VEDC loss of small business center bid to prompt layoffs.

Amid intense competition among organizations vying to host the United States Small Business Administration's Small Business Development Center Program for the Los Angeles area, the Valley Economic Development Center was passed over in favor of the Long Beach Community College District.

Worth $2.7 million per year, the VEDC had hoped that hosting the SBDC program would allow it to the brand the SBDC name across Los Angeles, Ventura and Santa Barbara counties. As a result of the SBA's decision to select LBCCD, the VEDC will likely be forced to close its Oxnard, Santa Barbara, Glendale, South Los Angeles and Santa Monica offices at the end of the month, resulting in approximately 10 layoffs as the organization will retrench itself to focus more exclusively on the Valley, according to VEDC President Roberto Barragan.

The VEDC was hoping to be the first nonprofit lead SBDC, as the other 62 lead SBDCs scattered across the country are all based at academic institutions. In order to be named a lead center, one has to either be an academic institution or host a women's business center (the VEDC runs a women's business center in Santa Clarita.)

The VEDC had been bidding to replace California State University, Northridge, as the area's lead center. CSUN had been the lead center for the region since July of 2003, but decided to opt out at the end of last year. As a part of its program, CSUN had contracted with the VEDC and had provided it with $1.4 million a year to run several of its SBDC offices scattered across the area. Lead centers often provide other organizations with funds to help administer the SBDCs. However, with Long Beach taking over the lead center designation it is under no obligation to contract with the VEDC and as a result Barragan said that it has planned to contract with other organizations to provide the SBDC work that the VEDC had been doing, causing the layoffs.

Representatives of the LBCCD refused to comment on the matter.

The SBDC program is the SBA's most extensive economic development program, one that attempts to help small businesses create jobs and strengthen the economy. The SBDC program is the SBA's largest counseling and training network with locations in every U.S. state and territory. SBDCs provide services such as development of business plans, manufacturing assistance, financial packaging assistance, procurement contracting assistance and international trade assistance. The lead SBDC is the institution which holds the contract with the SBA and administers and operates the area's SBDC program.

Barragan said the 10 employees will be laid off at the end of the month.

"This is the worst experience I've had in 20 years of running non-profits," Barragan said. "I've never had to lay people off before. These are people that have been here for up to six years. They're losing their jobs for no reason of their own. It makes no sense. We're the only entity that has any experience running an SBDC. LBCCD has none."

After the VEDC applied to be the lead center, Steve Jacoby, who at the time served as the head of CSUN's SBDC program questioned the validity of the VEDC's proposed use of Community Development Block Grant funds (in order to receive a lead center designation, one needs to match the funds allotted to it).

At one point, Jacoby's insistence on scrutinizing the VEDC's use of these funds made it to the Association of Small Business Development Center's weekly newsletter. Dated October 31, the newsletter describes how "in response to a request from the Los Angeles SBDC Regional Director Steve Jacoby, the ASBDC had requested that the SBA's Inspector General undertake an investigation of match funds claimed by the Los Angeles Region SBDC service center hosted by the VEDC." The ASBDC Board of Directors approved this action without a dissenting vote. However, despite the repeated auditing of the VEDC's use of CBDG funds, the validity of the use of the funds was affirmed.

Shortly after LBCCD received the SBDC host designation, CSUN fired Jacoby. While CSUN officials declined to comment on the specifics of Jacoby's dismissal, they claimed that it was not related to Jacoby's continued insistence on auditing the VEDC's use of matching funds.

Antonio Doss, the Washington-based associate administrator in the office of small business development centers, was part of the decision-making process and claimed that Jacoby's actions had no influence in the decision-making process.

"Without a doubt, Jacoby's actions played no role in our final decision. We feel that we made a good decision based on facts and not any other consideration," Doss said. "Long Beach had a very strong application. It wasn't an easy decision to make but they had a lot of good strengths, such as their history of service, their proposal to set up the network and their financial and administrative capacity."

As for the immediate future and the ramifications that this decision will have on the Valley's small businesses, the VEDC expects to consolidate its operations across the Valley floor in order to continue to ensure aid to local business. The Van Nuys-based non-profit plans to move its Women's Business Center from Santa Clarita to Pacoima, as well as moving its Glendale office to downtown Los Angeles. Barragan expects the VEDC's revenues to be flat in 2006 and he says that while it may suffer a bit in the short-term, its long-term future remains bright.

"We'd been providing approximately 400 business consulting workshops a year, now we're going to have to cut that number down to about 150. We'll continue to focus on the Valley in terms of lending and doing more loans," Barragan said. "Right now, we've been serving Santa Clarita to Santa Monica, but now we're going to focus more on the Valley. This is our home and we're going to make sure that we serve every small business' needs."