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? What about a veteran-owned or service-disabled owned small business?
Small Business. Small business size can be determined only by reference to the North American Industry Classification System (NAICS) code applicable to a procurement or government program. NAICS 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 receipts over a three-year period.
For example, NAICS Code 334220 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 NAICS Code 512110, Motion Picture and Videotape Production, defines a small business as a company generating $25,000,000 or less average annual receipts over the past three years.
To determine whether you are a small business, you first must figure out what NAICS Code applies to a particular procurement or program. If your company meets the NAICS 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's 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.
Veteran-Owned Small Business. A veteran-owned small business is a small business that is a least 51 percent owned by one or more veterans as defined at 38 U.S.C. 101(2), or in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans. In addition, the management and daily business operations must be controlled by one or more veterans. If your company meets this definition then you can self-certify to the agency and no formal process is required.
Service-Disabled Veteran-Owned Small Business. A service-disabled veteran-owned small business means a small business that is at least 51 percent owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service-disabled veterans. Again, the management and daily business operations of must be controlled by one or more service-disabled veterans.
However, in the case of a veteran with a permanent and severe disability, the spouse or permanent caregiver of such veteran can manage the daily business operations. Service-disabled veteran means a veteran, as defined in 38 U.S.C. 101(2), with a disability that is service-connected, as defined in 38 U.S.C. 101(16). As with women-owned and veteran-owned small businesses, no formal certification is required.
Small Disadvantaged Business. This one is more complicated. Small disadvantaged businesses (SDBs) 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. 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 is submitted to SBA for approval.
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 socially 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 the SBA, the SDB will remain certified for a period of three years from the date of its certification. Notwithstanding the three-year certification, however, a business must be able to represent that it is both disadvantaged and small at the time that the business submits an offer on a federal procurement. The firm must also represent that no material changes have occurred to its SDB status since certification. The business also must specifically represent that the net worth of the disadvantaged individuals(s) upon whom the small, disadvantaged eligibility was based still doesn't exceed $750,000.
Yet another category, HUBZone small businesses, exists. The requirements for becoming a HUBZone small business are dealt with in a separate article called "HUBba HUBba."
