In our “Choosing your Entrepreneurial Path” series we discussed Government Contracting as one of the options. Since this is a Virginia SBDC blog and the government literally lives in our backyard, it is likely that many of the entrepreneurs who are reading this are considering or already are building a government contracting business.
With that said, in this and future post we are going to dive much deeper into government contracting and the federal contracting process. To start us off we are going to look at the importance of small business classification and the registration process.
What is a Small Business?
Federal, state, and local governments offer businesses the opportunity to sell billions of dollars worth of products and services to them. Many government agencies require that some percentage of their procurements be set aside for small businesses. To be a small business, you must adhere to industry size standards established by the U.S. Small Business Administration.
The SBA, for most industries, defines a "small business" either in terms of the average number of employees over the past 12 months, or average annual receipts over the past three years. In addition, SBA defines a U.S. small business as:
- Organized for profit'Having a place of business in the US
- Operating primarily within the U.S. or making a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor
- Independently owned and operated
- Not dominant in its field on a national basis
The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences, such as size standards.
The most common size standards for “small business” are as follows:
- 500 employees for most manufacturing and mining industries
- 100 employees for all wholesale trade industries, except federal prime contractors and subcontractors where the maximum number of employees is 500
- $6.5 million for most retail and service industries
- $31 million for most general and heavy construction industries
- $13 million for all special trade contractors
- $0.75 million for most agricultural industries
About 25% of all industries have a size standard that is different from these levels. They vary from $0.75 million to $32.5 million, based on average annual revenues, and from 100 to 1,500 employees for size standards based on number of employees. Several SBA programs have either alternative or unique size standards, such as the Small Business Investment Company Program.
SBA has also established a table of size standards, matched to North American Industry Classification System (NAICS) industries. The table is available at http://www.sba.gov/size.
In addition to establishing eligibility for SBA programs, all federal agencies must use SBA's size standards for their federal government contracts to identify small businesses. Agencies must also use SBA’s size standards for their other programs and regulations, unless they are authorized by federal statute to use something else.
For further information, you may contact the Office of Size Standards:
Office of Size Standards
U.S. Small Business Administration
409 3rd St., SW, Washington, DC 20416
Phone: 202-205-6618 — Fax: 202-205-6390
Once you have classified your company based on the established size standards, you are ready to begin registering to do business with the government. Follow these easy steps to certify your business as small and obtain the registrations you need to begin bidding on government proposals.
Steps to Registering as a Federal Contractor and to Certifying Your Business as Small
According to the SBA these are the steps you need to take when registering as a federal contractor:
- Obtain a D-U-N-S Number: You will need to obtain a Dun & Bradstreet D-U-N-S® Number. This is a unique nine-digit identification number for each physical location of your business. The assignment of a D-U-N-S Number is free for all businesses required to register with the federal government for contracts or grants. Visit the D-U-N-S Request Service to register or read a quick overview here.
- Register your Business with the System of Award Management (SAM): You need to register your business with the federal government's SAM, the primary database of vendors doing business with the federal government. When you register, you will "self-certify" that your business as “small,” meaning you don’t have to supply documented proof, you just certify it by checking off that box. Federal Acquisitions Regulations (FAR) require all prospective vendors to be registered in SAM prior to the award of a contract, basic agreement, basic ordering agreement, or blanket purchase agreement.
- Find the NAICS Codes for Your Company: You may also find that you need a North American Industry Classification System (NAICS) code for administrative, contracting, and tax purposes. The code classifies the economic sector, industry, and country of your business. For Federal contracting purposes, you will need to identify in SAM all the NAICS codes applicable to your business. Read Identifying Industry Codes for more information.
- Obtain Past Performance Evaluations: Businesses interested in getting on the U.S. General Services Administration (GSA) Schedule for contracts should obtain an Open Ratings, Inc. Past Performance Evaluation. Open Ratings, a Dun & Bradstreet Company, conducts an independent audit of customer references and calculates a rating based upon a statistical analysis of various performance data and survey responses. While some GSA Schedule solicitations contain the form to request an Open Ratings Past Performance Evaluation, vendors may also submit an online request directly to Open Ratings.
Items Needed for Registration
Below are some of the items that you will need in order to complete registration processes.
- Your NAICS (North American Industry Classification) codes: To find the NAICS codes, search at http://www.census.gov/eos/www/naics/. You can add or change NAICS codes at any time.
- Your Data Universal Numbering System (D-U-N-S) Number: As mentioned earlier this is a number given out for FREE by Dun & Bradstreet. You may get your number online at http://www.dnb.com
- Your Federal Tax Identification Number (TIN), also known as an Employer Identification Number (EIN) or Form SS- 4: This can be obtained online, by phone, or fax. For information, go to the IRS Small Business/Self Employed Community website at http://www.irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29/ and click on “Employer ID Numbers (EINs).”
- Your Standard Industrial Classification (SIC) codes: This is another type of code that describes your products and services. SIC codes can be four or eight numbers. You must have at least one SIC code for your registration to be complete. You can find your SIC code at http://www.osha.gov/pls/imis/sicsearch.html.
- Your Product Service codes (PSC): These are optional and provide additional information about your service for government buyers. Search for PSC codes at http://www.fpds-ng.com, click Downloads and scroll down to Reference Information.
- Your Federal Supply Classification (FSC) codes: These codes are optional and provide additional information about your products. Each Federal Supply Classification (FSC) code is derived from the Federal Supply Groups (FSG). Search for FSC codes at http://www.sider.com/fsc.htm.
More About Government Contracting
Contracting with the Federal government can open the door to many opportunities for your small business and can aid your business' growth. Visit the following pages for more information:
Small Business Development Website- www.sba.gov