Three primary categories of disadvantaged small businesses are currently eligible for various contracting programs under federal law: (1) small businesses participating in the Small Business Administration's (SBA's) Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program) (8(a) participants); (2) "small disadvantaged businesses" (SDBs); and (3) "disadvantaged business enterprises" (DBEs). These firms are characterized as "disadvantaged" because they are at least 51% unconditionally owned and controlled by socially and economically disadvantaged individuals or groups. Members of certain racial and ethnic groups are presumed to be disadvantaged, and other individuals can prove personal disadvantage by a preponderance of the evidence. Veterans and persons with disabilities are not presumed to be disadvantaged for purposes of these programs. Contracting opportunities for disadvantaged small businesses are perennially of interest to the Members and committees of Congress because of small businesses' widely asserted role in job creation. Also, there has been concern that the recession of 2007-2009 disproportionately affected disadvantaged small businesses, and that such businesses have been slow to recover. A separate report, CRS Report R43573, Federal Contracting and Subcontracting with Small Businesses: Legislation in the 113th Congress , by [author name scrubbed], discusses recently enacted and introduced legislation pertaining to the 8(a) and SDB programs. Implemented by the SBA under the authority of Sections 7(j) and 8(a) of the Small Business Act, as amended, this program is commonly known as the 8(a) Program, and participants in it are often called 8(a) participants or 8(a) firms. Additionally, socially and economically disadvantaged individuals may confer eligibility for the 8(a) Program upon only one firm over their lives. In particular, mentors and protégés may form joint ventures that could qualify as "small" for purposes of government procurements, including sole-source awards under Section 8(a). However, most federal programs for SDB prime contractors have been discontinued, with only the government-wide and agency-specific goals for the percentage of federal contract and/or subcontract dollars awarded to SDBs each year remaining. In the few cases where SDB certification is currently required, 8(a) participants are deemed to be certified, and other firms may be certified by the agency conducting the procurement, private certifying entities, or state and local governments. Firms do not need to be certified SDBs to qualify for federal programs for subcontractors. Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract, or give contractors "monetary incentives" to subcontract with SDBs. Firms that have been certified as DBEs generally remain certified "until and unless" the funding recipient removes their certification, in whole or in part, using procedures spelled out in federal regulation. Assuming firms must be recertified, there is no apparent limit on the number of times they may be recertified. The federal government has as a goal that 10% of such funds be awarded to DBEs. Funding recipients also generally set goals for DBE participation overall and on individual contracts that have the possibility of subcontracting. Similarly, in finding that the program was narrowly tailored to meet the government's interests, the court noted (1) that goals for contracting with small disadvantaged businesses are purely aspirational, and there are no penalties for failing to meet them; (2) the nine-year limits on program participation for individual owners and firms; and (3) that SBA may not accept a requirement for the 8(a) Program if it determines that doing so will have an adverse effect on another small business or group of small businesses.
Three primary categories of "disadvantaged" small businesses are currently eligible for various contracting programs under federal law: (1) small businesses participating in the Small Business Administration's (SBA's) Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program) (8(a) participants); (2) "small disadvantaged businesses" (SDBs); and (3) "disadvantaged business enterprises" (DBEs). All programs are based in statute. Section 8(a) of the Small Business Act authorizes the 8(a) Program; Section 8(d) of the Small Business Act, the SDB program; and various transportation statutes, the DBE program. However, many of the specific requirements pertaining to these programs derive from agency regulations.
8(a) firms, SDBs, and DBEs are all characterized as "disadvantaged" because they are at least 51% owned and controlled by one or more socially and economically disadvantaged individuals or groups. However, social and economic disadvantage is defined somewhat differently for each program. Members of certain racial and ethnic groups are presumed to be socially disadvantaged for purposes of the 8(a) and SDB programs, while women are also presumed to be socially disadvantaged for purposes of the DBE program. Similarly, individuals' net worth must be $250,000 or less for entry into the 8(a) Program, while net worth can be as high as $750,000 for newly designated SDBs and $1.32 million for newly designated DBEs.
The programs for the various types of firms also differ in their operation. The 8(a) Program is open only to firms that have been certified by SBA, and firms and individual owners may generally participate in the 8(a) Program for a maximum of nine years. 8(a) participants are eligible for set-aside or sole-source contracts, as well as other assistance from the SBA. All 8(a) firms qualify as SDBs. Non-8(a) firms must be certified as SDBs by procuring agencies, private certifying entities, or state or local governments to qualify for federal programs for SDB prime contractors, although they may self-certify for similar programs for SDB subcontractors. SDB certification, when required, generally lasts three years, but could last longer and apparently be renewed. There are government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to SDBs. Additionally, certain prime contractors must have "plans" for subcontracting with SDBs as terms of their contracts. Agencies may also use past performance in subcontracting with SDBs as an evaluation factor in source selection decisions, or give prime contractors "monetary incentives" for subcontracting with SDBs. DBEs must be certified by the state of the funding recipient. Certifications generally last "until and unless revoked," and there is no apparent limit on the number of times firms may be recertified. There is a national goal that 10% of federal funding for certain transportation-related projects be awarded to DBE contractors and subcontractors. Funding recipients must generally set similar goals, including on individual contracts.
Contracting opportunities for disadvantaged small businesses are perennially of interest to the Members and committees of Congress because of small businesses' widely asserted role in job creation. Also, there has recently been concern that the recession of 2007-2009 disproportionately affected disadvantaged small businesses, and that such businesses have been slow to recover. A separate report, CRS Report R43573, Federal Contracting and Subcontracting with Small Businesses: Legislation in the 113th Congress, by [author name scrubbed], discusses recently enacted and introduced legislation pertaining to the 8(a) and SDB programs.