If you’re a small business that wants to get bigger, pursuing a federal contract could be one of the best ways to achieve new growth.
Each year, the federal government has a goal of spending at least 23 percent of its contracting dollars with small businesses. Plus, any federal contract worth less than $150,000 is automatically set-aside for small businesses—that is, only small businesses can compete for that work.
Before a company can pursue these opportunities, though, it must be officially certified as a small business. It takes time—and some paperwork—but earning a certification can open a lot of doors for smaller companies.
Companies that meet additional criteria can qualify for other programs. For example, the federal government has goals for spending a certain amount of its contracting dollars with women-owned small businesses (5 percent) and companies owned by service-disabled veterans (3 percent), among others.
And we haven’t talked about state governments, which typically have their own programs to promote disadvantaged small businesses (DBEs) and those owned by women and ethnic minorities (WBEs and MBEs). Some counties and large metropolitan communities have similar efforts.
In each case, you’ll need to prove that you actually qualify for these programs. If a company is seeking certification as a woman-owned business, for example, it’ll need to verify that its ownership is at least 51 percent female, and that women have documented, active control of the company.
Here is an overview of the best-known forms of certification.
8(a) Certification
The 8(a) Business Development Program is an SBA effort to help socially and economically disadvantaged entrepreneurs develop their businesses through federal contract participation. Federal regulation allows for contracts to be set-aside for 8(a) companies. Participants in the program can receive sole-source contracts, up to a ceiling of $4 million for goods and services and $6.5 million for manufacturing.
Businesses can seek 8(a) status via the Small Business Administration’s (SBA) website, www.sba.gov. The application process can be lengthy. Even after getting into the program, a small business needs to be prepared to market its products and services to potential government customers.
Women-Owned Small Business (WOSB)
Federal regulation requires that a WOSB either self-certify via the System for Award Management site, www.sam.gov, or utilize a preapproved third party to certify the business as women-owned. In addition, a WOSB will need to upload its WOSB certification form to the SBA’s General Login System (GLS) repository (eweb.sba.gov/gls). Most states also require a company to go through an application process to be certified as a women-owned business.
The U.S. government has a goal of 5 per-cent WOSB participation in federal contracting. Precisely what an agency buys from WOSBs can change year to year based on market analysis. Federal buyers are also restricted on which products and services qualify as only 86 categories of the North American Industry Classification (NAIC) codes used by buyers can be set-aside for WOSBs.
States and local governments typically don’t require a buying entity to set-aside portions of their contracting dollars for WOSBs, but participation in local contracts by WOSBs is strongly encouraged.
Programs for Veterans
The current process to be certified as either a veteran-owned business (VOB) or a service-disabled, veteran-owned small business (SDVOSB) is primarily a self-certifying process via www.sam.gov. The Veterans Administration (VA), however, requires that a VOB or SDVOSB be “verified” as veteran-owned via the agency’s own process (www.vetbiz.gov) before receiving priority or a set-aside award through the VA. Although the VA is currently the only agency requiring verification via its own system, other agencies are slowly following suit.
Getting verified has gotten easier over this last year, but the process can take some time. A business owner also needs to keep in mind that only the VA can give priority to VOBs and SDVOSBs. All other agencies typically work toward meeting a 3 percent participation goal for SDVOSBs, asmandated by federal regulation.
Historically Underutilized Business Zone (HUBZone)
To qualify for the HUBZone program, a business must meet the following criteria, unless it’s a tribally-owned concern:
» It must be a small business by SBA standards.
» It must be owned and controlled at least
51 percent by U.S. citizens, or a Community Development Corporation, an agricultural cooperative or an Indian tribe.
» Its principal office must be located within a “Historically Underutilized Business Zone,” which includes lands considered “Indian Country” and military facilities closed by the Base Realignment and Closure Act.
» At least 35 percent of its employees must reside in a HUBZone.
The benefits for HUBZone-certified companies include:
» Competitive and sole source contracting
» 10 percent price evaluation preference in full and open contract competitions, as well as subcontracting opportunities
The government has goal of awarding 3 percent of all dollars for federal prime contracts to HUBZone-certified small business concerns.
The HUBZone application process is done online, and supplemental documentation verifying employee residency is required. The process is a bit lengthy, but the benefits can be worth it. Learn more at www.sba.gov.
DBE/MBE/WBE
As stated earlier, DBE programs are typically state-run—usually through a state’s Department of Transportation. Because state and local governments receive federal dollars for many of their transportation-related projects, a DBE participation goal is usually a required part of any prime contract. WBE and MBE participation is not a mandate, but their participation is strongly encouraged in state and local projects
To gain status as a DBE, MBE or WBE, a business must apply via its home state’s application process. In most cases, the application used will allow a business to apply for all three certifications at once, if they qualify. A business may seek DBE/MBE/WBE status in other states, but the business will need to be certified in its home state first.
Private Sector
While we’ve focused on government contracting, many large businesses also want to team up with certified small businesses. This partnership might come in the form of a subcontract, a mentor-protégé relationship or possibly a joint venture. Each scenario helps the large business reach its small business participation goal while, at the same time, benefiting the smaller company.
Remember, regardless of your certification status, buyers ultimately want good contractors
who provide quality products and services at reasonable prices. Small businesses must market themselves as qualified vendors, with the history to back it up.
