[Congressional Record Volume 141, Number 137 (Wednesday, September 6, 1995)]
[Senate]
[Pages S12745-S12746]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         ADDITIONAL STATEMENTS

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                            THE 8(a) PROGRAM

 Mr. BOND. Mr. President, earlier this summer the Clinton 
administration released its report on affirmation action. The 
President's report devotes considerable attention to the Small Business 
Administration's 8(a) Minority Contracting Program. The report details 
the 8(a) program's failings and abuses, but in the end the President 
concludes that the program should be saved in the name of affirmative 
action.
  As the chairman of the Committee on Small Business, I have first hand 
familiarity with the 8(a) program. It is a program that gives a very 
valuable government contracting preference to members of certain 
minority groups without requiring proof of specific discrimination or 
social disadvantage.
  The 8(a) statute requires proof of economic disadvantage. But in 
practice, even those who have accumulated substantial wealth are still 
welcomed into this program. An applicant to the 8(a) program is deemed 
economically disadvantaged if the applicant has a net worth less than 
$250,000, excluding the value of his or her home and the value of the 
small business owned by the applicant.
  Let's focus for just a minute on what this economic disadvantage test 
really means. According to data provided to me by the Administrator of 
the Small Business Administration, 81.6 percent of all small businesses 
owners in the United States have a net worth under $250,000.
  But the 8(a) limit for economic disadvantage doesn't stop at 
$250,000. Once you are in the program, net worth can grow to $750,000 
without jeopardizing participation in the 8(a) program. The SBA 
Administrator has informed me that 91.6 percent of all small business 
owners have a net worth below this level. And President Clinton's 
affirmative action report correctly notes that business owners with 
excessive wealth even above these levels have managed to avoid 
detection and wrongfully remain in the 8(a) program.
  So let's review where we are on the 8(a) program. We have a program 
supposedly for small business owners who are socially and economically 
disadvantaged. But an applicant is eligible for the 8(a) program 
without an individual showing of specific discrimination. Then, under 
the economic disadvantage test, over 80 percent of all small business 
owners in the United States would be small enough to be eligible. And 
on top of that, an 8(a) participant's wealth can triple in size once in 
the program and still remain eligible for special government contract 
preferences.
  It doesn't surprise me that participants in the 8(a) program are 
fighting to save it. It is a good deal for anyone who can get in.
  In April 1995, I chaired a hearing before the Committee on Small 
Business, and we heard a great deal of passionate testimony about the 
8(a) program--both in favor of and opposed to the program. One of the 
witnesses was Josh Smith, founder of Maxima Corp., one of the best 
known companies to have participated in the 8(a) program. Mr. Smith
 discussed how the 8(a) program fails to benefit low-income communities 
and low-income minorities.

  Mr. Smith testified that 8(a) companies were not locating in and 
hiring people from needy neighborhoods and distressed inner cities with 
large numbers of unemployed members of minority groups. To the 
contrary, too often 8(a) firms can be found in northern Virginia or 
suburban Maryland. I think its wrong that the important objective of 
this program--bringing economic opportunity and jobs to historically 
disadvantaged areas and small businesses--has been lost.
  Today, the 8(a) program builds wealth among a small group of 
individuals who own small businesses and who gain acceptance into the 
program. The program makes no effort to encourage hiring of minorities 
or residents of distressed areas, nor is there any requirement that the 
8(a) company assist community redevelopment effort by locating in or 
performing work in distressed areas. The social disadvantage 
requirement of the 8(a) program is satisfied merely if the owner, who 
controls 51 percent of the company, is a member of a prescribed racial 
or ethnic group.
  I believe the 8(a) program as we know it today should be replaced 
with a race neutral program specifically designed to use Federal 
contracting expenditures to help attract small businesses and 
employment to distressed areas with low income and high unemployment. 
Such areas might be located in the inner city, on an Indian 
reservation, or in Appalachia.
  I suggest we call these areas historically underutilized business 
zones or 

[[Page S 12746]]
HUBZones. My proposal will allow any small business located in a 
HUBZone and employing people in the HUBZone to obtain a reasonable and 
meaningful preference in competing for Federal Government contracts 
against other businesses not located in a HUBZone.
  My proposal begins to return the idea behind the 8(a) program to its 
roots, when it was targeted to inner city areas after the riots 
following the assassination of Martin Luther King. In this case, 
government contract set-asides were used to bring in new businesses to 
areas trying to recover from the dramatic damage and tension that 
accompanies a riot, such as those that occurred in 1968.
  The HUBZone replacement for today's 8(a) program should not be 
limited, however, to inner cities. My program creates hope and 
opportunity for all cities, rural areas, and Native American 
communities that have not prospered while other more affluent areas of 
our country have flourished.
  For too long, we have overlooked programs to bring jobs and wealth to 
economically distressed areas of our Nation. We now have an opportunity 
to take a positive step to provide long overdue help where help is 
needed in our country. The HUBZone proposal will create a powerful 
private-public partnership to give opportunity to small businesses who 
locate in economically distressed areas and to give hope to people who 
have not had much chance until now to pull themselves up the economic 
ladder.


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