Certain groups have experienced discrimination in the past that was not related to their qualifications. This discrimination kept them from participating in the free market because they did not have access to capital.
In response, the Federal government tries to award contracts to businesses that are at least fifty-one percent owned by those from disadvantaged groups.
Minority-Owned Business Status
Five percent of the Federal government contracts are supposed to be awarded to members of an economically or socially disadvantaged group. This allows minority groups to remain competitive in the government market.
Under the Small Business Act, certain individuals are presumed socially disadvantaged:
- Hispanic Americans,
- Asian Pacific Americans
- Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians)
- Subcontinent Asian Americans.
An individual not a member of one of the groups listed can be admitted to the program if he/she shows – through a “preponderance of the evidence” – that he/she is socially disadvantaged. For instance, an individual may show social disadvantage due to race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes.
How Do I Know Being A Government Contractor Is Right For My Company?
There needs to be more certainty in business. A powerful client known for paying its bills on time, like our Federal Government, is a great asset.
Also, many of your competitors might dismiss being a government contractor as too much trouble. This means that there could be surprisingly little competition in some spaces. Their shortsightedness can be your company’s advantage.
What Qualifies As A Small Business?
To be considered a small business, a company has to meet the following requirements:
- A business must meet small business size standards.
- Part of a business must be within the U.S.
- A business must operate mainly within the U.S. or make a significant contribution to the U.S. economy through the payment of taxes or the use of American products, materials, or labor.
- A business must be independently owned and operated.
- A business cannot be dominant in its field on a national basis.
- The first thing a small business must do to qualify for government contracts is to register with the SAM Directory.
What Is The SAM Directory?
SAM stands for System Award Management.
To do business with the federal government, you must register your business in the System for Award Management. The government will not hire any business that has not registered in the SAM directory.
We have an article on our site, Everything You Need to Know About SAM for Small Businesses, that gives you important information about this process.
Luckily our site takes this headache off your hands. You can leave this important step to the experts at Sam Directory so you can concentrate on more important matters.
The best part is once you register, you will no longer have to keep re-entering important information every time you apply for a new government opportunity.
In addition, the business must show economic disadvantage by submitting a narrative and personal financial documentation about the company’s income, assets, and net worth.
Generally, successful applicants must also meet the following additional requirements:
- The business must be small according to the Size standards for small business concerns;
- The business must demonstrate a potential for success (generally by being in business for at least two years);
- The business must be unconditionally owned and controlled by
- by one or more disadvantaged individuals who
- are US citizens and who are of good character.;
Registering For Minority Certification
To qualify for the five percent of the contracts reserved for minority-owned or disadvantaged businesses, one must be certified by the government. This means a business is giving up 24 billion dollars of revenue by not registering.
Registering also has other advantages. The SBA offers specialized training programs and mentoring to registered organizations free of charge. You also get admitted to opportunity fairs and networking events through the National Minority Supplier Development Council.
Before applying for the 8(a) Program, each firm is urged to take an online training and self-evaluation course that can be found here at the 8(a) Business Development Suitability Tool.
The first section of the online course explains the 8(a) Program intimately. It culminates in an eligibility self-assessment test. The test consists of a series of straightforward yes/no questions that evaluate the degree to which your firm meets the essential qualifications for the 8(a) Program.
If key eligibility criteria are not met, you will be directed to the SBA resource deemed most appropriate to help you at this time.
In many markets, small businesses are often outcompeted by larger organizations that often have access to almost unlimited resources. This set aside actually might increase a small business’s chances of winning a lucrative bid. The following are set as statutory rules to give small businesses a fair chance in the marketplace:
- 23 percent of prime contracts are reserved for small businesses;
- 5 percent of prime and subcontracts are reserved for small disadvantaged businesses;
- 5 percent of prime and subcontracts are reserved for women-owned small businesses;
- 3 percent of prime contracts are reserved for HUBZone small businesses;
- 3 percent of prime and subcontracts are reserved for service-disabled veteran-owned small businesses.
Small Businesses Are Given Special Consideration When It Comes To Government Contracts
In many markets, small businesses are often outcompeted by larger organizations that have access to almost unlimited resources. This set aside might increase a small business’s chances of winning a lucrative bid.
The federal government is required to set aside at least 23 percent of its total spending specifically for small businesses. Several small businesses have made a fortune just on federal government contract awards.
The United States Government Is A Very Powerful Client With Deep Pockets
The Federal government usually spends around 500 billion dollars yearly on goods and services. This makes the U.S. government an extremely attractive client. There are few other organizations with this spending power and clout.
The government also tends to buy goods and services in bulk. If your business has the infrastructure to handle large orders, then the government can help you grow substantially at an accelerated pace.
Government agencies also buy goods and services in large quantities. Large orders can be a double-edged sword for small businesses. However, they can help you grow substantially and rapidly if managed correctly.