Budding 8(a)s: as Native-owned businesses "graduate" from the SBA 8(a) program, many form new spin-off companies that qualify for special exemptions.

• Author: West, Gail
• Position: Alaska Native BUSINESS NEWS

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Karen Forsland, Alaska district director for the U.S. Small Business Administration, calls the SBA 8(a) program a success in Alaska, and says it is heavily weighted by Alaska Native regional and tribal corporation businesses.

Initially, SBA set up the 8(a) program to help small businesses owned by socially and economically disadvantaged individuals. The program allows certified companies to receive sole-source contracts of up to $3.5 million for goods and services and $5.5 million for manufacturing. However, businesses owned by Alaska Native corporations and Indian tribes, under legislation supported by Sen. Ted Stevens (R-Alaska), and passed in 1989, are exempted from the sole-source caps.

"An increase in 8(a) program participation by Alaska Native Corporation-owned subsidiaries started about that time," Forsland said, "and we had tremendous growth. Over the last five years, though, the number of firms has remained relatively stable with firms entering and exiting the program."

Under the 8(a) program, a qualifying individual or entity must be both socially and economically disadvantaged, have a majority ownership in the firm, and be actively managing the business, said Forsland, and, once approved, the firm can participate in the 8(a) program for up to nine years.

"Our emphasis is to help the companies grow and be successful. It's to get them to the point they can operate without the 8(a) designation."

SBA requires former 8(a) firms to provide revenue data for three years after graduation, and SBA tracks whether the firms are merged, sold or continue to operate successfully.

"A business can participate in the program only once," Forsland said. "SBA requires a business history, and we ask a company to prove its ownership before it is approved to participate in the program. We look at all its governing documents to determine if it's the same company or if it's substantially different."

GRADUATION

So what is happening as Alaska Native-owned businesses graduate from the program or near the graduation point?

Ron Perry, the sitting president of the Alaska 8(a) Association, is himself owner of one of those 8(a) companies and is a shareholder in yet another.

President and sole owner of Microware, Perry said his company graduated from the 8(a) program in February 2006. To prepare for that transition, Perry said, "you start paying closer attention to the competitive mix of clients. SBA watches that mix, and they can't, by law...