Don’t think the 8(a) Program or HUBZone Program has any work? Think Again!

If you don’t think the 8(a) Program or HUBZone Program can be a valuable tool for your business just look at the following 8(a) and HUBZone contract information pulled from the Federal Procurement Data System (FPDS) for just the period of 10/1/2014 through 09/30/2016.


8(a) Sole Source Contract Actions:
Total Action Obligations: $17,327,494,322.14
Total Contract Actions: 122,381

8(a) Competitive Contract Actions:
Total Action Obligations: $16,760,620,275.87
Total Contract Actions: 72,546

8(a) with HUBZone Preference Contract Actions:
Total Action Obligations: $13,444,789.30
Total Contract Actions: 29

Summary:
Total 8(a) Sole Source, Competitive and HUBZone Preference:

Total Action Obligations: $34,101,559,387.31
Total Contract Actions: 194,956


HUBZone Set-Aside Contract Actions:
Total Action Obligations: $3,300,688,237.85
Total Contract Actions: 23,405

HUBZone Sole Source Contract Actions:
Total Action Obligations: $78,474,087.11
Total Contract Actions: 1,014

Summary:
Total HUBZone Set-Aside and Sole Source:

Total Action Obligations: $3,379,162,324.96
Total Contract Actions: 24,419


Need assistance with your 8(a)  or HUBZone Application? With 15 years and over 2,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8(a) or HUBZone certified.  Contact us today at 813-333-5800 or visiting our website at cloveer.com to discover what Cloveer can do for you.

Top 5 States with SBA HUBZone Businesses

There are 5,313 active SBA HUBZone Application firms as of October 2015. Below is an infographic showing the location by state and number of active SBA HUBZone Certified firms. The source of this information is the SBA Dynamic Small Business database.

HUBZone MAP

HUBZone MAP

The top five states with HUBZone Certified Firms are:
1. California – 481
2. Virginia – 371
3. Oklahoma – 300
4. Texas – 261
5. Maryland – 237

The top five states with the lowest number of HUBZone Certified firms are:
1. Delaware – 3
2. Rhode Island – 7
3. Vermont – 11
4. Connecticut – 14
5. Maine – 15

This information is provided by Cloveer.com.

Cloveer provides products and services on the SBA 8(a), HUBZone, and VA VetBiz programs.

Financial Statements – 35 Items the SBA reviews when applying for 8(a) Certification

When applying for the 8(a) Program you are required to submit the following financial statements for the business:

  1. Year to date Balance sheet and income statements, no older than 90 days, including a detailed A/P and A/R aging statement if you are operating on an accrual basis.

2. The last three years of Balance sheet and income statements (e.g. 2016, 2015, & 2014)

You should ensure that all financials provided are prepared on generally accepted accounting principles or an accepted cash basis.

What does the SBA reviewer look for when they review these:
*Note* The following items are taken from the current SBA SOP.

1. Are the current year to date financials no older than 90 days from date of receipt by the SBA?

2. Are the aging schedules for A/P and A/R consistent with with the year to date balance sheet?

3. Are any A/P or A/R more than 90 days old?

4. Do the balance sheets balance?

5. Are current assets recorded properly?

6. If the business is a dealer, wholesaler, or supplier, does the firm maintain any inventory?

7. Does the firm have fixed assets? If so, are these fixed assets recorded properly?

8. Are the fixed assets reported with depreciation or at actual value?

9. Do the firm’s fixed assets correspond with its type of business? For example, if the firm performs construction work does it have construction equipment?

10. If there is a partner shareholder or officer loan, is there a copy of the loan document? Is this loan reflected on the individual’s SBA Form 413, Personal Financial Statement?

11. Are there loans or notes receivable from a shareholder, officer or partner?

12. Has a copy of the loan or note been provided?

13. Does the loan reflect generally accepted repayment terms? If not, is this item over-inflating the firm’s assets?

14. Does the firm have the ability to service debts?

15. Are there any loans that are questionable or that may raise concerns regarding control?

16. Do retained earnings reconcile with previous financial statements?

17. Does the listed business equity match that reported on the Personal Financial Statements of the owners?

18. Is the profit and loss statement correctly calculated?

19. Does the profit and loss statement show revenues in the appropriate business activity?

20. Is “Cost of Goods Sold” included?

21. Are the line items properly recorded?

22. If there is an expense for salaries for employees, are employees listed on SBA Form 1010?

23. If there is an expense for worker’s compensation, are employees listed on SBA Form 1010?

24. Is the disadvantaged individual the firm’s highest compensated officer or employee? If not, has an explanation of the salary structure been provided?

25. Are there any large subcontracting expenses that appear questionable?

26. Does the firm appear to be in compliance with the percentage of work requirements for its primary business?

27. Does the firm appear to have the necessary equipment, financial resources, working capital, etc., to perform 8(a) contracts it may be awarded?

28. Are there questionable items listed on the statements, or have things changed significantly from the previous year end statement?

29. Are there indications that excessive withdrawals have occurred?

30. Does the firm have financing by non-disadvantaged individual(s) that would be considered critical financing? Also, is the loan payable upon demand?

31. Are there any significant changes in any categories that create a concern? For example, have loans disappeared?

32. What pattern are the revenues, profits, and losses showing? Is there a need to ask for clarification, such as an explanation of the reason for a downward trend or sudden revenue drop?

33. Are there any discrepancies between the firm’s tax returns and the statements? Are these discrepancies based on cash versus accrual? If not, is reconciliation required? Does taking into consideration cash versus accrual reconcile the accounts?

34. Do the balance sheets correspond with the tax return schedules? For example, are there shareholder loans on the tax return schedules that are not reflected on the financial statements?

35. Do the statements and corresponding tax returns reflect any conversions from accrual to cash accounting?

Need assistance with your 8(a) Application? Call us at 813-333-5800 or visit www.cloveer.com for more information.

Reduce your 8(a) Application review time, at the SBA, by 30+ days.

There are several certifications that are required to be submitted within your 8(a) Application paperwork. Failure to submit these signed and dated certifications will result in a letter back from the SBA deeming your 8(a) Application deficient or incomplete.

Please note. None of the below certifications are identified within the SBA’s current 8(a) Checklist. This blog post alone will save you at least one letter back from the SBA and possibly 30+ days of processing time at the SBA.

5 certification sheets that you must provide to the SBA within your 8(a) Application paperwork:

  1. Certification that the applicant firm’s financial statements truthfully and accurately represent the financial condition of my company.
  2. Certification that no 8(a) applicant, owner, director, or key officer of the applicant firm, or the applicant firm itself, have any delinquent federal obligations, past due taxes or liens.
  3. Certification that no immediate family member of any 8(a) applicant, owner, director, or key officer of the applicant firm has ever been an officer, director or shareholder of any other firm that is a current 8(a) Program participant or was a previous participant in the 8(a) Program.
  4. Certification that no 8(a) applicant, owner, director, or key officer of the applicant firm has ever been an officer, director or shareholder of any other firm that is a current 8(a) Program participant or was a previous participant in the 8(a) Program.
  5. Certification that the no 8(a) applicant, owner, director, or key officer of the applicant firm has any ownership interest in any other business other than the applicant firm,  or has an immediate family member who has ownership interest in any other business.

You should put each of the above certifications on a separate printed sheet and sign/date all of these and include a copy within your 8(a) Application. Please make sure all of these certifications provided to the SBA are accurate and truthful. Penalties for misrepresenting anything in your 8(a) Application are severe.

If any of the above cannot be provided because they might apply in your circumstances, please call us at 813-333-5800 for more information.

What role can a consultant play in your SBA 8(a) Application

Hiring a reputable consultant to assist in the preparation of your 8(a) Application can be very important. Most self prepared 8(a) Application are rejected outright or send back multiple times for deficiencies or inconsistencies. In fact “Only 2 out every 10 self prepared 8(a) Applications are approved by the SBA“.

Hiring and investing in a reputable consultant can dramatically increase your chances to achieve successful 8(a) Certification and decrease the time it takes to get 8(a) Certified. A consultant that does not have the experience or proven track record may hurt your chances. The old adage of “You Get What You Pay For” is important. If you believe that you can pay your consultant a few hundred dollars to prepare a successful 8(a) Application you will most likely “Get What You Pay For“. It takes anywhere between 40-80 hours’ worth or work typically to properly review and prepare the 8(a) Application with work on both sides. An 8(a) Application can be several hundred to over a thousand pages in length and is not just a bunch of forms to fill out.

A reputable 8(a) Consultant should perform a free pre-qualifying interview to determine your current state of 8(a) Program eligibility before they enter into any agreement with you. As a result of this pre-qualifying interview they should let you know if your chance of qualifying or not. If you don’t qualify for the 8(a) Program they should let you know why and how to get around these issues without breaking any of the rules.

When you hire any consultant, accountant or attorney to assist with your 8(a) Application they are required to report the SBA that they assisted you and what fees you paid them to assist you. They must also provide a copy of any agreement between the client and the them for review by the SBA.
If you choose to enter into an agreement with a consultant you should make sure:

1. The consultant must have extensive experience in preparing 8(a) Applications that have resulted in successful 8(a) Certification by the SBA and can provide real references for you to speak to directly.

2. The consultant must thoroughly understand the current SBA 8(a) regulations and Office of Hearings and Appeals (OHA) cases that might impact your 8(a) Application.

3. The consultant you speak to initially should be the person who will assist in your 8(a) Application and not be passed off to some junior analyst with limited experience.

4. The consultant should also have detailed knowledge of Federal procurement. For example did they previously work for an 8(a) Certified company or work in the federal market space as a contractor.

5. The consultant should provide you with very specific guidance and clear recommendations to you while preparing your 8(a) Application with clear answers to your questions with no double-talk.

6. No consultant should offer a guarantee that your application will accepted by the SBA as the SBA is the final determiner in whether you get certified. It is actually a violation of the SBA rules for any consultant to guarantee that your application will approved by SBA.

7. The consultant agreement should ensure that all of your personal information is protected properly and not shared with anyone other than you and the consultant.

8. The consultant should assist you after the 8(a) Application is submitted to the SBA should the SBA ask for additional information.

Cloveer employees live and breathe 8(a) Certification. When you hire Cloveer to prepare your 8(a) Application you will working directly with Rick Otero, our President/CEO who has 15 years to experience with proven results.

Rick keeps up to date on all of the latest daily SBA 8(a) Program changes and has a detailed understanding of the current SBA 8(a) regulations and the latest SBA OHA cases on 8(a) Certification.

Cloveer has a very strong success rate. We maintain a rate over 99% for clients we pre-qualify and have assisted thousands of small businesses to achieve and maintain their 8(a) Program Certification.

Rick worked in his family owned 8(a) Certified business, RJO Enterprises, Inc.. This business was one of the most successful 8(a) Certified companies in the 8(a) Program. In fact this business was recognized by INC. Magazine for five consecutive years as one of the country’s most successful 8(a), high-tech, information technology and electronics concerns.

Cloveer will pre-qualify you for FREE as we don’t want to waste your time or investment if you do not qualify. When you ask Rick a question you will get an honest answer with no double-talk. Even if Rick finds that you do not currently qualify he will identify the workarounds to your specific issues, if possible, so you can apply down the road.

All information provided to Cloveer is protected and will be secure and will never be shared with anyone.

Finally, our Full 8(a) Application Service is turnkey and once we prepare and you submit your 8(a) Application we will be there for you until with full support, at no additional fee, should the SBA ask for additional information.

Give us a call at 813-333-5800 to speak with Rick or visit us at www.cloveer.com for a wealth of information on the 8(a) Program.

Active SBA 8(a) Certified Firms as of July 1, 2014 by Location

There are 7,078 active SBA 8(a) Certified firms as of July 1, 2014. Below is an info graphic showing the location by state and number of active SBA 8(a) Certified firms. The source of this information is the SBA Dynamic Small Business database.

8(a) Certified Firms as of July 1, 2014

8(a) Certified Firms as of July 1, 2014

The top five states with 8(a) Certified Firms are:
1. Virginia – 880
2. California – 789
3. Maryland – 668
4. Texas – 605
5. Florida – 441

The top five states or US territories with the lowest number of 8(a) Certified firms are:
1. Vermont – 2
2. U.S. Virgin Islands – 3
3. Rhode Island – 7
4. Delaware – 9
5. North Dakota  – 10

This information is provided by Cloveer.com.

Cloveer provides products and services on the SBA 8(a), HUBZone and VA VetBiz programs.

Have additional Questions? or want to get started on your SBA 8(a) Application?

With 14 years and over 2,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8a certified.  Contact us today at 813-333-5800 or visiting our website at www.cloveer.com to discover what Cloveer can do for you. We also offer these options for further assistance in completing your 8(a) Application.

Option 18(a) Application Review

  • For those who wish to complete the application on their own we offer an 8(a) Application Review service.  Here, one of our 8a program experts will review your entire application, checking it for missing documents and potential eligibility issues.  We will then advise you as to how best to modify your application to ensure it will be approved an SBA reviewer.

Option 28a Application Completion Service

  • The majority of our clients however, prefer a little more of a hands-on approach.  They recognize the expertise we have accumulated in the over 14 years we’ve been assisting clients obtain 8(a) certification, and want us to put it to use for them.  If you opt for our 8(a) Application Completion Service, we will work one-on-one with you to ensure that your 8(a) Application is 100% complete and compliant so the SBA can review and accept it the first time.

 

Top 5 States with HUBZone Certified Firms

Update: As of May 2014, the number has dropped to 5,987. See below for April Data. This is a drop of 45 hubzone certified participants since April.

There are 6,032 active SBA HUBZone Certified firms as of April 2014. Below is an info graphic showing the location by state and number of active SBA HUBZone Certified firms. The source of this information is the SBA Dynamic Small Business database.

HUBZone infographic

HUBZone Certified Firms by Location as of April 2014

The top five states with HUBZone Certified Firms are:
1. California – 540
2. Oklahoma – 361
3. Virginia – 310
4. Texas – 279
5. Florida – 243

The top five states with the lowest number of HUBZone Certified firms are:
1. Delaware – 5
2. Rhode Island – 7
3. Vermont – 13
4. Maine – 18
5. Connecticut – 20

This information is provided by Cloveer.com.

Cloveer provides products and services on the SBA 8(a), HUBZone, 8(m) and VA VetBiz programs.

 

8a Program Eligibility – The $250,000 Adjusted Net Worth Requirement

Among the many 8a business development program eligibility requirements, the applicant for 8a Certification must have a personal adjusted net worth of less than $250,000 at the time of 8a Application Submission.

What is the definition of Adjusted Net Worth?

The algorithm used to determine Adjusted Net Worth for 8a Certification purposes is:

Adjusted Net Worth = Personal Assets – Personal Liabilities – [Equity in primary residence + value of ownership interest in applicant business + value of any IRA/401(k) or other retirement account that is subject to a penalty for early withdrawal]

If the applicant is married and the asset or liability is jointly held, you split the value 50/50. If the applicant is married and lives in a community property state, you only split assets and liabilities 50/50 if you have a transmutation or pre/post nuptial agreement that states otherwise.

How can I determine my Adjusted Worth?

You can easily determine your Adjusted Net Worth by using our Adjusted Net Worth Calculator.

anw

What is required to be submitted within the 8a Application to prove the applicant’s Adjusted Net Worth?

Each applicant, and their spouse, must submit a separate SBA Form 413, Personal Financial Statement. Along with the SBA Form 413 you must also submit statements for each asset or liability supporting the amounts reported. These statements cannot be any older than 30 days at the time of 8a Application submission.

Are there any ways to reduce an applicant’s Adjusted Net Worth below the $250,000 threshold?

For more information, contact us.

*Important* You cannot transfer an asset out of the applicant’s name within two years of the time your apply for 8a Certification for less than fair market value. Doing so will result in the full amount of the asset being re attributed back to the applicant.

8a Certification Advantages

8a certification is a valuable marketing vehicle for socially and economically disadvantaged small businesses to access the federal government marketplace. Initially, contracting under the 8a Program may seem more difficult than other methods. However, it is no more complicated than contracting under full and open competition through the sealed bid procurement process and it presents many advantages for both the government and the 8a contractor.

Advantages to the Government

A big advantage for government procurement personnel in selecting the 8a contracting method is that the agency does not have to solicit bids and may choose a specific 8a contractor to fulfill its requirements. For sole-source requirements under the competitive thresholds, the contracting agency can identify the 8a company to perform a contract by simply naming that company in an offering letter to the SBA. Of course this does not happen by itself. The 8a firm must actively self-market with the contracting agency or be introduced to the contractor through a referral. For competitive 8a requirements, the contracting agency does not have the same ability to choose a contractor, although the competition can be limited to eligible 8a companies within a certain geographic area or participation stage.

Another advantage for the government is that they can often get what they need faster by contracting though the 8a Program. This is because competitive requirements must be synopsized in FedBizOpps and the resulting solicitation must be open on the street for a minimum of 30 days. This process for full and open competition can take several months. 8a contracts have no synopsis requirements (except for competitive 8a contracts) and contracting agencies are not required to allow 8a firms 30 days to respond to the solicitation. Therefore 8a contracts can be finalized much faster.

Advantages to the 8a Contractor

The advantages to an 8a company are great. An 8a company can obtain federal contracts on a sole-source or limited competition basis much faster than in a full and open competition. For many small businesses, the costs of preparing proposals are very prohibitive. If the contract is a sole source, the 8a firm does not have to endure the costs associated with preparing a competitive proposal and participating in subsequent rounds of discussions with the contracting agency’s contracting officer.

Once the buying agencies are aware of the advantages of the 8a process and have a good experience with your 8a firm, they will most likely prefer to extend future contracts to you. The SBA plays a role in the beginning of the contracting process by verifying and approving the requirement for the 8a company. Once the requirement is in place, the 8a company and the federal agency deal directly with each other during negotiation of the contract and during performance of the contract.

Looking for help with Getting 8a Certified?

For clients who are too busy running their businesses to complete the application themselves, we understand you don’t have time to look over the 8a checklist and that you would rather have a group of trusted 8a program experts more involved in your application. Cloveer offers other services including an 8a Application Review, and for those who would like their entire 8a application completed and approved in record time, a full 8a Application Completion Service.

No matter which option you choose, Cloveer guarantees that no other company will work harder or faster to assist you in getting your business SBA 8a certified. We have been assisting clients to obtain their 8a certification and maintain their 8a program eligibility for over 10 years. As such, we know the SBA 8a program regulatory requirements, 8a standard operating procedures and Office of Hearings and Appeal cases that affect the 8a program better than 99.9% of anyone else out there.

At Cloveer, we believe in treating you the way we want to be treated. We go the extra mile to make sure your experience with our company is outstanding. Contact us today to discover what Cloveer can do for you.

Top 10 8(a) Program Continued Eligibility Problems

1) Late or non-submission of 8(a) Annual Review documents. 

The most common eligibility problem 8(a) firms encounter is either the late or non-submission of required Annual Review documents. SBA is required to review each 8(a) firm’s program eligibility every year on the firm’s certification anniversary date. Your local SBA office will send a request for the required Annual Review documents and information shortly before the end of your program year which contains the date that your submission is due back to your Business Development Specialist (BDS). If it is not received by the due date, you will be sent a reminder and a second due date. If the information is not submitted by this second date, SBA’s rules & regulations require the SBA to start program termination proceedings against your firm. The termination process may result in the loss of your 8(a) certification. Once it is lost you cannot be certified in the program again. Since annual reviews are done every year on your anniversary date, you should be prepared for it and comply on time.

2) Late or non-submission of annual financial statements or failure to submit required type of statement based on sales level.  

Your year-end financial statements must be signed, dated and their accuracy verified by an authorized officer, partner, or sole proprietor of the concern. Firms with annual receipts of less than $2 million may submit statements prepared in-house, in accordance with “generally accepted accounting procedures” or have a compilation statement prepared by a qualified CPA or independent public accountant. Those firms with sales of more than $2 million and less than $10 million must provide reviewed statements, prepared by a qualified CPA or independent public accountant. Statements are due within ninety (90) days after the close of the company fiscal year. Those firms with total sales of $10 million and over are required to submit audited financial statements prepared by a CPA or independent public accountant. Those firms who will be submitting audited statements are allowed an additional 30 days due to the added complexity. The company’s sales figures on the Profit and Loss Statement must show the break-down of 8(a) and non-8(a) sales, if applicable. The submission of proper, year-end financial statements, (Balance Sheet and Profit and Loss Statements) is mandatory as a condition of 8(a) program participation, as noted in your signed 8(a) Participation Agreement. Firms who are delinquent in submitting annual financial statements are ineligible to receive 8(a) contract awards. In addition program termination proceedings may be initiated if financial statements are not received in this office by the required due date. Most 8(a) firms have calendar fiscal year end date (December 31). While the financial statement due date might correspond with the time that your accountant is doing your business & personal tax returns, there is no provision for any extensions to the financial statement submission date. Make sure that your CPA is aware of this mandatory 8(a) compliance requirement.

3) Failure to keep your BDS up to date on contact information changes, e.g. address, telephone number, e-mail address, etc.

8(a) firms must notify their BDS immediately upon making any changes to their contact information. Since they may be contacting you either via email, telephone, regular mail or certified mail, they must have accurate contact information for you. They are required by some of SBA’s regulations to use “certified mail, return receipt requested” to contact you regarding certain issues, such as Annual Reviews. Several firms have actually lost their 8(a) certification because they either didn’t notify SBA of their address change or they didn’t bother to pick up their certified mail at the post office.

Since the SBA may contact you  via email regarding the your Annual Review process, it is imperative that they have your proper email address and the SBA is not blocked by any SPAM filters.

4) Excessive compensation or withdrawals from the 8(a) concern.

Regarding the compensation of the owners of 8(a) firms, 13CFR 124.112 states the following: (d) Excessive withdrawals. (1) The term withdrawal includes, but is not limited to, the following: Cash dividends; distributions in excess of amounts needed to pay S Corporation, LLC or partnership taxes; cash and property withdrawals; payments to immediate family members not employed by the Participant; bonuses to officers; and investments on behalf of an owner. Although officers’ salaries are generally not considered withdrawals for purposes of this paragraph, SBA will count those salaries as withdrawals where SBA believes that a firm is attempting to circumvent the excessive withdrawal limitations though the payment of officers’ salaries. SBA will look at the totality of the circumstances in determining whether to include any specific amount as a withdrawal under this paragraph.

Withdrawals are excessive if during any fiscal year, they exceed (i) $250,000 for firms with sales up to $1,000,000; (ii) $300,000 for firms with sales between $1,000,000 and $2,000,000; and (iii) $400,000 for firms with sales over $2,000,000. The fact that a concern’s net worth has increased despite withdrawals that are deemed excessive will not preclude SBA from determining that such withdrawals were detrimental to the attainment of the concern’s business objectives or to its overall business development.

5) Failure to meet Competitive Business Mix targets.

To ensure that Participants do not develop an unreasonable reliance on 8(a) awards, and to ease their transition into the competitive marketplace after graduating from the 8(a) BD program, Participants must make maximum efforts to obtain business outside the 8(a) BD program. During both the developmental and transitional stages of the 8(a) BD program, a Participant must make substantial and sustained efforts, including following a reasonable marketing strategy, to attain the targeted dollar levels of non-8(a) revenue established in its business plan. You should use the 8(a) BD program as a resource to strengthen the firm for economic viability when 8(a) program benefits are no longer available. During the transitional stage of the 8(a) BD program, a Participant must achieve certain targets of non-8(a)contract revenue (i.e., revenue from other than sole source or competitive 8(a) contracts). These targets are called non-8(a) business activity targets and are expressed as a percentage of total revenue. The targets call for an increase in non-8(a)revenue over time. During their transitional stage of program participation, Participants must meet the following non-8(a) business activity targets each year:

Participant’s year in the   transitional stage

Non-8(a) business activity   targets (required minimum non-8(a) revenue as a percentage of total revenue)

1

15

2

25

3

35

4

45

5

55

The SBA will measure the Participant’s compliance with the applicable non-8(a) business activity target at the end of each program year in the transitional stage based on the Participant’s latest fiscal year-end total revenue. At the end of each year of participation in the transitional stage, the SBA will review the Participant’s total revenues to determine whether the non-8(a) revenues have met the applicable target. In determining compliance  the SBA will compare all 8(a) revenues received during the year, including those from options and modifications, to all non-8(a) revenues received during the year.

Consequences of not meeting competitive business mix targets. Any firm that does not meet its applicable competitive business mix target for the just completed program year will be ineligible for sole source 8(a) contracts in the current program year, unless and until the Participant corrects the situation. The SBA may initiate proceedings to terminate a Participant from the 8(a) BD program where the firm does not make good faith efforts to obtain non-8(a) revenues.

6) Failure of the person upon whom 8(a) eligibility is based to be the highest compensated individual in the firm.

13CFR 124.106 (3) allows non-disadvantaged individuals to participate in the management of an 8(a) concern but they MAY NOT receive compensation from the applicant or Participant in any form as directors, officers or employees, including dividends, that exceeds the compensation to be received by the highest officer (usually CEO or President). The highest ranking officer may elect to take a lower salary than a non-disadvantaged individual only upon demonstrating that it helps the applicant or Participant. You must obtain the prior written consent of the Director, Office of Business Development or designee before changing the compensation paid to the highest ranking

officer to be below that paid to a non-disadvantaged individual. See your BDS for further information or if you have questions on this matter.

7) Failure of the person upon whom 8(a) eligibility is based to devote full-time management to the 8(a) concern.

13CFR124.106 requires the following to maintain 8(a) eligibility:

(a)(1) An applicant or Participant must be managed on a full-time basis by one or more disadvantaged individuals who possess requisite management capabilities.

(2) A disadvantaged full-time manager must hold the highest officer position (usually President or Chief Executive Officer) in the applicant or Participant and be physically located in the United States.

(3) One or more disadvantaged individuals who manage the applicant or Participant must devote full-time to the business during the normal working hours of firms in the same or similar line of business.

(4) Any disadvantaged manager who wishes to engage in outside employment must notify the SBA of the nature and anticipated duration of the outside employment and obtain the prior written approval of the SBA. The SBA will deny a request for outside employment which could conflict with the management of the firm or could hinder it in achieving the objectives of its business development plan.

8) Failure to obtain prior SBA approval of ownership changes.

A Participant may change its ownership or business structure so long as one or more disadvantaged individuals own and control it after the change and the SBA approves the transaction in writing prior to the change. The decision to approve or deny a Participant’s request for a change in ownership or business structure will be made and communicated to the firm by the Director, Office of Business Development. The decision of the AA/8(a) BD is the final decision of the Agency. A decision to deny a request for change of ownership or business structure may be grounds for program termination where the change is made nevertheless. A change in ownership does not provide the new owner(s) with a new 8(a) BD program term.

9) Failure to Perform the Required Percentage of Work on an 8(a) Contract.

To assist the business development of Participants in the 8(a) BD program, an 8(a) contractor must perform certain percentages of work with its own employees. These percentages and the requirements relating to them are the same as those established for small business set-aside prime contractors, and are set forth in 13CFR125.6. A Participant must certify in its offer that it will meet the applicable percentage of work requirement both sealed bid and negotiated procurements. (a) In order to be awarded an 8(a) contract, the 8(a) concern must agree that:

(1) In the case of a contract for services (except construction), the concern will perform at least 50 percent of the cost of the contract incurred for personnel with its own employees.

(2) In the case of a contract for supplies or products (other than procurement from a non-manufacturer in such supplies or products), the concern will perform at least 50 percent of the cost of manufacturing the supplies or products (not including the costs of materials).

(3) In the case of a contract for general construction, the concern will perform at least 15 percent of the cost of the contract with its own employees (not including the costs of materials).

(4) In the case of a contract for construction by special trade contractors, the concern will perform at least 25 percent of the cost of the contract with its own employees (not including the cost of materials).

10) Failure to submit SBA form 1790 Representative Report.

13CFR124.601 requires each Participant to submit a semi-annually a written report to its assigned BOS that includes a listing of any agents, representatives, attorneys, accountants, consultants and other parties (other than employees) receiving fees, commissions, or compensation of any kind to assist such Participant in obtaining or seeking to obtain a Federal contract. The listing must indicate the amount of compensation paid and a description of the activities performed for such compensation.

For more information on the 8(a)BD Program, including the 8(a) Annual Review or 8(a) Compliance Service, please visit www.cloveer.com or call 813-333-5800.