The Small Business Administration announced yesterday that it will begin banishing companies that are too large, too successful or too hopeless from a program designed to aid small, disadvantaged businesses. The firms that still qualify will have their participation limited to from three to five years.
Unveiling what the agency called significant new and tough policies for a program that has not appeared to be a favorite of the Reagan administration, SBA chief Michael Cardenas also said that the agency has imposed an indefinite moratorium on bringing new companies into the program.
Cardenas also said that the SBA will review the records of 40 of the largest firms now benefiting from the program to determine whether they should be cast out of the 12-year-old SBA program which awards noncompetitive federal contracts to eligible firms. Although Cardenas would not identify those firms, he released a list of the 50 largest companies in the procurement program -- a list which SBA officials said overlapped the list of firms under review.
Included in the list were four Baltimore firms and eight Washington-area companies, including the Jones Artis Construction Corp. which for several years has been listed in a survey of the nation's 100 largest black-owned businesses. Jones Artis had received $19.3 million in contract awards from its entry into the program through Sept. 30, 1980.
The other Washington-area firms listed were Unified Industries Inc., an electronics company based in Alexandria which had $73.2 million in contracts; OAO Corp., an engineering and data-processing firm in Beltsville ($47.2 million); Systems and Applied Science Corp., a computer software firm in Riverdale ($34.2 million); Rehab Group Inc., of Falls Church ($28.5 million); Raven Data Processing Inc. of Washington ($24.1 million); International Business Services of Washington ($23.7 million); and Unified Services, a janitorial firm in Washington ($19.2 million).
Under the revised program -- the details of which will be published in the Federal Register and some of which will be worked out in hearings -- firms that have grown so large that they no longer need the assistance of the SBA's minority set-aside program will be dropped from the program.
Others, which appear to have gotten as much benefit from the program as it can offer or who appear unlikely to make it with additional assistance also will be eliminated to make room for other firms to benefit.
Cardenas reiterated his and the Reagan administration's support for a program to aid socially and economically disadvantaged firms and denied that the new procedures were the beginning of an attempt to dismember the program.
"The concept of helping small, socially and economically disadvantaged firms and increasing their representation in government contracting and commercial business is sound," he said. "But the SBA 8(a) program has been mismanaged. It has helped very few eligible and deserving small firms."
"Two percent of the firms in the program have received $1.7 billion, or a whopping 31 percent of all 8(a) awards to date," he said. Many of those same firms also have received multiple "string-free" funds called "business development expense," he said. "Old policies have resulted in many firms staying in the program long after they had exceeded small-business-size standards," he said.
Under the new programs, companies coming into the set-aside program will be expected to achieve certain goals under an individual business plan. "A rational business plan will not allow a firm to go from very small to a Fortune 500 firm," said Deputy Administrator Donald R. Templeman. Otherwise, what the plans look like will depend on which business and which industry is involved.
Virtually no firms have left the SBA set-aside program in the past three years, Cardenas said. Some 2,200 firms are participating now. Another 600 are waiting to be certified, and another 620 have been certified but have not yet received contracts.
As firms are eliminated from the program, 200 to 300 new firms a year will be allowed in, based on their size, what type of work they do, their chances of success and what type of work is available. Although the number of firms entering the program will not be much different from what it is now, the absolute number of companies in the program will grow more slowly than in the past.