Are you a small disadvantaged business enterprise that needs help getting federal government contracts? New Small Business Administration (SBA) SDB certification rules are somewhat tricky but you can overcome affiliation by applying the basic requirements.
An SBA Small Disadvantaged Business Concern under 13 CFR 124.1002 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.
When there is a legal challenge to your SDB status, your run the risk of losing the contract and substantial revenues to your company.
A Small Disadvantaged Business (SDB) is defined as a small business concern that is at least 51 percent owned and controlled by one or more individuals who are both socially and economically disadvantaged. Meeting the legal definition makes your company eligible to take advantage of the advantages of bidding on Federal Government Contracts.
The SBA defines socially disadvantaged persons as those who have been, historically, subjected to “racial or ethnic prejudice or cultural bias” within the larger American culture. Examples of certain groups include: African Americans, Asian Pacific Americans, Hispanic Americans, Native Americans and Subcontinent Asian Americans. Members of other groups may qualify if they can satisfactorily demonstrate that they meet established criteria.
Avoiding Challenges to Your SDB Status
Applicants fail to get SBA SDB certified on the first try. Although SBA small disadvantaged business self-certification can be an option, the true test comes when your competition challenges your SBA SDB business 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 for becoming an SBA 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 business 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 SDB business: You have to own and control the business to become an 8a disadvantaged business certified. All of your 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.
FOCUS OF YOUR APPLICATION
Under 13 CFR 124.1002, Certifying that you are an SBA disadvantaged business concern, 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 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.
In your 8a application, you will be demonstrating your current inability to take advantage of traditional opportunities used by non-disadvantaged businesses.
The general rule is that every 8a certified company automatically has its small disadvantaged status. However, every small disadvantaged company is not necessarily and 8a certified company. As a contractor and small business, you may also want to note that agencies have small disadvantaged business goals. However, there is no such thing as 8a business goals issued by congress.
13 CFR 124.1002 SBA Certified Small Disadvantaged Business Concern – SBA SDB Certification Criteria
- 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 as an SDB business, 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 Certified Small Disadvantaged Business & 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 small disadvantaged business 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 SBA disadvantaged business concern certification eligibility. See also 13 CFR 124.1002.
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 SDB status can be attacked.
AGENCY CONTRACTING GOALS
Federal government agencies have an annual requirement to allow certain amounts of contracting dollars to certified SBA SDB 8a small disadvantaged businesses.
When relying upon the SBA 8a small disadvantaged business eligibility criteria, your company can qualify as an SDB business enterprise if you are socially and economically disadvantaged. In other words, all companies that have their 8(a) status automatically qualify as an SDB.
HOW DO THE NEW SBA CERTIFICATION REGULATIONS IMPACT YOUR ABILITY TO GET GOVERNMENT CONTRACTS?
The new rule allows firms to self-represent their SDB Program status for subcontracting purposes without first receiving any official Disadvantaged Small Business certification.
The SBA SDB certification new rule also recognizes that the benefits of being an SBA 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 the 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 the 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 an SDB business 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 SBA Small Disadvantaged Business Certification / 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 Certification 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 SDB certified small disadvantaged business concern 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 Certification rules under 13 CFR 124.1002 for being socially and economically disadvantaged or a minority-owned business. Are you a small disadvantaged business concern? Call 1-866-601-5518.