Fed’s SDB program broadens reach

A new federal program for “small disadvantaged businesses” is designed to help small businesses overcome handicaps and tap into the lucrative $200 billion annual federal procurement market.

As of Oct. 1, all small disadvantaged businesses, or SDBs, must be certified by the U.S. Small Business Administration. But don’t worry, the application form is as close as the Internet, and the program is broader and more inclusive than the old federal minority-preference program.

“If in doubt, apply,” advises Chris Chavez, the U.S. Small Business Administration’s regional communications director. “We recommend that people apply, and we’ll make a determination if they qualify, but we’d rather see people participate.

“It’s another tool in their toolbox that they can utilize to try to build their businesses and build their revenues and hire more employees,” Chavez added. “It’s all about trying to get these folks to become successful and hopefully become a bigger business. Everybody starts out small, but we’d love to see these companies grow into large businesses eventually.”

Historically, the federal government’s SDB program was designed to give minority-owned businesses a step up in gaining federal contracts, either directly from federal agencies or through large federal contractors. The new federal certification program grew out of a lawsuit (Adarand Constructors Inc., vs. Pena) that said affirmative-action programs must be narrowly targeted to remedy only the lingering effects of discrimination. It is part of President Clinton’s pledge to “mend, not end” affirmative action programs.

In the past, SDBs self-certified that they were small disadvantaged businesses. The new program requires the SBA to determine if in fact the companies qualify, but it also expands the definition from traditional minorities to a broader definition of anyone who is or has been socially or economically disadvantaged.

“It’s pretty broad, because it’s not necessarily race-based anymore,” Chavez said. “Basically, anybody can qualify under the SDB program now — women, disabled, handicapped. We’re going to look at a broad base of business owners now, vs. the traditional race base.”

Chavez said that the SBA will review the businesses to make sure they are socially or economically disadvantaged and view their business history to make sure they’ve been discriminated against have had barriers placed in front of them.

“There’s a whole process we look at,” he said. “However, the definitions of ‘small’ are fairly large. They vary from industry to industry, sometimes based on annual revenues (e.g., up to $20 million a year for a general contractor) or employees (up to 1,500 for a manufacturer).

“Here in Colorado, over 95 percent of businesses are small. In Wyoming, you’re probably looking well over 97 percent of the businesses considered as small,” Chavez noted. “So it’s not just the mom-and-pop grocery store down the road. You’ve got a lot of businesses that qualify as small.”

The advantages of having SDB certification can be substantial: a share of the $200 billion the federal government spends annually on projects, products, supplies and services. SDBs qualify for various preferences under new federal procurement rules, but most important is a “price evaluation adjustment” of up to 10 percent for SDBs bidding as prime contractors in certain industries in which disadvantaged companies have been underused. SDBs could exceed the low bid by up to 10 percent and still get the contract.

Under federal law, federal agencies are not only encouraged to let contracts to small businesses, they are required to direct a certain portion of their business to small businesses, including SDBs. Large federal contractors receive points and credits for subcontracting with small businesses, so they have an incentive, too.

“Many times, a federal agency will designate a specific contract for SDB participation,” Chavez explained. “For example, F.E. Warren Air Force Base in Cheyenne could have a contract for supplies and specify for SDBs only, so only small disadvantaged businesses could actually bid on that contract.”

Applying for SDB certification is relatively painless, or at least as painless as any eight-page federal application can be. Applications can be downloaded from (and filed on) the SBA’s Internet Web site (www.sba.gov).

Each applicant must explain why it should be considered socially or economically disadvantaged. Reasons could include lack of equal access to credit or markets, exclusion from professional or business associations, or even discriminatory pressure that dissuaded them from certain education, or long-time residence outside the mainstream of society.

“The way I tell people is that if you believe you may qualify, send us an application,” Chavez said. “I would rather have someone apply and be declined than think ‘Oh, I’m not going to qualify,’ when actually they may have.”

For those that want or need help, the federal government has designated a number of nonprofit organizations nationally as “private certifiers” who, for a small fee, will help potential SDBs fill out their applications. There are two private certifiers in Wyoming: Denali Ventures, (307) 778-6442, and Wyoming Business Consultants (307) 778-3968, both in Cheyenne.

Colorado currently does not have a private certifier, but the SBA is looking for one, Chavez said. Once an SDB is certified, it is listed on the SBA’s small-business registry called PRO-Net (also at the Web site).

“This is the database federal agencies and prime contractors use when they’re searching for businesses in a particular area, or a particular field,” Chavez said. “So if they want all the SDBs in Fort Collins and Larimer County, they can pull them up. It’s a really fast way of getting information.”

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