Washington Post Business Section, 10-16-06, Page D4 (LINK)

The "Fast 50" is supposed to be a list of the fastest growing small IT government contractors compiled by Washington Technology, a sister publication of the Washington Post.           Being named to the "Fast 50" is considered an honor in the IT community.  Many of the firms trumpet this honor in their literature and on their web sites.

          The dirty little secret is that the majority of the "Fast 50" have benefited from huge racial preferences and contract set asides.  Neither the Washington Post nor Washington Technology disclosed this important fact.

          Additionally, many of the "Fast 50" firms also enjoy multiple preferences, including not only the 8(a) set aside program, but also the Small Disadvantaged Business (SDB) program, the Historically Underutilized Business (HUB) zone program, and the Woman Owned Business (WOB) program.  In FY 2005 all of these programs taken together represented $60,027,649,900 (that's $60 billion) in federal business upon which Caucasian American males were not allowed to bid.2

          Below is Adversity.Net's annotated version of Washington Technology's "Fast 50" list with the racial set aside status of the businesses listed.

          8(a) is the Small Business Administration's designation for minority-owned firms which receive the highest proportion of government set aside contracts based upon the race of the business owner.  The name "8(a)" refers to the section of the Code of Federal Regulations which defines this program.

          In FY 2005 the federal government set aside $10.5 billion for 8(a) firms.3

GOV'T REGULATIONS ABOUT 8(a): RACE of the 8(a) business owner:  The Code of Federal Regulations (CFR), at 13 CFR 124.103, clearly states the racial requirements of being granted 8(a) certification: "§ 124.103 Who is socially disadvantaged? "(a) General. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control.

SBA graphic of happy minority business owners who have scaled the 8(a) tower.

"(b) Members of designated groups.

"(1) There is a rebuttable presumption that the following individuals are socially disadvantaged:

"Black Americans; Hispanic Americans; Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians); Asian Pacific Americans (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by SBA according to procedures set forth at paragraph (d) of this section. Being born in a country does not, by itself, suffice to make the birth country an individual’s country of origin for purposes of being included within a designated group."

---

WEALTH OF THE 8(a) BUSINESS OWNER:  According to the Code of Federal Regulations at 13 CFR 124.105, to qualify as an 8(a) firm the owner must not have a net worth of more than $250,000 excluding the equity in their personal residence and excluding the equity in their business!           Furthermore, to remain in the 8(a) program for the full nine year term, the owner's net worth must not exceed $750,000 (again, excluding equity in his/her home and business).

SBA graphic of specific races taking profitable advantage of set asides.

§ 124.105 -- "(2) Net worth.

          "For initial 8(a) BD eligibility, the net worth of an individual claiming disadvantage must be less than $250,000. For continued 8(a) BD eligibility after admission to the program, net worth must be less than $750,000. In determining such net worth, SBA will exclude the ownership interest in the applicant or Participant and the equity in the primary personal residence (except any portion of such equity which is attributable to excessive withdrawals from the applicant or Participant). Exclusions for net worth purposes are not exclusions for asset valuation or access to capital and credit purposes."

          SDB stands for "Small Disadvantaged Business".  As with the 8(a) program, businesses must be owned by certain preferred races or ethnicities in order to be eligible for the SDB designation.

          An 8(a) firm is automatically considered to be an SDB, but an SDB is not automatically considered to be an 8(a).

          In FY 2005 the federal government set aside $33 billion in contracts for SDB firms.4

GOV'T REGULATIONS ABOUT SDB:

[13 CFR] Sec. 124.1001 General applicability.

(a) This subpart defines a Small Disadvantaged Business (SDB). It also sets forth procedures by which a firm can apply to be recognized as an SDB, including procedures to be used by private sector entities approved by SBA for determining whether a particular concern is owned and controlled by one or more disadvantaged individuals or Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes (tribes) or Native Hawaiian Organizations (NHOs). Finally, this subpart establishes procedures by which SBA determines whether a particular concern qualifies as an SDB in response to a protest challenging the concern's status as disadvantaged. Unless specifically stated otherwise, the phrase "socially and economically disadvantaged individuals'' in this subpart includes tribes, ANCs, CDCs, and NHOs.

[Editor's Note:  ANC stands for Alaskan Native Corporation.  NHO stands for Native Hawaiian Organization.  CDC stands for Community Developed Corporation.  These categories represent even more generous set asides for specific groups but are beyond the scope of this report.]

(b) Only small firms that are owned and controlled by socially and economically disadvantaged individuals are eligible to participate in Federal SDB price evaluation adjustment, evaluation factor or subfactor, monetary subcontracting incentive, or set-aside programs, or SBA's section 8(d) subcontracting program.

(c) In order for a concern to represent that it is an SDB as a prime contractor for purposes of a Federal Government procurement, it must have:

(1) Received a certification from SBA that it qualifies as an SDB; or

(2) Submitted an application for SDB certification to SBA or a Private Certifier, and must not have received a negative determination regarding that application from SBA or the Private Certifier.

(d) A firm cannot represent itself to be an SDB concern in order to receive a preference as an SDB for any Federal subcontracting program if it is not on the SBA-maintained list of qualified SDBs.

Sec. 124.1002 What is a Small Disadvantaged Business (SDB)?

(a) Reliance on 8(a) criteria.

          In determining whether a firm qualifies as an SDB, the criteria of social and economic disadvantage and other eligibility requirements established in subpart A of this part apply, including the requirements of ownership and control and disadvantaged status, unless otherwise provided in this subpart.

          Qualified Private Certifiers must use the 8(a) criteria applicable to ownership and control in determining whether a particular firm is actually owned and controlled by one or more individuals claiming disadvantaged status.

(3) Except for tribes, ANCs, NHOs, and CDCs, whose management and daily business operations are controlled by one or more socially and economically disadvantaged individuals. For the requirements relating to tribes and ANCs, NHOs, or CDCs, see Secs. 124.109, 124.110, and 124.111, respectively.

(4) Which, for purposes of SDB procurement mechanisms authorized by 10 U.S.C. 2323 (such as price evaluation adjustments, evaluation factors or subfactors, monetary subcontracting incentives, or SDB set-asides) relating to the Department of Defense, NASA and the Coast Guard only, has the majority of its earnings accruing directly to the socially and economically disadvantaged individuals.

(c) Disadvantaged status. In assessing the personal financial condition of an individual claiming economic disadvantage, his or her net worth must be less than $750,000 after taking into account the exclusions set forth in Sec. 124.104(c)(2).

(d) Additional eligibility criteria. Except for tribes, ANCs, CDCs and NHOs, each individual claiming disadvantaged status must be a citizen of the United States.

(e) Potential for success not required. The potential for success requirement set forth in Sec. 124.107 does not apply as an eligibility requirement for an SDB.

(f) Joint ventures. Joint ventures are permitted for SDB procurement mechanisms (such as price evaluation adjustments, evaluation factors or subfactors, monetary subcontracting incentives, or SDB set-asides), provided that the requirements set forth in this paragraph are met.

(1) The disadvantaged participant(s) to the joint venture must have:

(i) Received an SDB certification from SBA; or

(ii) Submitted an application for SDB certification to SBA or a Private Certifier, and must not have received a negative determination regarding that application.

(2) For purposes of this paragraph, the term joint venture means two or more concerns forming an association to engage in and carry out a single, specific business venture for joint profit. Two or more concerns that form an ongoing relationship to conduct business would not be considered ``joint venturers'' within the meaning of this paragraph, and would also not be eligible to be certified as an SDB. The entity created by such a relationship would not be owned and controlled by one or more socially and economically disadvantaged individuals. Each contract for which a joint venture submits an offer will be evaluated on a case by case basis.

(3) Except as set forth in 13 CFR 121.103(f)(3), a concern that is owned and controlled by one or more socially and economically disadvantaged individuals entering into a joint venture agreement with one or more other business concerns is considered to be affiliated with such other concern(s) for size purposes. If the exception does not  apply, the combined annual receipts or employees of the concerns entering into the joint venture must meet the applicable size standard corresponding to the SIC code designated for the contract.

(4) An SDB must be the managing venturer of the joint venture, and an employee of the managing venturer must be the project manager responsible for performance of the contract.

(5) The joint venture must perform any applicable percentage of work required of SDB offerors, and the SDB joint venturer(s) must perform a significant portion of the contract.

(g) Ownership restrictions for non-disadvantaged individuals. The ownership restrictions set forth in Sec. 124.105 (g) and (h) for non-disadvantaged individuals and concerns do not apply for purposes of determining SDB eligibility.

          HUB Zone refers to the SBA's "Historically Underutilized Business Zone" program.  The HUB Zone designation is essentially a proxy for race and ethnicity since virtually all designated HUB Zones are located in areas populated by lower income racial minorities.

Footnotes

Note 1.	Technically, the SBA does grudgingly allow some Caucasian American males to be part of the 8(a) program.  Such firms must submit copious documentation and "proof" of historic discrimination which is not required of, for example, black-owned firms.   Furthermore, SBA's own official statistics show that less than 1/2 of 1 percent of all 8(a) firms are owned by Caucasian American Males.  See SBA's FY 2005 Report to Congress (MS Word document).            If this low percentage of participation by Caucasian American males were viewed through the lens of applicable civil rights case law it would constitute prima facie evidence that this group has been illegally and systematically excluded from this program because of their race, ethnicity and/or gender.	Return to Text:
Note 2.	The $60,027,649,900 figure is based upon SBA's FY2005 report titled "Small Business Goaling Report:  Actions Reported Between Fiscal Year 2005 (Q1) and Fiscal Year 2005 (Q4)".  The $60 billion figure is the total of the set asides listed for 8(a), SDB, HUB Zone, and Woman Owned businesses in that report. --See SBA's FY2005 Goaling Report (Adobe Acrobat Reader required).	Return to Text:
Note 3.	According to the SBA's FY2005 report "Small Business Goaling Report:  Actions Reported Between Fiscal Year 2005 (Q1) and Fiscal Year 2005 (Q4)" the federal government set aside $10.5 billion in conracts for 8(a) firms. --See SBA's FY2005 Goaling Report (Adobe Acrobat Reader required).	Return to Text:
Note 4.	According to the SBA's FY2005 report "Small Business Goaling Report:  Actions Reported Between Fiscal Year 2005 (Q1) and Fiscal Year 2005 (Q4)" the federal government set aside total of $33 billion in contracts for all SDB firms. --See SBA's FY2005 Goaling Report (Adobe Acrobat Reader required).	Return to Text:
Note 5.	According to the SBA's FY2005 report "Small Business Goaling Report:  Actions Reported Between Fiscal Year 2005 (Q1) and Fiscal Year 2005 (Q4)" the federal government set aside a total of $6.1 billion in contracts for all firms located in Historically Underutilized Business Zones (HUB Zones). --See SBA's FY2005 Goaling Report (Adobe Acrobat Reader required).	Return to Text:
Note 6.	According to the SBA's FY2005 report "Small Business Goaling Report:  Actions Reported Between Fiscal Year 2005 (Q1) and Fiscal Year 2005 (Q4)" the federal government awarded a total of $10.5 billion in contracts for all firms certified as Woman Owned Businesses (WOB). --See SBA's FY2005 Goaling Report (Adobe Acrobat Reader required).	Return to Text:

... closing thoughts