Navigating the complexities of government contracting requires a precise blend of strategy, knowledge, and adaptability. Margarita Howard, the sole owner, CEO, and president of HX5, has masterfully demonstrated these qualities as she guides the company through the intricate field of federal contracts. The journey of HX5, a women-owned business specializing in professional mission support services to entities like NASA and the Department of Defense, offers valuable insights into how companies can sustain and expand after graduating from the Small Business Administration’s 8(a) program.
The 8(a) program is designed to help small, disadvantaged businesses compete in the marketplace. It provides access to training, marketing, and government contracts that have been set aside for 8(a) program. CEO Margarita Howard took full advantage of this program, facilitating HX5’s initial growth and development. Howard’s strategic approach within the 8(a) framework heavily emphasized building a solid track record and developing key government relationships.
“One of the most important things that should be done before the 8(a) graduates is to create a post-graduation comprehensive business strategy that outlines the goals, target markets, growth plans, and strategies for sustaining the company’s success once it graduates,” says Howard. “Using the lessons learned and insights gained during participation in the 8(a) program is key to ensuring that past mistakes are not repeated and that advantageous insights gained while in the program become part of the firm’s strategies going forward.”
Criteria for Qualifying for the SBA’s 8(a) Program
To qualify for the 8(a) program, businesses must satisfy a range of eligibility requirements set by the U.S. Small Business Administration. Firstly, the company must be at least 51% owned and directly controlled by U.S. citizens deemed economically and socially disadvantaged.
The “two years in business” rule stipulates that applicants must have been operating in their primary industry for at least two years before applying for the 8(a) business development program. To verify this, applicants must submit income tax returns for the last five years, if available. Notably, at least two of these returns must show operating revenues from the primary industry designated in their 8(a) BD certification application. This rule ensures businesses have a track record of activity and revenue generation in their specified field.
The 8(a) program provides numerous benefits to support business growth and development for small, disadvantaged businesses. One of the most significant advantages is the access to federal contracting preferences. Specifically, 8(a) firms are eligible to receive sole-source contracts, which can go up to a ceiling of $4.5 million for goods and services and $7 million for manufacturing. This opens up substantial opportunities for 8(a) firms to grow without competing with larger, more established companies.
Additionally, the program supports competitive set-aside contracts exclusively available to 8(a) companies. This facet ensures that 8(a) participants have a fair chance to compete within a smaller pool of competitors, all of whom meet similar business size and structure criteria.
Another cornerstone of 8(a) is the mentor-protege program, where participants can form beneficial relationships with experienced businesses. These mentor firms provide essential guidance and support, including helping to enhance the protege’s capabilities, achieving the goals set out in its SBA-approved business plan, and improving its overall competitive edge in the federal contracting marketplace.
Furthermore, the program encourages the formation of joint ventures between 8(a) firms and established businesses. This arrangement allows 8(a) participants to collaborate on bids for larger contracts, thus enhancing their capacity to undertake substantial projects and overcome the common challenges smaller businesses face, such as limited resources or lack of previous contracting experience.
“Seeking guidance from experienced mentors or advisors who had firms in the 8(a) program and graduated can provide valuable insights and advice based on their own experiences post-graduation,” says Howard.
The 8(a) program is designed by the SBA as a nine-year initiative, mirroring a developmental life cycle to foster business growth and sustainability. The program is divided into two main stages.
The first four years constitute the developmental stage, during which participating businesses receive intensive business assistance from the SBA.
Following this, the five-year transition stage takes over for the remainder of the program. During this phase, the emphasis shifts toward preparing the business to exit the program and thrive independently in a competitive market environment. This structured approach ensures that companies are well-prepared to meet immediate needs and equipped for long-term success and stability.
Once accepted, businesses must annually demonstrate that they continue to meet the program’s eligibility requirements. It must submit annual reviews that include financial statements and updated business plans.
Margarita Howard Talks Transitioning Beyond 8(a)
Graduating from the 8(a) program doesn’t mean the end of challenges; it signifies the beginning of a new, competitive phase. Margarita Howard says it’s “critical that the firms approaching graduation focus on diversifying their revenue streams to reduce dependence on sole-source 8(a) set-aside contracts. This diversification is a requirement while in the program, but once the firm graduates, it’s even more important.”
Howard continues, “The firm needs to explore and secure new non-8(a) opportunities through subcontracting, teaming agreements, and other avenues to ensure that once the firm graduates, it’s not so dependent on the 8(a) work that it cannot survive outside the 8(a) program.”
Moreover, leveraging past performance and maintaining the relationships built during the 8(a) tenure is crucial for securing new contracts. “The graduated firm should build a portfolio that highlights its track record of success while in the program, showing examples of customer satisfaction and high-scoring past performance evaluations, and use it to market to the government and companies where subcontracting opportunities may present themselves. Also, the firm should maintain strong relationships with government agencies, prime contractors, and industry partners that it previously worked with to have access to new opportunities,” Margarita Howard says.
Howard is keenly aware of the changing dynamics in government contracting. The recent emphasis on diversity and inclusion has opened new doors for women-owned and minority-owned businesses. HX5 stays abreast of these developments, ensuring it is well positioned to benefit from emerging opportunities.