8(a)s Grapple With Political Battles, Procurement Reform

The 8(a) community this year finds itself beset by politics and marked by such emotionally charged issues as racial quotas and discrimination.

Executives from 8(a) firms polled last year were more concerned with day-to-day business issues than with political and legal threats facing federal minority contracting programs. But that tone has noticeably changed in 1996. The shift reflects the increased fervor of the attacks against the 8(a) program spawned by the upcoming presidential election, a pivotal Supreme Court case and a perceived public backlash against affirmative action.

Ironically, this high-profile controversy may not be the greatest threat to the 8(a) program. The program is not really in danger of exploding, many observers said, but it could well wither from disuse as federal agencies change their buying patterns in response to procurement reform initiatives.

Still, the political controversy is making 8(a) program participants and supporters downright edgy.

"We really don't do any kind of interviews or talk about the 8(a) program because it's so volatile right now," a spokeswoman for Sylvest Management Systems Corp. said. In last year's Federal Integrator [FCW, June 19, 1995], Sylvest was one of many firms citing hard work as the proper defense against the slings and arrows soaring at the program.

Some 8(a) advocates said they fear that the pressures of the 1996 presidential campaign will cause the candidates to waver in their support for minority contracting. Another wrinkle is the Supreme Court's Adarand v. Pena decision, which prescribes strict prerequisites for sole-source awards to minority-owned companies. Adarand's most significant legacy for the 8(a) program may be skittishness among contracting officers now reluctant to use the program, according to some industry sources.

Weak support for the 8(a) program starts at the top, where both presidential front-runners have at one time or another been accused of backtracking on their support for affirmative action. While President Clinton has been criticized for downshifting his support, and Republican presidential contender Bob Dole is portrayed by many affirmative-action proponents as compromising an earlier position.

"Sen. Dole used to be very friendly to affirmative action, but in the '96 campaign he has taken the opposite posture," said Fernando Galaviz, vice chairman of the National Federation of 8(a) Companies. Galaviz is also chief executive of an 8(a) company called Centech Group.

In his prologue to recent legislation aimed at ending minority-based government programs, Dole said, "Let me be frank. While I have questioned and opposed group preferences in the past, I have also supported them. That's my record, and I am not hiding from it. But many of us who supported these policies never imagined that preferences would become a seemingly permanent fixture in our society."

Galaviz and others rebuffed this position, saying the sole-source contracts bestowed on minority-owned firms, which are one component of the 8(a) program, are still necessary. "In order to get to be the best-qualified, you have to gain experience. It seems that the new thrust is 'Let's select only the best-qualified.' For us, that is a code word that says, 'We, the white community, have had enough of the development of these people of color in the competitive environment,' " Galaviz said.

But John Spotilla, the Small Business Administration's general counsel, predicted that the political rhetoric surrounding the campaign will have little or no lasting impact on the 8(a) program. He said the 8(a) program's business development orientation should insulate it from attacks.

And the questions surrounding the program may actually help the 8(a) initiative, according to Spotilla.

"If we do have a national debate on whether it is advisable to have a program that helps minority business development - and we think it is - we may end up with a consensus that it is a positive thing. It may result in a more clear understanding on the part of the American public," he said.

Some 8(a) program participants are shrugging off the political rhetoric. George Fuster, president of International Data Products Corp., described 1996 campaigning as "heat-of-the-moment type things. The long-term process and goals of the program will come from more meaningful long-term [reviews]."

Adarand Impact

Lasting ramifications, however, will certainly accompany a June 1995 Supreme Court case in which five of nine justices agreed that a "strict scrutiny" standard must be adopted.

Seven justices, however, backed the theory of affirmative action. "Importantly, seven of nine justices agreed that race-conscious remedial measures remain appropriate if they are to 'remedy' the results of discrimination and satisfy the new 'strict scrutiny' standard," according to Devon Hewitt, who constructed an analysis on the decision for her Washington, D.C., law firm Shaw, Pittman, Potts & Trowbridge.

Immediately following the Adarand decision, the Clinton administration directed the Justice Department to review all federal affirmative-action programs and declared a three-year moratorium on new set-aside contracting programs.

The results of that inquiry were published last month as a set of proposed rules for contracting with minority-owned businesses. The DOJ plan states that agencies would not be able to use race-based programs unless the government determines that minority-owned firms in a specific industry are being discriminated against.

According to the DOJ plan, the Commerce Department, the General Services Administration and SBA will create a set of benchmarks to guide agencies in their use of race-based contract awards. Those guidelines will be the main element of the DOJ rules affecting 8(a)s, according to an SBA spokesman. The benchmarks are expected by the end of the calendar year.

"We believe the 8(a) program meets the constitutional test set by the Supreme Court and Adarand," Spotilla said. "There is a compelling need for the program, and it is narrowly tailored."

Indirect Effects

But some executives noted that campaign rhetoric and Adarand are already having a trickle-down effect on 8(a) contracting.

"The other phenomenon that is occurring is the natural human reaction of the managers in the federal government and the officers that make these contracts available," Galaviz said. "There is some concern in the community that the rhetoric and court actions have given opportunity to those who have not been supportive of 8(a) to slow down the process and the use of the program."

Hewitt, however, characterized any current shying away from the 8(a) program as mere nervousness. "Contracting officers now appear very hesitant to use the 8(a) program, and that is creating a chilling effect on 8(a)s, not withstanding the administration's saying they support it," Hewitt said. "The government is acting like a nervous horse that needs calming."

Added Hewitt, "The contracting officers are out there by themselves...and they are going to suspend their use of minority firms until someone comes out with something they can understand."

Spotilla said he has seen no direct evidence that Adarand is adversely affecting the program.

"We've heard some anecdotal reports to that effect but have had no specific charges aimed at agencies or individual contracting officers. We've tried to communicate to contracting officers that there is a need to support the program," he said.

Procurement Shift Offers Alternatives

While 8(a)s have an ear to the ground on overall affirmative-action issues, their greatest concern involves the more subtle encroachment of new procurement practices. In a procurement environment characterized by delays and protests, 8(a) contracts were viewed as a faster way to acquire products and services.

"The 8(a) program is under duress in many aspects," said Bob Dornan, senior vice president of Federal Sources Inc., a McLean, Va., market research firm. "Under the new acquisition system, there are strategies that are much quicker than the 8(a) channel."

GSA's revised multiple-award schedule program is one vehicle challenging the 8(a) program. The elimination of the maximum-order limitation and other reforms have made the schedule far more attractive to contracting officers. The increased use of governmentwide acquisition contracts is another procurement phenomenon that is posing problems for 8(a)s.

With governmentwide contracts such as NASA's Scientific and Engineering Workstation Procurement, "all the pieces are there for the asking," Dornan said. "And that is a more important threat to 8(a)s than the political or judicial attacks. It's really just now starting to sink in. Agencies are just starting to realize what they can do and get away with, and it's not shady or against the rules. But compared with the rules [that were in effect] two years ago, it's like getting away with murder."

The practice of combining products and services in a single omnibus procurement for a given agency is referred to as "bundling."

"There is a lot of talk now about bundling and what can be done to compensate minorities in the face of bundling, such as allowing [small, disadvantaged businesses (SDBs)] to form joint ventures to bid on large contracts," said Fred Ball, who monitors small-business matters for TRW Inc. "Still, SDBs will be depending on the agencies to attempt not to bundle to the extent that they normally would in order to encourage small-business participation." Ball is TRW's small-business liaison officer for its Systems Integration Group, East.

SBA associate administrator for minority enterprise development Cal Jenkins said the agency is looking into the problem.

"We've heard some concerns and are working within our office of government contracting" to ensure that contracting officers don't excessively streamline requirements to the detriment of small business, he said.

According to Galaviz, 8(a)s, like all government contractors, are feeling the pinch of reduced federal dollars and increased competition. "Major corporations like PRC, CSC and IBM have in the past had certain requirements like a $10 [million] to $15 million threshold. Now they have absolutely no qualms about looking at opportunities under $2 million."

However, Humberto Pujals, chief executive of 8(a) Government Micro Resources Inc., said he is not worried.

"Removal of the maximum-order limitation by GSA has made them more of a competitor, but they are not that big a threat. IDIQs are often for a particular customer and are customized. The 8(a) program fits the enterprise goals and objectives for a customer and is still an important niche," Pujals said.

One 8(a) executive, who asked not to be identified, said that in the face of all these challenges, an old maxim applies: That which does not kill you will make you stronger. The 8(a) program "is making companies stronger but not larger," the executives said. "But it is better to be stronger than larger in the long run."

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Jones is a free-lance writer based in Arlington, Va.