An SBA Small Disadvantaged Business (SDB) Enterprise or DBE carries some weight in Federal Government Contracting when bidding as a small business. It can mean the difference between getting business contracts that are worth $750,000 versus getting nothing. There are various levels of control and statutory requirements that applicants must meet.
Although you are truly a small disadvantaged business, the SBA denied certification in almost 57% of cases when companies applied for 8a status.
Many SDB Program applicants fail to get SBA certified on the first try. Although small disadvantaged business self-certification can be an option, the true test comes when your competition challenges your SBA SDB status in a size protest. By then it’s too late. You are then put in a defensive posture with little time to respond to the allegations.
Understanding the criteria and how courts look at the facts for socially disadvantaged and economically disadvantaged criteria in the record is key. However, most companies are not fortunate enough to have inside legal counsel. The real question is why do small businesses fail when their SBA SDB status is challenged 75% of the time?
- Using family and spouses to get the SDB status: Many company owners use spouses on paper only to gain their disadvantaged status. This can result in de-certification, loss of the contract, and even prosecution for false certification.
- Lack of control of the business: You have to own and control the business to become small disadvantaged business certified. All of you contracts, participation in the daily operations will be up for grabs.
- Failure to understand the legal criteria and requirements: Unfortunately, the SBA and courts do not give passes for not understanding the rules. Many business owners in good faith certify as SDB. However, the focus is substantially different when your status is challenged.
Certifying that you are a small disadvantaged business enterprise, for purposes of federal government contracting, means that you meet the legal requirements to get preferential treatment when bidding on government contracts.
If you are a minority owned business, in your SBA small disadvantaged business certification application, you will be demonstrating your current inability to take advantage of traditional opportunities used by non-disadvantaged businesses.
In your certification application, you will be demonstrating your current inability to take advantage of traditional opportunities used by non-disadvantaged businesses.
When claiming that you are a certified small disadvantaged business, for purposes of federal government contracting, means that you meet the legal requirements to get preferential treatment when bidding on government contracts.
In your 8a application, you will be demonstrating your current inability to take advantage of traditional opportunities used by non-disadvantaged businesses.
13 CFR 124.1002 SBA Small Disadvantaged Business Certification (SDB Program) Eligibility Criteria
What is a Small Disadvantaged Business?
- 51% or more owned and controlled by one or more qualified persons;
- The disadvantaged person or persons must be socially and economically disadvantaged, and
- The business must be small, in accordance with the SBA size standards.
In evaluating whether your business qualifies for government small business programs, the SBA applies the same criteria used for the 8(a) Business Development program.
Evidence of individual social disadvantage must also include the following elements:
- At least one objective distinguishing feature that has contributed to social disadvantage,
- personal experiences of substantial and chronic social disadvantage in American society, and
- negative impact on entry into or advancement in the business world because of this drawback.
SBA SDB Certification — Additional eligibility criteria under 13 CFR 124.1002.
Except for Tribes, ANCs, CDCs, and NHOs, each person claiming to be socially and economically disadvantaged for SBA certification programs must be a citizen of the United States. The other small business eligibility requirements in 13 CFR 124.108 for 8(a) BD program participation do not apply to disadvantaged small business certification eligibility.
You can now self-certify your business to the Federal Government as a DBE by just registering your business in the System for Award Management (SAM). However, you must still be aware that your small business status can be challenged either in a size protest or traditional protest before the SBA. The following is a real-life example of how your disadvantaged status can be attacked.
Agency SBA SDB Certification Goals: Federal government agencies have an annual requirement to allot certain amounts of contracting dollars to certified SBA small disadvantaged businesses.
When relying upon the SBA 8(a) eligibility criteria, your company can qualify as an SDB enterprise if you are socially and economically disadvantaged. In other words, all companies that have their 8(a) status automatically qualify as an SDB.
New Disadvantaged Small Business & SBA Minority Owned Business Enterprise (MBE) Rules
The new rule allows firms to self-represent their status for subcontracting purposes without first receiving any official Disadvantaged Small Business certification.
The new rule also recognizes that the benefits of being an SDB or minority owned business (MBE) for federal prime business contracts have been greatly diminished over the past years and shifts the responsibility of identifying firms as small DBE for federal prime contracts to those limited agencies that have authority and choose to use price evaluation adjustments to SDBs.
The rules shift the responsibility of identifying firms as small DBE for federal prime contracts to those limited agencies that have authority and choose to use price evaluation adjustments to SDBs.
The new regulation shifts the responsibility of identifying firms as small SDB, DBE or DBE for federal prime contracts to those limited agencies that have authority and chooses to use price evaluation adjustments to SDBs.
Section 124.1001 is amended to drop references to SBA performing SDB Program certifications. It also changes the provisions about which firms can certify their status as SDBs for both a prime business contract and subcontracts on federal prime contracts.
The rule eliminates the requirement that a firm must have received small disadvantaged business certification approval from the SBA before it can represent itself to be a disadvantaged enterprise.
Prime Contractor and Subcontractor Small Disadvantage Business Enterprise ( DBE) SBA SDB Certification Representation: In order for a concern to represent that it is a Small DBE to receive a benefit as a prime contractor on a Federal Government procurement, the rule states that a firm must:
(1) Be a current Participant in SBA’s 8(a) BD program; (2) have been certified by SBA as an SDB within three years of the date it seeks to certify in the SDB Program; (3) have received certification from the procuring agency that it qualifies as an SBA SDB; or (4) have submitted an application for Disadvantaged Business Enterprise certification to the procuring agency and must not have received a negative determination about that application.
For a subcontract, the rule permits a firm to represent that it qualifies as a Small DBE if it believes in good faith that it is owned and controlled by one or more socially and economically disadvantaged individuals.
Bottom Line About the SBA SDB Program
When you represent yourself as a small disadvantaged business enterprise, DBE or MBE to the federal government, you do not have to go through the old SBA small disadvantaged business certification program process and red tape. However, your representation as to what is a small disadvantaged business does not go unchecked.
Proceed with caution or contact a government contracts attorney that understands the SBA SDB Program and Certification rules under 13 CFR Part 124.1002 for being socially and economically disadvantaged or a minority owned business. Call 1-866-601-5518.