Certifiably Small

Are you a small business? And if so, how do you certify your company as a small business? What about a woman-owned small business or a small disadvantaged business?

• Small Business. Small business size can be determined only by reference to the Standard Industrial Classification (SIC) Code applicable to a procurement or government program. SIC Codes, which can be found at 13 Code of Federal Regulations (CFR) Subpart 121, define business size either in terms of the number of employees or average annual revenue over a three-year period. For example, SIC Code 3663 defines a small business engaged in the manufacture of Radio and Television Broadcasting and Communications Equipment as a business employing 750 workers or less, while SIC Code 7812, Motion Picture and Videotape Production, defines a small business as a company generating $21,500,000 or less average annual revenue over the past three years.

To determine whether you are a small business, you first must figure out what SIC Code applies to a particular procurement or program. If your company meets the SIC Code requirements, you can then self-certify to the agency that you are small.

• Woman-Owned Small Business. A woman-owned, small business is a small business that is at least 51 percent owned by a woman or group of women. In addition, a woman-owned business must be operated by a woman. It is not enough if a woman majority shareholder is a passive investor not involved in the business, nor is it sufficient if the woman is a figurehead executive. The management and daily business operations must be controlled by one or more women. If your company meets the definition of a woman-owned business, you can self-certify to the agency.

• Small Disadvantaged Business. This one is more complicated. Small disadvantaged businesses (SDB) can receive preferences in federal procurements once they are certified under SBA’s SDB certification program. While in the past a business could qualify for these advantages by self-certifying as an SDB in its offer, self-certification is no longer acceptable today. Under SBA’s current regulations, SBA itself must formally certify the business as an SDB before the firm may qualify as an SDB and be eligible for the benefits of the SDB Program.

Certification is accomplished by obtaining and completing an application for the SDB Program, and having that application approved by SBA. Applications may be obtained on SBA’s Web site at www.sba.gov/sdb/section06h.htm. Once completed, the application may be submitted directly to SBA or one of its approved third-party private certifiers. 8(a) firms automatically qualify for the SDB Program and need not apply.

The SDB application must demonstrate that the applicant, in fact, is small and that it is at least 51 percent owned and controlled by an economically and socially disadvantaged individual(s). African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are presumed to qualify, while other individuals must show by a preponderance of the evidence that they are disadvantaged. Additionally, all individuals must have a net worth of less than $750,000, excluding the equity in their primary residence and the business.

The benefits of the SDB program accrue both to the SDB itself, as well as to the prime contractor, which uses the SDB as its subcontractor. An SDB competing as a prime contractor can receive a price evaluation adjustment of up to 10 percent on procurements, which exceed the simplified acquisition threshold, and involve industries in which disadvantaged companies are underutilized. This means that an SDB can win a Federal procurement without being the lowest offeror. Instead, the SDB need only be within 10 percent of that lowest offeror.

A prime contractor, which uses an SDB as its subcontractor can receive an evaluation credit in competitive negotiated procurements involving industries in which disadvantaged companies are underutilized and which exceed $500,000 or $1,000,000 for construction contracts. Monetary incentives for prime contractors subcontracting with SDBs are also available. (The price evaluation adjustment and evaluation credits are not available on 8(a) procurements and small business set-asides.)

Once a business is certified by SBA, the SDB is listed on an online public registry of qualified businesses maintained in PRO-Net. A business may remain on the list for three years before having to renew its certification. Businesses may visit SBA’s Web site at www.sba.gov/sdb/index.html, for more information about the SDB certification program.