Unless the Small Business Administration comes up with an interim solution, it may be forced to shut down its billion-dollar minority contracting program in two weeks -- an act that could spell financial disaster for firms that depend on it.
A law passed in the previous Congress prohibits the SBA from handing out any new contracts or extending old ones after June 1 unless the agency and contracting firms have agreed on a "graduation" plan defining how long the company involved will be eligible for contracts set aside for minorities under the SBA's Section 8A program.
The catch is that no regulations have been published or adopted yet under which those graduation plans would be written, and the short time involved means that the regulations will not be adopted before the deadline.
According to SBA officials, the previous administration at the SBA had not done the groundwork that would have allowed the agency to meet a congressional timetable for putting the regulations into action.
Yesterday, SBA attorneys were working hurriedly to draft an interim solution to get the agency beyond the June 1 deadline. "It's not our intention to allow the program to be shut down by June 1," said Deputy Administrator Donald R. Templeman, who said he thought the agency would come up with an approach to avoid that. "It's a little tricky."
If the deadline cannot be avoided, "It would be critical for a number of firms," he said.
"We don't want to give anyone the idea that we're against the 8A program," Templeman said.
"It would b disastrous," said Roy Littlejohn, president of the Black Presidents Roundtable, an organization mainly of Washington area firms that includes SBA 8A participants. "Substantially all of the firms on the 8A program do most of their business through that program. To curtail that without notice means that most of these firms would be hurt very, very serverly, and I would think some might be forced out of business."
Littlejohn said he believes the SBA will avoid that crisis, however.
Congress enacted the law requiring graduation plans in response to criticism that the program, which was supposed to be a springboard to propel socially and economically disadvantaged firms to commerical success, had become a permanent home for many instead, sheltering them indefinitely from conventional competition.
Under the law, the SBA was supposed to publish regulations by February which were to become effective 30 days later. Then the agency was to begin to negotiate individual plans with companies already qualified to participate in the program and with new companies coming in.
Between enactment and the February deadline, administrations changed and a new crew arrived at SBA. They failed to meet the February deadline, a fact Templeman blamed on their predecessors at SBA.
Templeman said he expects the agency to publish regulations within a few days, along with a interim solution to the deadline "staring us in the face."