Small and Disadvantaged Business Certifications
Advancing Equitable Contracting: A Summary of Federal, State, and Local Initiatives
Navigating Government contracting, whether at the federal, state, or local level, can be complex for businesses, particularly for small and disadvantaged businesses. The following highlights key initiatives and regulations to foster inclusion and provide opportunities for small businesses, including those owned by minorities, veterans, and local businesses. From federal set-aside contracts and prompt payment regulations to state-mandated participation goals and local preference programs, this overview sheds light on the various avenues available for businesses seeking government contracts and the ongoing efforts to ensure fairness and accessibility in procurement processes.
Summary of Benefits:
Federally, contracts ranging from $3,500 to $150,000 are reserved for small businesses automatically, while contracts over $150,000 are set aside if two or more small businesses can handle the work. Large businesses must submit subcontracting plans for contracts exceeding $700,000 for non-construction or $1.5 million for construction projects. The Prompt Payment Act ensures federal agencies pay small businesses within 30 days.
Every state, county, and city has its own criteria and benefits, but we will focus primarily on California and Los Angeles for this blog.
In California, the mandate is 3% participation from Disabled Veteran Business Enterprises (DVBE) and 25% from Small Businesses. The Prompt Payment Act requires State agencies to pay invoices within 45 days.
In Los Angeles, local businesses within the city or county are given preference for contracts, with additional benefits provided by the Local Business Preference Program (LBPP), established in 2021. This program offers percentage preferences for local businesses and uses local subcontractors or consultants.
Classifications
Small Business Enterprise (SBE)*
Minority Business Enterprise (MBE)
Disadvantage Business Enterprise (DBE)
Disabled Veteran Business Enterprise (DVBE)
Service-Disabled Veteran-Owned Small Business (SDVOSB)*
Historically Underutilized Business Zones (HUBZone) Small businesses (HUBZone)*
Women-owned Business Enterprise (WBE)*
LDBTQQ Owned Businesses
Local Small Business (LSB)
Social Enterprise (SE) is designed to increase contracting opportunities for enterprises primarily to enhance economic, social, and environmental sustainability.
* Federal classification
General Eligibility Requirements (Will vary among city, county, and state agencies)
Be independently owned and operated
Not dominant in the field of operation
The principal office is in the city/county/state you are filing.
Owners, officers, members, managers, and/or partners must be domiciled in your filing location.
Employee count
Average Gross Annual Receipts (GARs) cap over the last X tax years, including affiliates.
General Certification Process (Will vary among city, county, and state agencies)
Complete the required forms (some are in PDF editable format)
Information you will need to provide
Number of years in business
Owners, officers, and directors (The company's primary owner must hold at least 51% of the shares to meet the category classification.)
Client information, including contract value.
Current licenses and permits held by owners, officers, and directors
Required documents for all types of business
Proof of ethnicity and/or gender for all qualifying owners (e.g., passport or birth certificate that explicitly states ethnicity and/or gender)
Proof of U.S. citizenship or permanent legal residency (e.g., passport, birth certificate)
Résumés of all qualifying owners, principals, and key personnel showing places of employment/ownership, education, and training with corresponding dates
Federal Individual Income Tax Returns (Form 1040), including all W-2s, schedules, and statements for the most recent three years for all qualifying owners (state tax returns are not required)
Documented proof of capital investment and/or contributions to acquire ownership or purchase stock for each qualifying owner (e.g., both sides of canceled checks).
End of year Balance Sheets and Income Statements for the most recent three years (or the life of the firm, if less than three years)
All relevant licenses, permits, and certificates with expiration dates.
Documented proof of ownership or signed lease agreement(s) for all office, warehouse, storage space, etc., owned or leased by your firm
Bank Signatory Card
Required information for different entities
Corporation:
Federal Corporate Income Tax Returns (Form 1120 or 1120S), including all schedules and statements for the most recent three years (state tax returns are not required)
Articles of Incorporation (signed by the state official with approval date)
Both sides of all corporate stock certificates (current and canceled)
Stock transfer ledger
Minutes of the First Organizational Meeting Board Meeting Minutes for the last three (3) years, if available.
Partnership or Joint Venture
Federal Partnership Income Tax Returns (Form 1065), including all schedules and statements for the most recent three years (state tax returns are not required)
Original and any amended Partnership and/or Joint Venture Agreements
LLC
Federal Partnership Income Tax Returns (Form 1065), including all schedules and statements for the most recent three years (state tax returns are not required)
Original and any amended Operating Agreement(s)
GSA/Federal Small Business Basic Requirements include the following:
If you are certified by one agency, check to see if the agency you are applying to will honor certifications from other agencies.
Most documents are required to be notarized.
There may be a small filing fee
It could take up to 30 days.
Certain certifications require an interview.
Renewal requirements
Some certifications may need to be renewed annually; check the application requirements.
You must inform the agencies of any significant changes in the company, such as changes in business ownership or mergers.
Leverage your certifications
Promote your certification(s) on your website and collateral materials.
Invest time in networking and building relationships with key government agencies and stakeholders in larger firms. Attend industry conferences, workshops, and training sessions to gain invaluable insights and connections.
Leverage online resources and government portals that list upcoming contracting opportunities. Keeping a close eye on these can help them apply promptly and prepare competitive bids.
Partner with other small or disadvantaged firms to undertake larger projects.
Partner with larger firms.