Is getting certified worth it? Part 2: Disadvantaged Business Enterprise
Blog Post
This is the second of our 5-part series to help small business owners evaluate whether federal certification is right for their business. You can read the first part of the series, which discussed the 8(a) Business Development Program, here.
Does attracting potentially millions of dollars’ worth of new business interest you? With government contracting work, you can open the doors to additional business that larger companies are not eligible to receive. For instance, government agencies and corporations that do business with the government are mandated by law or corporate policies to spend approximately 20 percent of their budget with small, disadvantaged companies.
Many federal, state, and city contracts that are set aside for certified small businesses go unclaimed because those businesses do not know how to be recognized as a small business. Certification is a review process designed by the certifying agencies to ensure that the business is actually owned, controlled, and operated by applicants that are an underserved group such as women, minorities, or veterans. Each program, however, comes with unique rules and compliance hurdles.
Be cautioned that the Small Business Administration (SBA), the agency responsible for approving four of the five programs we will discuss in this series, denies a large percentage of the applications it receives. For example, the SBA rejects approximately 70 percent of applications under the 8(a) Business Development Program. If your application is rejected, all of the programs require that you wait a mandated time period before reapplying, in many cases one full year. Moreover, once you do reapply, your application will likely receive closer scrutiny the second time around. To have the best chance of getting certified, your application must be fully and correctly completed, with all proper documentation accompanying the application.
Below is the second of five main federal certification programs we will discuss in this small business series.
Disadvantaged Business Enterprise
A program similar to SBA’s 8(A) program is the Department of Transportation (DOT) Disadvantaged Business Enterprise Program (DBE). This is a federal program that is administered by each state’s DOT.
The DBE program provides contracting appointments for small businesses owned and controlled by socially and economically disadvantaged individuals. Since 1983, a statutory program requires DOT to ensure that 10 percent of the funds authorized for the highway and transportation financial assistance program are to be expended with DBEs. Each DOT assisted state and local transportation agency is required to establish annual DBE goals.
Most qualifications for participation in the 8(a) program and the DBE program are the same. The DBE program, however, has a few differences from the 8(a) program, including the presumption that women-owned-businesses are disadvantaged. The DBE program also sets different limits on owners’ net worth and firm’s gross revenue.