaska Native
Corporations’ (ANC’s) ability to establish multiple 8(a) businesses for continued economic
development opportunities
• Assisting with decision-making and timing of establishing new business
• Clarifying requirements for success and defining your expectations for growth
This training program is available to all tribally or ANC owned firms and their representatives.
Portions of this presentation may not be applicable to an individual business owner, as the rules
for 8(a) program succession differs for Tribes and ANCs. Please carefully review the Chapter 13
of the Code of Federal Regulations, Part 121 for details.
The self-paced web-based workshop that accompanies this workbook is available at:
www.native8aTraining.com on the Course Offerings page.
Page 3
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
3
For more information on the programs and services provided by the Small Business
Administration (SBA) visit www.sba.gov .
Page 4
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
4
For more information on the specific programs and services provided by the SBA’s Office of
Native American Affairs visit www.sba.gov/naa .
Page 5
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.
5
The Cherokee Nation is the owner of Cherokee Nation Businesses, the board-governed holding
company for its portfolio of business offerings. The seven divisions within CNB are highly
diversified and include many businesses that are 8(a), MBE and HUBZone certified.
Within the 7 portfolios of CNB are 22 individual Tribal-owned companies, 12 of which are
currently 8(a) certified. Cherokee Nation Businesses mission is to grow the economy of the
Cherokee Nation through diversification and create jobs for Cherokee citizens in Oklahoma and
other states. All of CNB’s profits are either reinvested into job creation or social services for
tribal citizens.
Cherokee Nation Technology Solutions (CNTS) is at Tribal 8(a), supporting this program through
a sole-source 8(a) contract through the SBA’s Office of Native American Affairs.
Page 6
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.
6
The intent of the 8(a) business development program is to provide socially and economically
disadvantaged individuals, as well as Tribes, ANCs and Native Hawaiian Organizations the
mechanisms to compete against established competitors for contracts and to remain successful
post-graduation.
The objectives of this lesson are for participants to identify strategies for expanding businesses
while in the 8(a) program. Additionally, it is equally important for graduates of the 8(a) program
to remain competitive in the full and open market.
Page 7
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
7
Participants in the 8(a) Business Development Program receive targeted business development
support.
Throughout the 9-year 8(a) program, a firm will be supported by an SBA Business Opportunity
Specialist (BOS). This individual will be assigned directly to your company and will be your Point
of Contact (POC) at SBA for all of these services. The BOS will assist and guide you through the
development and transition stages of the program. The BOS is also responsible for conducting
the annual review of the firm against the objectives of the program.
Page 8
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
8
The 8(a) program is intended for Tribes, ANCs and NHOs (Native Hawaiian Organizations) to
increase economic opportunities to sustain nation building through the revenues obtained in
government contracting. In doing so, the Entity-owned firms become an income generator for
the Entity itself. Secondarily, because Entities are permitted to participate through multiple 8(a)
firms, the potential for additional revenue generation expands exponentially.
Page 9
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
9
Let’s review what the differences are in the 8(a) program contracting rules for Tribes/ANCs or
NHOs (Entity Owned firms) and individually (non-Entity owned) firms.
Firstly, for an individual, the SBA limits the value of a single direct-award (or sole sourced)
contract to 6.5 million dollars for manufacturing and 4 million dollars for all other contracts. An
entity owned firm, on the other hand, does not have a cap on the dollar value of a single
contract. There is a 25 million dollar threshold after which the contracting agency must justify
the 8(a) sole source as opposed to opening the opportunity for competition.
Next, let’s look at the quantity of awards available to 8(a) contractors. Entities have no limit to
the number of 8(a) sole-source awards they can receive. (We will talk in a minute about what
this means in terms of the entity owned firms’ growth potential and pipeline planning). On the
other hand, an individual 8(a) firm is limited to a cumulative total of $100M (or 5X the value of
its primary NAICS) on any 8(a) contract – sole source and/or competitive – at any time. For
either party, however, there are no limits or caps on full and open, i.e. competitive awards. In
fact, competitive awards are increasingly encouraged through the 9-year program.
Page 10
8(A) PROGRAM TRANSITION STAGE
10
In the following section we will discuss the expectations of a firm in the Transition Stage of the
8(a) Business Development Program. This information is applicable to both Entity-Owned and
Individually-Owned program participants.
Page 11
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%
11
As a firm enters the transition stage of the program at year 5, the SBA begins to scrutinize the
ratios of non-8(a) contracts against 8(a) sole-source or competed awards maintained by the
firm.
In the development phase of the 8(a) program (years 1-4), there are no requirements to balance
8(a) and non-8(a), or competitive, award ratios. Thus, it is easy for a firm to get wrapped up in
sweeping up as many 8(a) contracts as it can sustain. But the point of the program is for the firm
to obtain capabilities to compete in the full and open market. The development phase is the
perfect time for a firm to “practice” competing for contracts, and to use the direct award
contracts as a “safety net,” of sorts.
In theory, as the firm moves in to the transition stage in year 5, it has established a baseline of
skills to begin to compete more heavily. This is when the SBA begins to review the non-8(a)
business activity targets. It must be identified in the company’s pipeline that it will target,
capture, and perform on non-8(a) contracts. Failure to meet the prescribed business mix will
render the firm ineligible for sole source 8(a) contracts in the current program year, unless and
until the firm is able to correct the situation and balance its’ competitive business mix
requirement. If a company continually fails to maintain these ratios, either by not meeting the
targets, or by excessively exceeding the targets, it will be forced to exit the program early. Lastly,
if a company out-grows its small business size standard according to its primary NAICS code, it
will graduate early from the program.
Page 12
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
12
In the transition phase of the 8(a) Business Development Program, the firm’s Business
Opportunity Specialist, or BOS, will review the firm’s activities within the program against the
firm’s potential for success as a program graduate. Using the resources and support afforded to
the firm by the SBA and the BOS, and having a strong business plan will facilitate success and
reduce the risk of program termination or early graduation. Most importantly, it will result in a
firm with strong competitive capabilities to sustain itself post-graduation.
There are firms who do not adequately prepare themselves for further growth without the
benefits of the 8(a) program. We suggest you consider the 8(a) program to be a type of “college
for businesses.” Once you graduate, what are you going to do with your business? How will you
take what you’ve learned in the program and apply it to sustaining the business for the long
term?
Page 13
 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) 13
This graphic presents multiple messages, a few of which we will examine in more detail.
On the surface, it would appear that 42% of entity owned 8(a) firms graduate early, or do not
complete the program. While this statistic is factual, for 2012, it is also misleading in its
interpretation. Consider this, 42 percent of entity owned firms either outgrew their small
business size standard in less than 9 years, or they were able to obtain considerable competitive
awards to facilitate an early graduation. For an individual, that type of growth would be difficult
to maintain long term without considerable capital to support a rapidly growing infrastructure.
However, for an entity owned organization, it demonstrates the relative ease in which an entityowned firm can obtain high dollar contracts.
Only 6% of entity owned firms were terminated from the program, either for including false
information in their program reporting, or (a more likely scenario) were unable to maintain
eligibility for the program for a lack of 8(a) contracts. It would be safe to assume these firms
were not prepared for the program and were unable to sustain themselves as 8(a) contractors
through lack of preparation or lack of understanding of the program requirements for the firm.
Page 14
 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
14
According to the GAO report that generated these statistics, there are several examples of why
entity owned firms do not complete the program. It is essential for 8(a) firms to consistently and
continually review its revenues to manage its award ratios. It can be a balancing act per se.
None of the above scenarios are ideal for any firm. Let’s consider each.
In the first example, some firms are unable to meet the competitive business mix targets due to
the size of the sole source 8(a) contracts awarded early on in the program. This imbalance,
limits the long-term projections of the entity owned firm. Consider a firm that has received a
few large 8(a) contracts in a particular market. Yes, the firm is receiving revenues for the entity;
however, it has limited its potential to diversify into other markets, increase its program
portfolio, and limited opportunity for establishing relevant past performance. Thus, the firm is
required to pursue larger competitive opportunities, but it doesn’t have a strong performance
record to justify an award. It will be unable to meet the business targets ratio and graduate
early. The result? It will be unable to re-compete the programs it currently has when they
expire, and it does not have a strong enough portfolio to compete in the full and open market.
In the second scenario, the firm received such large 8(a) contracts that it drained its resource
pool. The growth came so fast, the firm does not have the capabilities to expand into the
competitive market. This is commonly referred to a “one and done” 8(a) contractor. Yes, that
first contract is exciting, but only one contract does not a successful firm make, in the long term.
The third scenario is one of intent vs. actuality. It is very easy, and tempting, for entity owned
8(a) firms to focus on the 8(a) direct awards and ignore the competitive requirements of the
program in the transition phase. Some entity owned firms habitually max their 8(a) award
Page 15
targets, establishing another 8(a) firm in a similar market under a new primary NAICS, and
maintain a steady stream of 8(a) firms with no intent to enter into the full and open market.
Yes, it is the perception of the SBA that this approach goes against the “spirit” of the program.
This approach also presents all entity owned firms with a negative reputation in the small
business contracting world.
Page 16
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.
15
Essentially, the goal of the program to “wean” the company from its 8(a) awards as it gets closer
to its graduation date. Let’s remember, once a firm (entity or individually owned) graduates
from the 8(a) program, its currently held 8(a) contracts are not available to it for recompete. In
other words, the firm’s 8(a) contracts will expire at the end of the contractual period of
performance. Furthermore the firm is no longer eligible for any new 8(a) awards. Firms must
establish a pipeline of competitive awards to refill their revenue pools as the 8(a) contracts
expire.
How do you do that? Well, you look for opportunities that lead to long-term sustainment.
Contracting vehicles, such as Multi-Award contracts and GSA schedules keep your firm on the
agencies’ “short list” for contractors. Teaming relationships with large businesses, other 8(a)
firms, and sister entity firms help as well.
Page 17
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
16
There is a reason the majority of the 9 years of the program are intended to prepare a firm for
graduation from the program. We have discussed each of these points in previous slides.
Remember, the intent of the 8(a) program for entity-owned as well as individual-owned firms is
to establish a solid foundation of business development capabilities to be successful in a full and
open market. Just as most small businesses fail in the first two years of business, it is also true
that most 8(a) graduates struggle in the first few years following graduation.
The company’s strategic plan should reflect the company’s goals for sustainment beyond the
8(a) program.
Page 18
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
17
So, how does a firm make the most of their time in the program? Just like everything else in
business, it starts with planning.
First, it is advised of any firm to have a strong business development capability. There should be
at least one, and depending on the size of the company, several individuals whose main focus is
growing the business. Some firms “double-hat” their program management staff as business
developers until the infrastructure justifies a full time business developer. These are the people
who have continuing relationships with not only the customer program office, but the
contracting offices as well. Most 8(a) firms thrive on because of their reputation for providing
quality services. The business developers use these positive relationships as leverage to expand
into other markets, reach new customers, and to establish growth opportunities within the
company’s current cadre of customers.
There are many avenues within federal government contracting that enable firms to compete in
a full and open environment. Look to the GSA schedules, multi-award contracts within certain
agencies, or become a subcontractor to a large business on an multi-award contract or GSA
schedule.
As we mentioned previously, once a firm graduates from the 8(a) program they are ineligible to
compete on their previously held 8(a) contracts. Generally, once an opportunity is identified as
an 8(a) contract, it is unlikely to move it out of 8(a). However, there are some scenarios where
this is possible. For example, if the scope of the contract has increased or diversified from the
Page 19
original scope of work, it is possible to argue that the statement of work has evolved to the
point where it could be considered a new opportunity and thus can be re-considered in a full
and open, or as a small business [non- 8(a)] set aside. Remember… although the firm is
graduating from 8(a), as long as it remains within its Small Business Size Standard, it is still
eligible for small business and small disadvantaged business set asides.
Consider also that an entity-owned 8(a) firm’s sister company (another 8(a) firm owned by the
same entity) cannot be direct-awarded an 8(a) contract as a follow-on. This standard does not
apply to competitive 8(a) contracts. For example, an entity owned firm receives an 8(a)
competitive award for a 4 year contract in year 5 of its’ 8(a) program. The firm recognizes that
when the contract is available for re-award it will qualify to compete. However, it is entirely
within the rule of the law to subcontract a portion of the effort, according with the contract’s
terms, to a sister 8(a) entity and allow the sister entity to gain a performance record on the
opportunity. As a result, when the 8(a) contract is released for recompete, the entity has
another firm that can legally compete on the opportunity as a prime 8(a) contractor, with a
record of performance.
Page 20
8(A) PROGRAM EXIT
18
In the following section we will discuss the ways in which a firm may exit the 8(a) Business
Development Program.
Page 21
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
19
Remember, the 8(a) Business Development program is a type of “college for businesses.” It was
established as a means for socially and economically disadvantaged individuals, as well as
Native American entities, to overcome some of the hurdles socio/economic disadvantaged firms
may face in being competitive in the federal contracting realm. There are, essentially, 3 ways to
exit the 8(a) program.
•
•
•
Perform in accordance with program expectations and meet all program requirements and
graduate at the conclusion of the 9-year program term.
Exceed program expectations for growth and graduate early.
Fail to perform in accordance with program expectations and/or fail to meet all program
requirements and either voluntarily withdrawal or be terminated from the program.
Page 22
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
20
It is the SBA’s intent to have all 8(a) firms perform in accordance with the expectations and
requirements of the program and graduate. Ideally, firm would take advantage of the benefits of
the program over its 9 years. It is recommended that firms slowly and steadily prepare for
graduation at the conclusion of the 9 year period.
Early graduation is presented to the firm when one of the two above criteria have been met. It
shouldn’t necessarily be the objective of the business owner to graduate the firm early, though
much can be said for being able to do so. So long as the firm has the foundation to be successful
after an early graduation determination has been made.
For entity owned firms, only the first criterion applies, as the Entity’s disadvantage status is not
re-evaluated during the program.
Page 23
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
21
 Ability to operate successfully without 8(a) contracts.
The above criteria are regularly reviewed by the BOS as part of the annual update. Each firm is
required to submit a business plan to SBA as condition of participation and to review that plan
with the Agency annually. As a part of this effort, SBA collects information on the “8(a) Annual
Update” to ensure eligibility for participation in the 8(a) Business Development Program
according to the requirements listed in 13 Code of Federal Regulations (C.F.R) Part 124.112. SBA
Form 1450 is the template for the annual review.
As part of an annual review, each Participant firm certify to the district office that it meets the
8(a) BD program eligibility requirements; and that there have been no changed circumstances
which could adversely affect the Participant's program eligibility.
When a firm fails to provide documentation for annual review, SBA may initiate termination
proceedings.
Page 24
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.
22
If a company experiences too much success or extremely quick growth within the 9-year
program, to the point where its three year average sales exceed prescribed limits per primary
NAICS code, then it will be “graduated” from the program prematurely.
These annual sales figures are obtained from line 1 of the company's business tax return, so
these sales may differ from financial statement sales depending on the tax basis with which the
company files its annual returns (cash vs. accrual).
Further, if the company can demonstrate it is in the process of changing its primary NAICS code,
early graduation due to exceeding the size standard can sometimes be avoided.
What is the effect of early graduation or termination on a firm?
After the effective date of early graduation, a firm is no longer eligible to receive any 8(a) BD
program assistance. However, the firm is obligated to complete previously awarded 8(a)
contracts, including any priced options which may be exercised.
Page 25
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.
23
 Failure to maintain good character.
A firm may file an appeal an ineligibility, early graduation, or termination with Office of Hearings
and Appeals (OHA) within 45 days of receiving the SBA determination in accordance with 13
CFR 134.404
The following slides list the criteria for program termination. Understand that any a violation of
any one of these items is deemed grounds for termination. There does not need to be a history
or a series of violations for the SBA to determine a firm’s eligibility to remain in the program.
Page 26
 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.
24
This is a continuation of the criteria for program termination.
Page 27
 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
25
pertaining to material issues.
This is a continuation of the criteria for program termination.
Page 28
DEVELOPING NEW 8(A) ENTITIES
26
In the following section we will discuss possibilities for entity owned firms to establish multiple
8(a) firms. Remember, this only applies to entity, meaning Tribally, ANC or NHO-owned firms.
An individual may only own one 8(a) firm in his or her lifetime.
Page 29
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?
27
In the following slides we provide suggestions for consideration when establishing multiple
entity owned firms. Tasks identified here are suggestions based on the Cherokee Nation’s
lessons learned and best practices we have encountered when growing our firms. This serves as
a guide, and is not the only recommendation.
Early on in the economic development activities of the entity, the option of establishing
multiple 8(a) firms should be considered. Previously, we provided an example of a firm that
received a few high-dollar 8(a) contracts and did not have the resources to sustain their
eligibility for the program’s competitive business mix requirements. This will become an issue
for any entity-owned firm. Will the entity have the capital, infrastructure and resources to
sustain multiple companies?
Ideally the best time to consider additional companies is when it makes sense to do so.
Naturally, that’s a broad approach, but there is no one way for Tribes, ANCs and NHOs to grow
in the 8(a) program.
There are two major considerations in establishing a new firm for 8(a) program participation.
• Will there be opportunities for growing a new company in market without diluting an
existing company’s growth potential.
• Is there a Primary NAICS code that the company should target that provides for a reasonable
small business size standard over 9 years?
Page 30
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
28
Here, we provide a few suggestions to consider when establishing multiple firms for the 8(a)
program. There are many case studies available on Tribal and ANC approaches to establishing
multiple lines of businesses.
Please conduct additional research to determine which approach will comply with the laws of
the entity and facilitate the firm’s ability to meet the entities’ economic development goals.
Page 31
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
29
First, Entities must consider how much capital and time is required to invest in establishing and
supporting the new business line? Remember, it could take it a couple of years for a start-up to
be profitable. To apply for the 2-year waiver on a new 8(a) firm, the tribally-owned applicant
must establish a “potential for success.” As part of the 2-year waiver, the entity must make a
firm written commitment to support the operations of the applicant concern and that the entity
has the financial ability to do so.
The other option most entities have in establishing a new line of business is to purchase an
existing firm. Though certainly an advisable approach, there are many factors to consider in
purchasing an existing firm when it comes to ownership and control and the 8(a) program. We
recommend hiring an attorney to assist and for the Entity’s and Firm’s leadership to fully
understand the laws of acquisition pertaining to small business and the 8(a) program.
Page 32
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
30
development plan.
Because the SBA requires the firm’s primary manager to be a tribal or ANC member, there are
considerations when it comes to staffing a new firm for an Entity. We have found that most
Entities do not have a pool of business-savvy members to promote into company leadership
roles. The first consideration we recommend is for an Entity to establish an education system
that encourages the development of business management and leadership skills of its’
members.
Page 33
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
31
Consider what we discussed as requirements for a transitioning firm. Those requirements were
identified as a guide for the firm to set itself up for graduation. When it comes down to it, at
some point you will no longer be an 8(a) contractor. Will your company have the ability to
perform well into the long term? Being able to say “yes” to each and all of these criteria will
solidify the firm’s potential for success.
If so, congratulations, your firm has met the intent of the 8(a) program!
Page 34
Free Technical Assistance for Workshop Participants
As part of our program, CNTS offers follow-up assistance for online and onsite workshop
attendees. We will help answer any questions you have about preparing for 8(a) certification.
We can set up a time for a phone conversation and work with you. And because this is a
continuation of the workshop you took, there is no cost to you.
Please visit www.Native8aTraining.com and click on More Information to complete our
Workshop Follow-Up for Technical Assistance Survey.
Page 35
Resources
Reference
Tribal Business Structure
Handbook
http://www.irs.gov/pub/irs-tege/tribal_business_structure_handbook.pdf
Tribal Enterprise and
Business Structure Guides
http://oecbd.org/sites/default/files/Tribal%20Enterprise%20Developer's%
20Guide.pdf
http://www.irs.gov/pub/irs-tege/tribal_business_structure_handbook.pdf
http://aiebc.org/-/wp-content/uploads/2012/07/Tribal-EnterpriseDevelopers-Guide.pdf
http://www.michiganbusiness.org/cm/Files/Tribal_Business_Development
/Tribal%20Business%20Structures%20Guidebook.pdf
Tribal FAQs
ANC FAQs
NHO FAQs
http://www.sba.gov/sites/default/files/files/TriballyOwnedConcernFAQ08
12revised.pdf
http://www.sba.gov/sites/default/files/files/ANC%20FAQ_final.pd
http://www.sba.gov/sites/default/files/files/NHO%20FAQsrev20120802.pdf
Tribally Owned Business
Checklist
http://www.sba.gov/sites/default/files/files/TriballyOwnedConcernFAQ08
12revised.pdf
ANC Checklist
http://www.sba.gov/sites/default/files/files/ANC%20Checklist%20(final)_C
onference%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-enterprisebusiness-guide-8a-business-development-program
ANC Business Guide
http://www.sba.gov/tools/sba-learning-center/training/anc-businessguide-8a-business-development-program
NHO Business Guide
http://www.sba.gov/tools/sba-learning-center/training/nho-businessguide-8a-business-development-program
Page 36
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
Cherokee Nation Technology Solutions
Program Manager, SBA ONAA 8(a) Business Development Training
Marcia.Watson@cn-bus.com
410-350-4903
Page 37

THE SMALL BUSINESS ADMINISTRATION`S OFFICE OF NATIVE

Transcription

Similar documents

A Quick Reference Guide with Links for Start-up and

COMMONWEALTH OF PA v. HARPER MARMALARD

News Release - Caribe Federal

Property Brochure

BEFORE YOU GO, WATCH YOUR FACEBOOK POSTS

How to Guide - International Franchise Association

PRBI at a Glance - PR Boutiques International

Event Program - California State University, Bakersfield

SBA 1010C Business Plan Example - Rogers Construction Version 1.0

September 2015 - Capital Matrix