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               [The Wall Street Journal Interactive Edition]
                               August 1, 2000

Small Business Suite

SBA Program Falls Short
On Helping Firms Win Jobs

   By ELEENA DELISSER
   Staff Reporter of THE WALL STREET JOURNAL

   ONE OF THE FEDERAL GOVERNMENT'S best-known small-business programs
   should be doing a better job of serving its constituency, a new
   government report says.

   The Small Business Administration's so-called 8a program was
   established to help "disadvantaged" entrepreneurs, such as minorities
   and disabled people among others, gain a "foothold" in government
   contracting. But the SBA has placed too much emphasis on giving these
   firms management advice and not enough on helping them win federal
   contracts, the General Accounting Office concludes. "The SBA's efforts
   are not aligned with the needs or expectations of 8a firms," Stanley
   J. Ozerwinski, an associate director for the GAO, said in testimony
   last month before the U.S. Senate's Committee on Small Business.

   The GAO surveyed 1,200 of the 6,000 firms in the program. A large
   majority of those that responded said what was important to them were
   opportunities to win government contracts. Additionally, they said
   they weren't interested in receiving management tutorials, since 71%
   of these firms were owned by people with more than 10 years'
   experience operating a business. Instead, they said they wanted the
   SBA to make sure contacts at federal agencies were familiar with the
   8a program and to increase the number of ways through which the SBA
   informs 8a firms about contract opportunities.

   During fiscal year 1999, about $6.2 billion of contracts were awarded
   through the 8a program. Sen. Christopher "Kit" Bond, chairman of the
   U.S. Senate Committee on Small Business, said he was disturbed by the
   GAO's finding of a concentration of federal contracts among a small
   subset of eligible firms. "It's the rich get richer and almost
   everybody else gets nothing," Mr. Bond says. "There are a whole lot of
   qualified 8a firms that don't get anything." About $3.2 billion, or
   50% of the contracts awarded in fiscal 1998, went to 209 firms.
   Meanwhile more than 3,000 of the 6,000 8a firms didn't get any program
   contracts.

   For its part, the SBA concedes its program has shortcomings but says
   they are being addressed. Della Ford, associate administrator for 8a
   business development, says that in recent years the federal agency has
   instituted regulations that close loopholes and speed up the contract
   award process. She also notes that a new mentoring program that
   matches small firms with large companies for joint ventures currently
   has 60 small firms participating and the SBA plans to raise that
   number to 100 by the end of fiscal year 2000.

   But Ms. Ford says that some of the 8a firms may have misplaced
   expectations about just how much the SBA can do for them. "I think the
   firms are probably looking at 8a as a program that will offer them a
   contract upon entry," she says. "We really try to teach firms how to
   build their business in the federal marketplace and the 8a contracting
   mechanism is a tool that we use for that purpose."

   START-UP growing number of employees = human resources problems?

   Internet start-ups are so focused on raising cash and retaining
   employees that they may be neglecting a key area that affects the
   longevity of their enterprises -- human resources.

   While it may be considered mundane by some, the human-resources
   department is the one area of a company charged with making sure the
   company is in compliance with a raft of laws, from disability to
   sexual-harassment discrimination laws. But according to a survey of
   fast growing start-ups, their executives are putting the
   human-resources issue on the back burner and that decision could leave
   them open to litigation down the road. In fact there appeared to be a
   contradiction between entrepreneurs' words and actions.

   For example, 54% of the respondents said they don't have formalized,
   written sexual-harassment policies. And while most of the
   entrepreneurs surveyed noted the value of offering an employee
   handbook, 52% said they didn't have one.

   Meanwhile, many of the respondents said they didn't see the value in
   hiring an employee responsible for handling human-resources issues.
   About 51% of the respondents said they didn't have any dedicated
   person on staff to deal with human resources and 71% said they were
   "confident" they wouldn't hire an HR person anytime soon. The survey
   was sponsored by EmployeeMatters Inc., a Stamford, Conn.-based
   provider of employee administration services.

   At Waxdigital Inc., a New York-based Web design agency that has only
   been in existence for a little over a year, having a full-time HR
   person isn't on the agenda. Aaron Newman, chief executive officer,
   says with 19 full-time employees and plans to hire at least 16 more by
   the end of the year, it would be helpful to have someone on staff to
   handle personnel issues. "But right now I don't feel it's justified to
   hire someone for that purpose," he says. "We're just not big enough."
   Still, he says Waxdigital does have a written sexual-harassment
   policy, which all employees are required to sign.

   WorldNow Inc. is one young Internet company that believes in HR.
   Having formalized human-resources policies, even in a small company,
   is one way to establish a corporate culture and "core ideology" early
   on, says Gary Gannaway, the CEO.

   Not having a dedicated HR person is "a sign of cluelessness," Mr.
   Gannaway says. "You need somebody to be an outpost of your corporate
   vision."

   GEORGE W. BUSH isn't the only one hoping to benefit from this week's
   Republican National Convention.

   Kronosport Inc., a six-employee Pennsylvania company, is hoping to get
   some attention for its "pedicabs," which will be used to whisk
   delegates around the Philadelphia convention. The bright yellow
   vehicles, which look like a cross between a golf cart and a rickshaw,
   are powered by a small electric motor and human peddling. The
   Pennsylvania Department of Community and Economic Development, whose
   mission is to make the state more attractive to existing businesses,
   is leasing 10 of the pedicabs and two cargo vans from Kronosport for
   use during the event. The Republicans are using them to showcase
   environmentalism at the convention.

   Edward Kron, chief executive officer of Kronosport, hopes his
   three-year-old company's appearance at such a prominent event will
   drum up investor interest in his little business. "This is going to be
   my chance to break out," he says. He's hoping his days as a
   personal-injury attorney, representing people in bike accidents among
   other things, will soon be behind him.

   Write to Eleena Delisser at [log in to unmask]
     _________________________________________________________________

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