New Minority-Owned Business Rules Catch Some by Surprise

Ask Stan Shinpo, the Japanese American owner of STS Construction of Camarillo, if his business is minority owned and he can answer yes, plain and simple.

That’s as of today.

But come July 1, Shinpo and fellow minority business owners must have approval from the U.S. Small Business Administration to classify their businesses as minority owned in order to receive advantages in bidding for government contracts.

Shinpo, whose business depends largely on federal contracts with the naval bases at Point Mugu and Port Hueneme, has begun the months-long application process for the SBA’s 8(a) business development program. The certification would allow him to maintain and increase the benefits he currently has with his minority status.

Intended to assist minority and disadvantaged businesses in procuring contracts, 8(a) will be one of the primary certifications needed by minorities seeking help when bidding for federal jobs.

“For our business, 8(a) certification is going to be part of our growth,” said Shinpo, whose company is installing metal studs, drywall and suspended ceilings on both Ventura County naval bases. “This opens up a lot of opportunities. It’s kind of a steppingstone to get into larger programs. . . . Along with growth in sales volume, the company will grow in size.”

Though Shinpo is gearing up for the SBA policy change, officials of Ventura County’s small-business organizations say many minority business owners are unaware of the upcoming reform and soon could find themselves without minority procurement benefits--leaving them to fight head to head with larger contractors.

Businesses that want to be certified as either minority or disadvantaged should start the process now, said Fred del Castillo, a business management consultant for the Center for Economic & Community Development.

“Many of our minority entrepreneurs are just taking the steps toward certification now, and it’s a lengthy process. . . . They have to show their income tax for three years, their financial statements, all of their documents. It can take a small company up to four weeks just to assemble the documentation and get it ready.”

More than 6,000 businesses that accounted for $6.4 billion in federal contracts for fiscal 1997 are enrolled in the 8(a) program nationwide.

To qualify, businesses must be at least 2 years old, be considered to have a “good character” and good potential, and with net assets of no more than $250,000.

Benefits of certification include the ability to compete for jobs set aside by the federal government strictly for minority and disadvantaged companies.

Shinpo is working with the Oxnard College Center for Economic & Community Development to prepare for and file his 8(a) application.

The center, along with the Small Business Development Center in Ventura and other small-business agencies, has been trying to educate minority and disadvantaged business owners in the community.

“Most of them are not aware of this program,” Del Castillo said. “One of the reasons for the reform in the program is to better identify [firms]. Now, nonminority firms try to certify themselves as minority.”

Along with helping businesses achieve 8(a) status, Del Castillo and his counterparts are working with firms, minority and nonminority, that would better fit the SBA’s new Small Disadvantaged Business criteria.

As of Jan. 1, businesses can qualify for the disadvantaged designation if they can prove social or economic disadvantage in the marketplace.

Under federal guidelines, they would still be eligible for the 5% of federal contract funds set aside for minority or disadvantaged businesses.

“We have been focusing on the SDB [certification] for the last three months--we’ve sent information about it out to most of the firms we’ve identified as minority owned [in the county],” Del Castillo said.

“In the overall picture, they are a small percentage of the total business population,” he said. “But we’ve identified over 600 firms [in the county] that are capable of contracting with the federal government, or subcontracting” as either minority or disadvantaged.

Many business owners are not aware of the new disadvantaged-business status, del Castillo said.

“It’s a major federal reform, and unfortunately it was not publicized as it should have been,” he said.

Under the criteria for Small Disadvantaged Business status, nonminority businesses have a greater chance of qualifying for procurement benefits, Del Castillo said.

“Women-owned business, disabled individuals, companies that have found it difficult to penetrate certain markets,” Del Castillo said. “A woman-owned business in the construction industry would be a good example of a disadvantaged business because it’s a woman-owned business in a predominantly male industry.”

Lynn Dines, owner of Synectic Solutions of Camarillo, received 8(a) certification last October. She qualified as a woman competing for contracts in the male-dominated defense industry. With 8(a) certification, she automatically qualifies for Small Disadvantaged Business status.

“I think it’s a big advantage for businesses, particularly fairly young businesses,” said Dines, who develops computer training courses, databases and technical data for the Navy.

“It allows you, especially in the defense sector, to compete on smaller contracts in a way that would not be available otherwise,” she said. “As a small business, it has been very difficult for us to compete as a prime contractor. With 8(a) we are able to put together some proposals and compete for that work.”