It’s becoming a well-known fact that the federal government is actively working toward prioritizing small business participation, from increased contracting dollars to making entry into the government marketplace more feasible, especially for Small Disadvantaged Businesses (SDBs). The Small Disadvantaged Business designation was set up to promote involvement and provide more support for small businesses in the federal contracting space. In this blog, let’s discuss SDBs, the available programs for them, and what their role is in government contracting.
What is a Small Disadvantaged Business (SDB)?
A Small Disadvantaged Business (SDB) is a firm that qualifies as small for the size standard corresponding to the six-digit North American Industry Classification System (NAICS) Code assigned to the company and is owned and controlled by one or more individuals who are socially and economically disadvantaged.
The federal government sets aside about 12% (or roughly $50 billion) of federal contracting dollars for SDBs, creating a significant amount of opportunities for these businesses. Let’s dive into what socially and economically disadvantaged means and if you may qualify as a Small Disadvantaged Business.
What is Socially Disadvantaged?
A socially disadvantaged individual has been subject to racial or ethnic prejudice or cultural bias. Under federal law, Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans are presumed to be socially disadvantaged.
What is Economically Disadvantaged?
Economically disadvantaged is defined as an individual who has had a lessened ability to compete in the marketplace due to diminished capital and credit opportunities, as a result of belonging to a socially disadvantaged group. This is compared to others in the same or similar line of business who are not socially disadvantaged.
To be determined economically disadvantaged, it requires an evaluation of an individual's assets, net worth, and personal income for the past three years. An individual claiming an economic disadvantage:
1) Must have a net worth less than $750,000.
2) Must have an average income over the past three years that does not exceed $350,000.
3) Must not own assets worth more than $6 million.
SDB Eligibility and Registration
Now that we’ve covered what it means to be socially and economically disadvantaged, let’s talk about qualifying as a Small Disadvantaged Business. If you meet the 3 bullets below, you may register as an SDB:
- The firm must be 51% or more owned and controlled by one or more disadvantaged persons.
- The disadvantaged person or persons must be socially disadvantaged and economically disadvantaged.
- The firm must be small, according to SBA’s size standards.
You can find the full qualification criteria in this Code issued by the Small Business Administration (SBA).
To register, you must first sign your entity up in SAM.gov. During the sign-up process, you will be provided an opportunity to select "Small Disadvantaged Business." This will help federal procurement officials identify your business during market research.
Programs Available to Small Disadvantaged Businesses
In addition to registering your business as a Small Disadvantaged Business, your firm might also meet the requirements for any of the following programs, which will open the doors to more set asides and support opportunities.
The 8(a) Business Development program is for small, disadvantaged businesses and promotes equal access to contracting opportunities. Eligibility of the 8(a) program relies in part on criteria for Small Disadvantaged Businesses but recent qualifications have changed, which you can read about in our FAQ blog on 8(a) businesses.
The HUBZone program helps small businesses in urban and rural communities access federal opportunities. Small businesses that obtain HUBZone certification must employ staff who live in a HUBZone and must also maintain a "principal office" in one of these specially designated areas.
The Women-Owned Small Business federal contracting program authorizes contracting officers to set aside specific federal contracts for 51% or more controlled and owned eligible women-owned small businesses.
The Service-Disabled Veteran-Owned Small Business (SDVOSB) program sets aside contracting dollars for businesses that are 51% owned and controlled by service-disabled veterans. Certification has recently changed for this program from the VA to the SBA, which you can read more about in our SDVOSB certification blog.
SDBs and Federal Contracting
The federal government is the largest procurer of goods and services globally, but it’s not always the easiest environment for small businesses to sell their solutions in. Recent changes to federal government spending that have led to contract consolidation and bundling of resources has significantly impacted the ability of small businesses to compete for small business set-aside awards. The federal government is working toward turning this around and removing some barriers to entry for small businesses.
Recently, the SBA has increased federal contracting awards to Small Disadvantaged Businesses (SDBs) from 10% to 12%, promoting diversity, equity, inclusion, and accessibility. This, along with new Office of Management and Budget (OMB) guidance to help agencies support small businesses, and improved technical assistance opportunities is creating a more fruitful environment for SDBs and other small businesses.
Are You a Small Business that Needs Help?
Small businesses with limited resources are increasingly being granted a lot of opportunities in the federal marketplace. You should capitalize on the fact that the federal government prioritizes small business participation and make sure you are properly registered for any of the contracting assistance programs above. If you have questions about how to qualify for set-asides, you can check out our blog, “Do I Qualify for Set-Aside Contracts?” If you need help figuring out the qualification process or you have any questions about your GSA Schedule, you can reach out to one of our consultants.
