Pros and Cons of the Federal 8(A) Program: Implications for Small Businesses (1997)

ABSTRACT In November 1996, California voted to end preferential treatment on basis of race or sex in contracting, public hiring, and college admissions. A 1995 Court case essentially restricted use of federally mandated for minority owned small businesses. The future of all affirmative action is uncertain. This article looks at pros and cons of federal program and examines impact of recent Court decision on small businesses. INTRODUCTION The Small Business Act was passed in order to ensure that American system of free competition applied also to small businesses. The Act states that it is the declared policy of Congress that Government should aid, counsel, assist, and protect, insofar as is possible, interests of smallbusiness concerns in order to preserve free competitive enterprise, to insure that a fair proportion of total purchases and contracts or subcontracts for property and services for Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises... (Small Business Act, 15 U.S.C. § 631). section 8(a) of Act mandates that a percentage of all federal contracts and subcontracts must be set-aside for small and economically business owners. The 8(a) program is administered by Small Business Administration (SBA) and serves as a federal affirmative action program. Under section 8(a) guidelines, if at least 51 % of business is held by a minority owner, it is assumed that he or she suffers a social disadvantage. In 1994, this added up to a total of $4.4 billion in U.S. contracts (Barrett, 1995). However, there are a substantial number of people who believe that this program of set-asides has been greatly abused. Congressman John Conyers of Michigan states, If 8(a) program were a business, they wouldn't qualify for program themselves. Their performance is unacceptable... (Thompson, 1992, p. 66). Additionally, General Accounting Office (GAO), investigative office for Congress, has put together a report that points out a number of abuses in 8(a) program during 1980s and early 1990s, [the SBA] has been working aggressively since 1993 to correct these types of abuses. (SBA Minority Program, p. B2). Some proponents, however, believe that GAO report provides Congress proof it needs to either reduce or kill section 8(a) affirmative action program. President Bill Clinton convened a panel which has examined effects of affirmative action and made recommendations for its modification (Clinton Will Keep Affirmative Action Programs, 1995). He has also said that he intends to order an intense, urgent review of all executive orders requiring affirmative action and set-asides. In addition, a bill was introduced on floor of Senate calling for elimination of all federal preferential to include contract set-asides. Perhaps most serious blow to federal is recent Court decision, Adarand Constructors, Inc. v. Pena (1995). Not surprisingly, many see this decision as a significant challenge to federal affirmative action. In fact, after Adarand decision, The Wall Street Journal stated that Supreme Court has now dealt a severe setback to federal affirmative action programs (Dialing Up Discrimination, 1995). This article examines both pros and cons of federal program. It then examines impact Adarand decision will have on future preferential awarding of government contracts to small businesses. Finally, new standards imposed on federal preferential set-asides, and implications for small businesses, are reviewed. ARGUMENTS FOR THE 8(A) PROGRAM The program was designed to help socially and economically disadvantaged business owners gain a track record for success so that eventually they could function without special treatment. …