Small Disadvantaged Businesses

A Small Disadvantaged Business is a small business that is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged.

Small Disadvantaged Business status makes a company eligible for bidding and contracting benefit programs involved with federal procurement set aside contracts.

Businesses must be certified by the Small Business Administration (SBA) to qualify for Small Disadvantaged Business status.
(see Fines and or imprisonment for misrepresenting status.)

A publicly-owned business may be considered a Small Disadvantaged Business if at least 51 percent of its stock is unconditionally owned by one or more disadvantaged individuals and if the public company's management and daily business is controlled by one or more disadvantaged individuals.

The SBA defines socially disadvantaged groups as those who have been, historically, subjected to "racial or ethnic prejudice or cultural bias" within the larger American culture.

Identified disadvantaged groups include: Notes

• African Americans

• Asian Pacific Americans

• Hispanic Americans

• Native Americans and Subcontinent Asian Americans.

• Members of other groups may qualify if they can satisfactorily demonstrate that they meet established criteria

Economically disadvantaged individuals are defined as those for whom impaired access to financial opportunities has hampered the ability to compete in the free enterprise system, in contrast to people in similar businesses who are not identified as socially disadvantaged. Economically disadvantaged individuals are socially disadvantaged and their ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities, as compared to others in the same or similar line of business who are not socially disadvantaged.

To be eligible as a small disadvantaged business a firm must qualify as a small business in accordance with the standards set forth by the Small Business Administration (SBA), i.e., ownership, affiliation, profit, and number of employees. Also, a firm must be socially or economically disadvantaged pursuant to Section 8(a) of the Small Business Act.

At least one objective distinguishing feature that has contributed to social disadvantage, such as race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged.

Personal experiences of social disadvantage stemming from the objective distinguishing feature or features set forth in the preceding paragraph.

The experiences must have been in American society, not in other countries, and must have been substantial and chronic. Negative impact on entry into or advancement in the business world because of the disadvantage.

SBA considers any relevant evidence in assessing this element. In every case, however, SBA considers education, employment, and business history, where applicable, to see if the totality of circumstances shows disadvantage in entering or advancing in the business world.

Self certification as an Small Disadvantaged Business prime contractor for statistical purposes is acceptable

However, anyone whomisrepresents their status as a small disadvantaged business for the purpose of securing a contract or subcontract shall:

Be punished by imposition of fine, imprisonment, or both
Be subject to administrative remedies, including suspension and debarment
Be ineligible for participation in programs conducted under the authority of the Small Business Act

Notes:

A subcontractor claiming Small Disadvantaged Business status must be certified by the Small Business Administration (SBA).

Small Disadvantaged Business can obtain application information from the SBA by calling 1–800–558–0884.

Small Disadvantaged Business that receive formal certification are listed in the SBA on-line database Pro-Net. 
 

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