This chapter discusses the size and the importance of small businesses in the United States and the opportunities available for them in the federal marketplace. The Small Business Act of 1953 was passed to ensure that small businesses have a fair opportunity to participate in federal contracts. The act also established the Small Business Administration (SBA) to manage and promote the interests of small businesses.

The government sets government-wide goals for the awards of federal contracts to small businesses. In fiscal year 2012, the government established that 23% of all federal contracts should go to small businesses, with additional goals for small disadvantaged businesses, small women-owned businesses, small HUBZone businesses, and small service-disabled veteran-owned businesses. These goals are based on the percentage of procurement dollars spent by the government. Each federal agency negotiates with the SBA to determine its own agency-specific goals.

The SBA determines what constitutes a small business based on the North American Industry Classification System (NAICS). The NAICS is used to identify different industries and establishments, and it replaced the U.S. Standard Industrial Classification system in 1997. The SBA issues size standards that are defined according to the number of employees, average annual sales, or total electric output for utility firms. These size standards are used to determine eligibility for various federal programs and services, such as financial assistance loans and participation in the Small Business Innovation Research program.

It is important for businesses to determine their NAICS code and ensure that they meet the size standards for their industry. The SBA provides a table of size standards on its website, and businesses can also contact the Size Standard Division of the SBA for assistance. Size certifications are usually self-certifications made by the contractor, but the contracting officer may request that the SBA formally determine the company’s size. Competitors may also protest a company’s size certification.

Affiliation is an important factor in determining the size of a business. Affiliates of a business must combine their incomes and employees when determining their size. The SBA looks at the power to control a business to determine if it is an affiliate, rather than the actual exercise of control.

The SBA also manages the Certificate of Competency program, which assists small businesses in obtaining federal contracts for which they were determined to be the lowest responsive and responsible bidder. If a contracting officer questions a small business’s ability to perform a contract, the business can apply for a COC from the SBA.

The chapter also discusses small business set-asides, which are contracts that are exclusively reserved for small businesses. Set-asides ensure that a fair proportion of government contracts go to small and small disadvantaged businesses. Partial set-asides allow the contracting officer to set aside a portion of a contract for small businesses, while class set-asides reserve specific classes of products and services for small businesses.

In conclusion, the federal government offers many opportunities for small businesses, and it is important for businesses to determine their size, eligibility, and the applicable set-aside programs in order to take advantage of these opportunities. The SBA provides resources and assistance to small businesses to help them navigate the federal marketplace.

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