Minority firms try to move from government aid to mainstream
Boston — Some $275 million in contracts await a Chicago black man who started his business in 1966 by making loudspeakers in his living room. The entrepreneur is Jerry T. Jones, a Mississippi-born migrant to the Windy City, a graduate engineer, and a board member of the Illinois Institute of Technology.
His company is Sonicraft, a high technology firm that does 90 percent of its business with the federal government, most of it as an ''8A'' contractor - that is, one eligible for federal funds, contracts, and grants set aside for minority businesses.
Sonicraft has already received $65 million to design an emergency communications system that will function after a nuclear attack. The United States Air Force has issued the challenge that would net Sonicraft an additional
''To us, this is a big contract,'' says Mr. Jones, who was in Boston at a luncheon honoring minority business people.
''But to a Fortune 500 firm it would be just another job. Our next priority is to be prepared to graduate from Section 8A to the mainstream of government contractors. We have two years (within the program) to go.''
Upgrading minority businesses is a goal espoused by President Reagan first in December 1982, and again last July when he declared Oct. 2-8 as Minority Enterprise Development Week.
''Our challenge today is to enhance the ability of minority Americans to particpate more fully in the market economy and to achieve greater economic independence,'' the President said.
That week was highlighted by a series of activities focused on minority businesses. President Reagan honored three outstanding minority firms at a White House reception for 400 guests. Entrepreneurs were honored at similar functions throughout the nation.
Minority business leaders were impressed with the week's activities and awards, but there was criticism, too.
Critics lauded federal activities - channeled basically through the Minority Business Development Agency of the US Department of Commerce and the Small Business Administration.
They welcomed reports of progress, especially reports that federal agencies maintained $16 billion on deposit in minority banks, and that the US Department of Energy has deposited $7.7 million in additional funds in these banks. They also proposed changes:
* Formulate a step-by-step program to graduate minority firms from contracts set aside specifically for minorities to mainstream competition.
* Develop sources of capital available to minority firms for expansion or fulfillment of contracts. Loans to these businesses are often unavailable from private financial agencies such as banks. This capital may be in the form of direct loans or loan guarantees from federal sources, help from community development corporations, or more loans from traditional lending agencies.
* Show a greater sensitivity to the needs - improved management, job skills training, and other technical assistance - of minority enterprises.
Jones of Sonicraft also suggests that larger minority firms subcontract with smaller ones. ''My plans don't include selling out to a conglomerate and taking the money and quitting,'' he says. ''Black people need institutions that survive , that keep money in their communities, that offer jobs.''
Sonicraft has expanded beyond Chicago to operations in Waltham, Mass., and Alexandria, Va., but Jones sees one drawback.
''We don't do enough business with private enterprise,'' he says. ''Most of this work is on a small scale.''
He suggests that larger black firms pool their resources to meet competition ''at the 'megabucks' level.'' He also advocates more aggressive marketing to receive contracts from major private entrepreneurs. He does business with IBM and a few other major firms, he says.
Two critics of federal policies are speaking out. The National Bankers Association has two complaints. First, they say that a new reform in the federal government's bank-deposit policies - a lock-box program that improves federal management of its cash flow - is reducing funds in banks run by blacks, Hispanics, or women.
In the program, the federal government is selective in depositing money in banks, and funds sometimes bypass smaller banks for larger ones.
They also point out that a presidential executive order calling for more federal agency deposits in minority banks has not been implemented.
''We are aware of these issues,'' says Carole Dineen, fiscal secretary of the Treasury Department. She has met informally with minority bankers to discuss these issues, and more meetings are planned, she says.
The federal government can do more, says Maj. L. Clark III, staff director of the House Small Business Committee, headed by Rep. Parren J. Mitchell (D) of Maryland. Speaking in Boston, Major Clark said:
''Congress has eliminated most direct loans to minority firms, with exceptions. In 1981, minority firms were involved in 3.4 percent of the federal procurement budget. In 1982, involvement dropped to 3.2 percent. We're on a course of moving backward not because of what these firms are doing, but because they are doing so well.''
The Minority Business Development Agency (MBDA) has set up a network of 100 one-stop centers, covering everything from information on loans to advice on grant programs and management.
This helps to short-circuit red tape, say director Victor M. Rivera and deputy director Theron J. Bell. These centers have helped 1,700 people start business, rescued 900 from failure, and helped 2,000 to expand, they say.
MBDA also has developed a minority business locator service, called Profile. It offers a computerized directory of minority-owned firms and what they do.