The development program provides a strong opportunity for economically and socially disadvantaged individuals. The definition of "economic disadvantaged" is specific, but "socially disadvantaged" does allow some flexible consideration by the SBA. They key is that the individual meet not only the definition of being from a disadvantaged group, but that she herself is also economically disadvantaged. It does not guarantee success, but instead promotes entrepreneurship for individuals who are not typically represented in the 1 percent.
This would seem to be a win-win for the government: provide the proverbial hand up in exchange for goods and services. And the program has shown success. There are currently more than 5,000 firms in the program, and cumulative revenues for 8(a) firms totaled more than $30 billion. For fiscal 2013, the government significantly exceeded its statutorily mandated 5 percent goal for the 8(a) program. Contract revenue totaled 8.62 percent. This revenue helps the owners build wealth and create jobs simultaneously
However, a combination of legal cases and trends in the market, in addition to decisions made by Congress, are slowly threatening to undermine and potentially undo the program. As a result, the key program that aims to help small businesses owned by disadvantaged individuals may go the way of the dinosaurs and with it one tool to fight economic inequality.
Because overall dollars spent on contracting declined in 2013, the government spent more money on 8(a) contracts in fiscal 2012 than in 2013, despite a higher percentage last year. The cause of the decline in contract dollars is a confluence of factors, including focused efforts to spend more efficiently. However, the blunt tool known as sequestration is impacting government contractors, including small businesses. While the congressionally created policy zombie is temporarily detained, it could rise again with future budget battles on the horizon.
Fewer dollars to spend means small businesses face a tough road, and likely will see a declining pie of available small business dollars, even if the government meets its percentage based goals.
There are still larger threats to the bottom line than sequestration—and programs that support economically and socially disadvantaged businesses—in pending court cases.
Two years ago, the U.S. District Court for the District of Columbia ruled in DyanaLantic v. Department of Defense et. al that the 8(a) program was generally constitutional, but its use in a specific industry was unconstitutional. The court ruled that because the federal government did not prove that companies had experienced discrimination in that specific industry (military simulator manufacturing to be specific) use of the 8(a) program was unconstitutional.
Both the plaintiff and the government appealed that decision, but it eventually settled early this year. The settlement precludes use of the 8(a) program in the military simulator manufacturing industry "without articulating a strong basis for doing so."