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If you’re a small business (SB) pursuing government contracts, then you’re probably aware of set-asides. These are contracts that are reserved for small businesses with certain perceived “disadvantages”: women-owned small businesses (WOSB), small disadvantaged businesses (SDB), service-disabled veteran-owned small businesses (SDVOSB) and HUBZone businesses. Since proposals from eligible small businesses receive priority consideration in these situations, qualified parties receive a significant competitive advantage on prime contracts.
In fact, given the attractiveness of government contracts, many businesses dedicate extensive resources to qualifying as one of the set-aside business designations. However, not all businesses are properly certified to compete for these “disadvantage” advantages, and not all “certified businesses” stay in compliance with the strict rules governing disadvantaged business certifications after being awarded a set-aside contract. For example, there is a huge difference between calling yourself a WOSB and operating as a certified WOSB in the government’s eyes. This landscaper’s recent experience is proof.
If you want to confidently qualify for a set-aside contract, and retain your eligibility for the duration of the contract, you should take the steps to become properly certified as a set-aside eligible business. If you are competing for a federal contract, be sure to get certified by an SBA-approved Third-Party Certifier (TPC). Alternatively, you could self-certify in accordance with current SBA regulations.
Just be sure you are truly prepared to meet – and prove that you meet – every one of the qualifying criteria as defined by the certifying organization, particularly that you “own and control” the business as a woman, veteran, etc. Thorough investigations will be conducted into your business structure, leadership team, finances and day-to-day operations. In other words, no aspect of your business is off-limits either during the qualification process or after a small business designation has been assigned. Make sure your bylaws, Board of Director meeting minutes and business registrations are in order. Be prepared to share emails, call records and other proof that key business decisions are indeed being made by the claimed owner.
Note: If you are competing for a state or local set-aside contract, it is best to contact the local agency or Small Business Office to confirm the details of their set-aside qualification criteria. If they don’t follow the Federal Acquisition Regulations (FAR) – which they don’t have to – then it is very likely that they don’t follow the federal set-aside guidelines either.
Note: Small Disadvantaged Businesses can self-represent at the federal level without applying for a special status. Learn more here.
All federal government agencies are required to follow the FAR when buying commodities, services, construction and systems. They are also required to award a certain number of set-aside contracts each year. However, state and local government agencies are not obligated to do either. That doesn’t mean that they don’t support small businesses. It just means that they get to define the terms of their set-aside programs.
The good news is that state and local agency set-aside programs often gives small businesses even more advantages when it comes to the number of prime contracts awarded.
State and local governments often execute more robust Supplier Diversity or Disadvantaged Business Programs than federal agencies as well. Many recognize Minority Business Enterprise/Entity (MBE) within the terms of their set-aside programs – which federal agencies do not – and the non-FAR agencies may sometimes boast a higher set-aside contract “minimum” than federal agencies. For example, the current federal “government-wide procurement goal stipulates that at least 23% of all federal government contracting dollars should be awarded to small businesses. In addition, targeted sub-goals are established for the following small business categories:
The State of New York aims to utilize minority-and-women-owned enterprises (MWBE) for 30% of its state contracts, and Connecticut has a 25% disadvantaged business set-aside goal. Even among those states with lower defined targets, you might find that they provide more resources to MBEs, WOSBs, SDVOSBs and VOSBs. They are also more apt to encourage local business participation in the bidding process as they are keen on using government funds to stimulate local economies.
Take the Commonwealth of Massachusetts. Not only do they offer certifications (and priority consideration) for local businesses, their Supplier Diversity Program (SDP) now includes the following designations: Minority (MBE), Women (WBE), Service-Disabled Veteran (SDVOBE), Veteran (VBE), Lesbian, Gay, Bisexual and Transgender (LGBTBE); and Disability-Owned Business Enterprises (DOBE). They even offer a non-profit organization certification.
Even municipalities are striving to increase the advantages they give to disadvantaged businesses. For example, Philadelphia’s Office of Economic Opportunity works with the local business community “to build internal and external alliances with Minority ("MBE"), Women ("WBE") or Disabled ("DSBE") owned business enterprises (collectively "M/W/DSBEs), with the City of Philadelphia, and with private industries to help develop strong, mutually beneficial relationships that facilitate successful networking opportunities.” Their current ‘participation goal’ from these specially classified businesses is set at 35%. That means that they aim to award 35% of city and quasi-public contracts to an MBE, WBE or DSBE, which is pretty significant considering that the federal government is only aiming for a 23% award rate.
The point is that there are opportunities abound for businesses of all sizes and “disadvantages” aiming to grow their government contract portfolio. The catch is that you must commit to completing the appropriate certification processes for each agency with which you want to do business. Take the time to learn about each state or local jurisdiction’s vendor registries, their Disadvantaged Business Entity programs and – most importantly – their certification process. There are many states and local organizations that offer self-certification and TPC options, just like the SBA does for federal agencies. But, unlike the SBA-federal agency certification program, there are very few blanket certifications at the state and local level. Even within the same state, each city or county may require you to complete a different application for a “disadvantaged” advantage. At the same time, each state may use a different revenue or employee size scale to define “small business.” Some states even give advantages to micro-businesses of less than five people.
While it may seem like a tedious process to qualify for special status, know that it can pay off greatly in the end. We publish over one million new bid opportunities from 90,000 state and local agencies each year through our BidSync Pro service. If just 25% of those are set-asides for a DBE, that means that 250,000 state and local contracts EACH YEAR are available at a less competed level. Even if you are only eligible for 1/1000th of those opportunities based on your NAICS code, locality or certifications, you are still potentially in the running for 250 contracts each year in a priority consideration position.