October 2000 - With the Small Business Administration's 8(a) Business Development program under attack again, some people are questioning what good the program accomplishes. Every year the SBA offers a statistical answer in the form of a report to Congress. For 1998 (the latest year of available data), the program had 6,078 member companies, which won $6.4 billion in federal contracts. That breaks down to 26,961 individual contracts with an average value of $191,386. Those numbers indicate that the program fulfills a valuable function by directing relatively small contracts to historically disadvantaged contractors.
In the Hispanic economy, those contracts tend to be concentrated both geographically and among larger companies. Using data from the report, HISPANIC BUSINESS focused on those states where 8(a) contractors seem to prosper. The following pages detail those states and the reasons why 8(a) entrepreneurs thrive there.
Top States for Hispanic 8(a) Companies
Rank & State / Number of Cos.
1. Texas -- 251
2. California -- 213
3. Virginia -- 132
4. New Mexico -- 110
5. Florida -- 96
6. Colorado -- 93
7. Maryland -- 89
8. New Jersey -- 40
9. New York -- 38
10.* Illinois -- 35
10.* Arizona -- 35
Source: "1998 Report to Congress on Minority Small Business and Capital Ownership Development," U.S. Small Business Administration.
It is no coincidence that Texas, the top-ranked state for Hispanic-owned 8(a) firms, also has a plethora of military bases. The state plays host to 14 Air Force and Army facilities.
"Our strong federal presence helps us a great deal. It gives us a chance to grow," says Ana Maria Lecea, CEO of Professional Performance Development Group Inc. (PPDG) in San Antonio, a provider of medical logistic engineering services.
PPDG has contracts with several Texas military bases, including nearby Fort Sam Houston. The business now has 475 employees in 34 states and annual revenues of $11.3 million. The company ranks number 309 on the HISPANIC BUSINESS 500.
In explaining her company's success despite cutbacks in military spending, Ms. Lecea cites a critical mass of Hispanic entrepreneurs in Texas. "It's getting to the point where you have to do business with Hispanics if you want to do business at all," she says. Hispanics account for two-thirds of the state's population growth and will outnumber Anglos by 2025, according to the Texas Department of Economic Development.
The state's Hispanic 8(a) firms benefit from a healthy economy. Since the oil recession of 1986, the economy has steadily diversified. The current construction boom has directed a lot of money to 8(a) contractors. In addition, the service sector's share of Gross State Product has jumped from 14.6 percent in 1986 to 19.4 percent in 1999, and manufacturing has grown from 14.5 percent to 15.3 percent over the same period, according to the Department of Economic Development.
Like Texas, California offers Hispanic 8(a) firms a wide variety of military customers. The Golden State has 15 Naval installations, nine Air Force bases, five Army facilities, and six Marine operations.
"California is a great place for Hispanic 8(a) companies because so much federal money is spent here. Businesses can start with small contracts and grow slowly," says Rafael Martin, CEO of Azteca Construction in Rancho Cordova.
Azteca owes much of its success to military contracts. Forty-five percent of the company's $17 million in sales stems from the armed services. State contracts account for the other 55 percent.