Socio-Economic Certifications Can Bring Big Benefits to Small Businesses

Certification as a small business, socio-economic disadvantaged business, woman-owned business, veteran-owned business, or some combination of those can give you an edge in bidding on contracts with the government and with prime contractors who sell to the government. Here’s the scoop.

The federal government awards more than $200 billion every year in government contracts, making it one of the largest, if not the largest, purchasers of goods and services in the country. For businesses that are small, women-owned, minority-owned, or service-disabled veteran-owned, this is particularly good news because the federal government has mandated that 25 percent of all government contracts should be given to small businesses meeting those requirements. Here are a few key points for businesses owners interested in seizing these opportunities.

While certification is not a mandatory requirement for doing business with the government, if you are a woman, minority or service-disabled veteran business owner, you should get your business certified. “Certification” is the process by which someone, usually a government entity such as the Small Business Administration or the Department of Transportation, or approved third-party certification organizations,reviews your business to confirm that it is indeed owned by a woman, minority, or service-disabled veteran.

Numerous “socio-economic” certifications exist, including the Disadvantaged Business Enterprise, SBA 8(a), Women Owned Small Business, and Service Disabled Veteran Owned Small Business. Each of these certifications targets specific types of owners, such as minorities or women.

The advantage of being certified is that instead of competing for government contracts with large government contractors who are household name companies, your company will compete for contracts with businesses that are similar in size and capability. While the contracts are generally smaller than the large contracts you may hear about in the news, many of the contracts set aside for small businesses are still worth millions of dollars.

To determine whether you or your company is eligible for certification, you must generally be able to meet the following qualifications:

• First, your company must be owned and controlled by a member of the group the certification is designed to help. For example, to be considered a “Woman Owned Small Business,” your company must be independently owned and controlled by women. This means 51 percent or more of the company must be owned by women as verified in the company’s records. Similarly, if you’re seeking a DBE certification, 51 percent or more of your company must be owned by women or minorities.
• Another general requirement is that your business must be “small.” In most instances, that is evaluated according to SBA size standards. The SBA size standards table is published on its website, www.SBA.gov. Depending on your industry, your business must fall under a certain annual receipt limit. This limit can be as much as $36 million in the case of construction companies, for example, and the business will still be considered small. In other industries, it is determined by the number of employees.
• Most certifications also have a personal net worth requirement. In the case of the DBE certification and the related Airport Concessions Disadvantaged Business Enterprise Certification, the PNW requirement is a limit of $1.32 million, excluding the qualifying owner’s interest in the business and the value of the owner’s primary residence. For the SBA 8(a) program, the PNW requirement is a limit of $250,000. For the WOSB or Economically Disadvantaged Women-Owned Small Business certification, the PNW requirement is a limit of $750,000. It’s important to know the particular requirement for the specific certification for which you are applying. 

Ownership, size and personal net worth are three key criteria that certifying agencies will review to determine whether your company is eligible for a particular certification. There many more, and it important for you to ensure that you understand all of the requirements for the particular certification you seek and that you have taken the necessary steps to meet them. Without a doubt, the benefits of completing the certification process can be significant, as your business will have cleared the first step towards getting its slice of the $200 billion government contracts pie.

Jeff Cazeau is a shareholder with law firm who has a national practice assisting small and mid-sized companies obtain and keep contracts with federal, state and local government entities. He may be reached at JCazeau@bplegal.com.