Discover more in the Government Contracting series

Government Contracting for Small and Minority-Owned Businesses

If you qualify, government money is available for minority-owned businesses.
February 07, 2012

Federal law mandates that the government allocate 23 percent of its contracting work to small businesses. Of this portion, 5 percent is meant for businesses with economically or socially disadvantaged owners. These are essentially minority-owned businesses.

It isn't chump change. Total federal contracting in its 2011 fiscal year (ending September 30, 2011) was $477 billion, so 5 percent works out to $23.85 billion.

The contracting process isn’t easy or quick. But learn to navigate with these steps.

Getting certification

If you show that you are socially or economically disadvantaged, the SBA for the Section 8(a) business-development program can certify your business. Certification under this program entitles businesses to do the following.

  • Bid for federal contract set-asides for 8(a) businesses. Generally, contracting that is limited to $5 million for manufacturing and $3 million for other businesses.

  • An advanced-training program and mentoring.

  • Access to the Business Consortium Fund’s Working on Capital Loan Program.

  • Participation in business-opportunity fairs conducted by the National Minority Supplier Development Council.

Eligibility

Certain groups are presumed to be socially disadvantaged. African Americans, Hispanic Americans, Asian Pacific Americans, Native Americans and Subcontinent Asian Americans are part of that group. Other individuals can obtain certification if they show that they are disadvantaged because of race, ethnicity, gender, physical handicap or residence in an environment isolated from the mainstream of American society.

A group is economically disadvantaged if its ability to compete in the free-enterprise system is impaired because of diminished capital and credit opportunities, compared to others in the same or similar line.

A company in the 8(a) program must be owned unconditionally by one or more such individuals. That means ownership of at least 51 percent.

In addition, you must have a net worth (not counting your business and personal residence) below $250,000 initially (and $750,000 later on). Usually, you must have been in business for at least two years. Finally, you must demonstrate a reasonable chance of success.

Once you’ve been certified, program participation can run for nine years. You remain SDB-certified for three years following the date of the last annual review of your status.

Preliminaries

Certification isn’t the end of the process; it’s only the beginning. Before you can start to look for contract opportunities, you need to get your house in order.

  • Obtain a Data Universal Numbering System (DUNS) number from D&B. It’s free and can be done online.

  • Choose the best classification for your business. Government contracting uses the North American Industry Classification System Code (NAICS Code) to identify opportunities. Use this code on your tax return. However, more than one number may be suitable for your business. If so, you can use an alternate code to look for opportunities.

  • Get your financial information organized. Work with your CPA or other financial advisor to review, correct and improve your financial reports.

Making connections

Getting certified as a minority-owned business in the 8(a) program does not guarantee that you’ll get any government contracts. You have to market yourself like any other business does.

  • Register with the Central Contracting Database CCD. Registration is free.

  • Register with the General Services Administration’s GSA Schedules Program or other contract vehicle that the government uses to ensure that you’re legitimate.

  • Check for an invitation for bid (IFB). These are posted on FedBizOpps.

  • Responding to an invitation. This requires you to know your market so your bid is realistic relative to your competitors;

  • Following up. Your initial information may not be sufficient and you may be asked to provide more, written documents or in-person presentation.

If you win, you’ll have to do more paperwork to start the job.

Additional help

There are many free resources as well as paid firms to help you in the certification and contracting process. Do your research before you start. Here are some resources to help:

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser’s Small Business Taxes and The Complete Idiot’s Guide to Starting a Home-Based Business. She is a trusted professional advocate for small businesses and entrepreneurs and the publisher of Idea of the Day, the monthly e-newsletter Big Ideas for Small Business and host of Build Your Business radio. Follow her on Twitter @BarbaraWeltman.

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