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A business that is independently owned and operated and which is not dominant in its field of operation and in conformity with specific industry criteria defined by the Small Business Administration (SBA). Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period. The SBA has established a table of size standards matched to North American Industry Classification System (NAICS) industries.
The Federal Government is required to reserve a fair proportion of its total purchases and contracts for property and services for small business concerns. The Government does this by reserving or "setting aside," entire procurements or parts of procurements for small businesses. This does not guarantee that any particular small business will receive a contract. It means that only small businesses may compete for the contract ("total small business set-aside") or the reserved portion ("partial small business set-aside").
The Government is also required to buy goods and services at competitive, fair market prices. Therefore, contracts are set aside only when at least two qualified small businesses are expected to submit offers that are competitive in terms of market prices, quality and delivery. In this context, "market price" means a price based on reasonable costs under normal competitive conditions, and not lowest possible cost.
The Small Disadvantaged Business (SDB) Certification Program is one of two SBA programs targeted towards providing business assistance to small disadvantaged businesses. SDB certification pertains specifically to federal procurement. SDB firms are eligible for special bidding benefits. Also, SDBs increase their subcontracting opportunities with prime contractors who accumulate evaluation credits by subcontracting to qualified SDBs. The SBA must certify small businesses that want to claim SDB status.
An SDB is a small business that is at least 51% owned and controlled by a socially and economically disadvantaged individual or individuals.
Socially disadvantaged individuals are those who have been subject to racial or ethnic prejudice or cultural bias within American society because of their identification as members of certain groups. African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are presumed to quality. Other individuals can qualify if they show by a "preponderance of the evidence" that they are disadvantaged. All individuals must have a net worth of less than $750,000, excluding the equity of the business and primary residence. Successful applicants must also meet applicable size standards for small businesses in their industry.
Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged. Economically disadvantaged must be established for all applicants. The SBA determines eligibility on a case-by-case basis.
SBA's 8(a) Business Development Program offers a broad scope of assistance to socially and economically disadvantaged firms; it was created to help eligible small disadvantaged businesses become independently competitive in the federal procurement market. A firm must be 51% owned and controlled by a socially and economically disadvantaged individual or individuals to be eligible for the 8(a) Program; 8(a) firms automatically qualify for SDB certification. Unlike the SDB Program, 8(a) applicants must generally be in business for at least two years before applying. The SBA must certify small businesses that want to claim 8(a) status.
Program participation is divided into two stages: the developmental stage and the transitional stage. The developmental stage is four years and the transitional stage is five years. The developmental stage is designed to help 8(a) certified firms overcome their economic disadvantage by providing business development assistance. The transitional stage is designed to help participants overcome the remaining elements of economic disadvantage and to prepare participants for leaving the 8(a) Program.
The requirements to enroll in the SBA's 8(a) Program are similar to those for SDBs with the exception that an applicant's personal net worth must be less than $250,000 (excluding the applicant's ownership interest of the business and primary residence) for initial eligibility. For continued 8(a) eligibility after admission to the program, net worth must be less than $750,000. The SBA will also consider the individual's average two-year income, fair market value of all assets, access to credit and capital, and the financial condition of the applicant firm in evaluating economic disadvantage.
Firms participating in the 8(a) Program may take advantage of specialized business training, counseling, marketing assistance, and high-level executive development provided by the SBA and its resource partners. They may also be eligible for SBA-guaranteed loans and bonding assistance. In addition, 8(a) Program participants are eligible to participate in the SBA's Mentor-Protégé Program.SBA's Mentor-Protégé Program
The Mentor-Protégé Program is designed to enhance the capabilities of eligible 8(a) firms and to improve their ability to successfully compete for and receive federal government contracts. Mentors provide technical and management assistance, financial aid in the form of equity investments and/or loans, subcontracting support and assistance in performing prime contracts through joint venture arrangements with 8(a) firms for which 8(a) firms would otherwise not qualify.
Mentor and protégé firms must enter into an SBA-approved written agreement outlining the protégé's needs and describing the assistance the mentor has committed to providing. The Agreement must also specify that the Mentor will provide such assistance to the Protégé firm for at least one year.
The Historically Underutilized Business Zone (HUBZone) Program provides federal contracting opportunities for small business concerns located in economically distressed communities in order to increase employment opportunities, stimulate capital investments in those areas, and empower communities through economic leveraging. HUBZone areas are determined by various census data. To qualify as a HUBZone, a business must meet the following criteria:
The SBA must certify small businesses that want to claim HUBZone status. HUBZone businesses are eligible to receive sole-source or set-aside contracts, or receive a price preference up to 10% when competing for full and open competition procurements.
A service-disabled veteran-owned small business concern is a small business that is at least 51% owned by one or more service-disabled veterans. In the case of publicly owned businesses, at least 51% of the stock is owned by one or more service-disabled veterans and the management and daily business operations are controlled by one or more service-disabled veterans or in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran.
Service-disabled veteran means a veteran with a disability that is service-connected; the disability was incurred in the line of duty while serving in the U.S. active military, naval or air service.
SDVOSBs are eligible for sole source contracts and restricted competitions. All contracts valued at $100,000 or more include a clause, which requires the prime contractor to provide the maximum practicable opportunity to SDVOSBs to compete for subcontracts.
A veteran-owned small business concern is a small business that is at least 51% owned by one or more veterans. In the case of publicly owned businesses, at least 51% of the stock is owned by one or more veterans and the management and daily business operations are controlled by one or more veterans. VOSBs are not eligible for sole source contracts and procurement set-asides however the FAR requires federal agencies to actively encourage their prime contractors to use VOSBs as subcontractors. All contracts valued at $100,000 or more include a clause, which requires the prime contractor to provide the maximum practicable opportunity to VOSBs to compete for subcontracts.
A women-owned small business concern is a small business that is at least 51% owned by one or more women. In the case of publicly owned businesses, at least 51% of the stock is owned by one or more women and the management and daily operations of the business are controlled by one or more women.
WOSBs are not eligible for sole source contracts and procurement set-asides however the FAR requires federal agencies to actively encourage their prime contractors to use WOSBs as subcontractors. All contracts valued at $100,000 or more include a clause, which requires the prime contractor to provide the maximum practicable opportunity to WOSBs to compete for subcontracts.
The successful offeror or bidder on contracts valued at $500,000 or more ($1 million for construction) must submit an acceptable subcontracting plan that sets percentage (based on the contract's total value) and dollar goals for the award of subcontracts to small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone, small disadvantaged business and women-owned small business concerns. (Note: Small business concerns receiving prime contracts are exempt from this requirement.)
OSDBU staff and contracting officers review all subcontracting plans by prime contractors to ensure compliance with subcontracting requirements. The subcontracting plan must be submitted and accepted before the contract may be awarded. Also, according to the FAR, any contractor receiving a contract for more than $100,000 (simplified acquisition threshold) must agree in the contract that small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone, small disadvantaged business and women-owned small business concerns will have the maximum practicable opportunity to participate in contract performance consistent with its efficient performance.