By Holly Powell, Federal Procurement Analyst, NCMBC
If you intend to pursue federal prime contracts and/or subcontracts, it is very important to know whether your firm is considered a small business (SB), and, if so, whether you qualify for any of the small business socioeconomic programs. In this case, knowledge is power—taking advantage of these programs can greatly increase your chances of winning contracts!
As discussed in the previous article entitled “The Numbers that Describe You”, you must decide which North American Industry Classification System (NAICS) codes best fit the products and/or services you want to sell to the government, and the government must assign the most appropriate code to each purchase it makes. NAICS codes are very important because the Small Business Administration (SBA) has established a small business size standard for each NAICS. The size standard is either based on the number of employees or the average annual receipts of the business over the past three years, depending on the industry.
Note that if your firm is owned by a parent company or if it is affiliated with other companies by virtue of common ownership and control, all of the related companies must be included when calculating the total for size purposes no matter what products or services the other firms sell. Determining affiliation can be complicated, so be sure to see How does SBA determine affiliation? if this is an issue for your firm.
For a quick summary of the current SB size standards, see the article entitled “SBA Raises Small Business Size Standards”. To view the entire list of NAICS matched to size standards, see the US SBA Table of Small Business Size Standards. (If you are not the manufacturer of the products you sell, your firm is small if you have less than 500 employees.)
After reviewing the table, you may find that your firm will be considered a SB under some NAICS codes but not under others. Therefore, it is especially important to note what NAICS code is assigned by the Contracting Officer to a particular acquisition, as that will govern whether your firm will be considered small for that acquisition, and, if that procurement is a set-aside of some type, it will govern whether you can compete as a prime contractor.
Once you determine that your firm is small for at least one NAICS code, you should explore what type of SB you are. (Note that you may not qualify for any of the subgroups below. In that case, your firm is simply a small business.) If eligible, you may “self-certify” your firm as one or more of the following:
Veteran-owned
“Veteran-owned small business concern” (VOSB) means a small business concern—
(1) Not less than 51 percent of which is 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; and
(2) The management and daily business operations of which are controlled by one or more veterans.
(Also see http://www.vetbiz.gov/. Note that the Department of Veterans Affairs will require your firm to be registered at this website in order to take advantage of this designation.)
Service-disabled Veteran-owned
“Service-disabled veteran-owned small business concern” (SDVOSB) means a small business concern—
(1) Not less than 51 percent of which is 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; and
(2) The management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a service-disabled veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran.
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).
If your small business is at least 51% owned and controlled by one or more veterans, you should investigate whether your firm qualifies as a SDVOSB. Note that the bar for qualification is very low – any “service connected” disability (even zero percent compensable) validated by VA rating letter is qualifying. If you had any medical condition that was addressed while you were in service, but you do not have a VA rating letter, you should request a “disability rating for federal contracting purposes” from the VA by contacting your local Veterans Service Officer. Find your local Veterans Service Officer at http://www.doa.state.nc.us/vets/locations/default.asp. Also see http://www.vetbiz.gov/.
Woman-owned
“Women-owned small business concern” (WOSB) means a small business concern—
That is at least 51 percent unconditionally and directly owned and controlled by one or more women who are US citizens.
Economically Disadvantaged Woman-owned
“Economically disadvantaged woman-owned small business” (EDWOSB) means a small business concern—
That is at least 51% unconditionally and directly owned and controlled by one or more women who are US citizens and who are economically disadvantaged.
Economically disadvantaged women are those 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. The net worth of a woman claiming disadvantage must be less than $750,000. In determining such net worth, SBA will exclude her ownership interest in the firm and equity in her primary personal residence. (See What are the rules governing the requirement that economically disadvantaged women must own EDWOSBs? for further details.)
This is a new category of small businesses, and the program has not yet been fully implemented—watch for information about the WOSB and EDWOSB programs in the future.
Small Disadvantaged Business
“Small disadvantaged business” (SDB) means a small business concern—
That is at least 51% unconditionally and directly owned and controlled by one or more individuals who are both socially and economically disadvantaged and who are US citizens.
Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control.
(See Who is socially disadvantaged? for further details.)
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. The net worth of an individual claiming disadvantage must be less than $750,000. In determining such net worth, SBA will exclude the ownership interest in the firm and the equity in the primary personal residence.
(See Who is economically disadvantaged? for further details.)
You should also check to see if your firm qualifies for either of the following certification programs:
HUBZone Certification
Determine if your small business is eligible to seek certification as a Historically Underutilized Business Zone (HUBZone) firm by checking the address of your principal place of business as well as those of your employees at https://eweb1.sba.gov/hubzone/internet/index.cfm. If you are eligible, you may apply for HUBZone certification by clicking on the link provided on that page. Many parts of NC are considered HUBZones, so be sure to check to see if you qualify! (Note that this is totally different from the State of NC HUB Program which does not apply to federal contracting.)
SBA 8(a) Program
If your firm qualifies for self certification as a SDB, you should consider applying to the SBA 8(a) Program. See: http://www.sba.gov/aboutsba/sbaprograms/8abd/ for complete details.
So, to review, if your firm is a small business, it may also be a VOSB, SDVOSB, WOSB, EDWOSB, SDB, HUBZone and/or 8(a) firm. It is very important to know which (if any) of these types of businesses your firm is because:
Federal government agencies currently have dollar goals for prime contract awards to SB, SDVOSB, WOSB, SDB, and HUBZone firms. The agencies can pursue these goals by:
Awarding sole source contracts to qualifying firms (applies to SDVOSB, HUBZone and 8(a) firms when certain conditions are met)
Restricting competition to qualifying firms (applies to SB, SDVOSB, HUBZone and 8(a) when certain conditions are met)
Providing price preferences to qualifying firms when conducting full and open competitions (currently applies to only HUBZone firms)
Note that the VA also has a contracting goal as well as contracting programs for VOSB.
In addition, prime contractors who are not small businesses themselves and who are awarded a contract in excess of $550,000 ($1 million for construction), must negotiate a Small Business Subtracting Plan which contains goals for subcontract awards to SB, VOSB, SDVOSB, WOSB, SDB and HUBZone firms. They are looking for firms to help them meet their goals!
So, it is incumbent on you to know if your firm is a small business, and if so, whether you meet the criteria for any of the subsets of types of SB. Then, be sure that your status is appropriately represented in your listing at Central Contractor Registration. (Note that CCR automatically determines from the information that you have entered whether your firm qualifies and that only SBA can enter information regarding HUBZone and 8(a) certifications.) Also, be sure you are appropriately registered at NC’s FREE database at www.matchForce.org which will match you to prime and subcontracting opportunities.
The next step is to market your firm to the federal government and prime contractors using all of the SB designations that apply to you. And, watch for acquisitions that are set aside for qualifying firms. Any time you can limit your competition to a smaller universe of competitors, you stand a better chance of winning the contract!
Questions about this article may be referred to powellh@ncmbc.us.
[None of the information in this article is to be construed as legal advice.]
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