An Overview of Small Business Contracting

An Overview of Small Business Contracting
July 29, 2022April 29, 2024
Congress has broad authority to Congress has broad authority to impose requirements uponimpact the federal procurement process the federal procurement process, that
is, the process whereby and how agencies agencies obtainpurchase goods and services from goods and services from the private sectorprivate sector firms. One way in which Congress has exercised R. Corinne Blackford . One way in
Robert Jay Dilger
which Congress has exercised this authority is by adopting measures to promote this authority is by adopting measures to promote contractingcontracts and subcontracts with “small Analyst in Small Business businesses.” This report discusses federal contracting preferences for firms that meet the Small and Economic Business Administration’s definition of “small.” It also provides information on statutory and Development Policy regulatory requirements for agencies to award contracts to small businesses, as well as federal assistance for small business owners seeking government contracts. Small business contracting policies and programs respond to the congressional directive to ensure that a “fair proportion” of federal contract and subcontract dollars is awarded to small businesses. Congress established government-wide goals for the percentage of federal contract and subcontract dollars awarded to small businesses each fiscal year. The Small Business Administration (SBA) negotiates small business procurement goals with each federal agency, negotiating agency-specific goals that collectively add up to the government-wide goals in statute. The SBA publishes annual Small Business Procurement Scorecards and the System for Awards Management (SAM.gov) posts an annual Small Business Goaling Report, which measure goal achievement. There are procurement goals for both prime and subcontract dollars for small businesses, small businesses owned by socially and economically disadvantaged individuals (SDBs), women-owned small businesses (WOSBs), small businesses located within a HUBZone and
Senior Specialist in
subcontracting between “small businesses” and federal agencies.
American National
Government
These measures, among other things, are designed to ensure that a “fair proportion” of federal

contract and subcontract dollars is awarded to small businesses; establish government-wide and
R. Corinne Blackford
agency-specific goals for the percentage of federal contract and subcontract dollars awarded to
Analyst in Small Business
small businesses; establish an annual Small Business Goaling Report to measure progress in
and Economic
meeting these goals; generally require federal agencies, under specified circumstances, to reserve
Development Policy
contracts that have an anticipated value greater than the micro-purchase threshold (currently

$10,000), but not greater than the simplified acquisition threshold (currently $250,000)
exclusively for small businesses; authorize federal agencies, under specified circumstances, to set

aside contracts that have an anticipated value greater than the simplified acquisition threshold
exclusively for small businesses; authorize federal agencies to make sole-source awards to small businesses when the award
could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances); authorize
federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g.,
8(a) small businesses, HUBZone small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-, and service-disabled veteran-
owned small businesses (SDVOSBs)); and task the Small Business Administration (SBA) and other federal procurement
officers with reviewing and restructuring proposed procurements to maximize opportunities for small business participation.
Small business contracting programs generally have strong bipartisan support. However, that does not mean that these
programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs.
For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR)
narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such
as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates
want the federal government to enact policies that reduce or eliminate such exclusions. Critics have questioned some of these
programs’ effectiveness, in terms of both promoting small business opportunities to win federal contracts and promoting a
more diversified, robust economy.
Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by
whether the federal government and individual federal agencies meet the predetermined procurement goals in the annual
Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-
wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses, 5% to
small disadvantaged businesses (SDBs), and 3% to SDVOSBs. It has had difficulty meeting the goals of 5% to WOSBs and
3% to HUBZone small businesses.
The Small Business Goaling Report is the most convenient measure available to compare federal small business contracting
performance over time, but it has limitations. For example, the SBA excludes some contracts from the report in its
determination of what is “small business eligible” and some federal procurement activities are not included because they are
not recorded in the Federal Procurement Data System—Next Generation. It also does not evaluate the effect these contracts
have on small businesses, industryowned small businesses (SDVOSBs). In recent years, the government has generally succeeded in meeting the government-wide goals for awards made to small businesses, SDBs, and SDVOSBs. It has also met its subcontracting goals for small businesses and WOSBs. It has had difficulty meeting the WOSB and HUBZone prime contracting goals. A collection of laws and regulations underpin small business contracting efforts. In order to facilitate contracting opportunities for small businesses, Congress has authorized federal agencies, under specified circumstances, to set aside contracts exclusively for small businesses; authorized federal agencies to make sole-source awards to small businesses; and authorized federal agencies to set aside contracts for, or grant other contracting preferences to, the four types of small businesses for which there are small business procurement goals: SDBs, SDVOSBs, WOSBs, and HUBZone firms. Congress tasks the SBA and agency procurement personnel with reviewing and structuring proposed procurements to maximize opportunities for small business participation. Also supporting small businesses in the federal market are technical assistance providers, small business contractor mentor-protégé programs, and subcontracting policies and regulations. Observers may judge the relative success or failure of federal efforts to create small business contracting opportunities by whether the government and individual agencies meet small business procurement goals. The publication of goal attainment data and SBA Procurement Scorecards offer an accessible way to examine the level of small business contracting each year, but may focus reviewers on readily measured information (dollars awarded) rather than broader assessments of the effectiveness of contracting programs and policies. Moreover, the procurement goals themselves may not reflect overall policy aims, because of how they are expressed by monetary value, and/or because of how high or low they are relative to the availability of small suppliers. Other valuable information might include measures of market diversification, competitiveness, competitiveness, or concentration. or the overall economy.
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Contents
Introduction ..................................................................................................................................... 1
Basic Contracting Requirements ..Small Business Procurement Goals ................................................................................................... 4
Federal Contractors ................................................................................................................... 4
Federal Agencies ............................................................ 2 Legislative History of Small Business Procurement Goals........................................................... 6
The Pre-Award Process . 2 Agency-Level Goal-Setting .................................................................................................................. 8
Federal Agency Requirements ............................... 4 Small Business Procurement Scorecards and Reports ................................................................... 8
The Role of SBA Procurement Center Representatives 4 Small Business Contracting Preferences ............................................................ 9
The Role of the Office of Small and Disadvantaged Business Utilization ............................. 10
The Roles of Other Procurement Officers and Offices ................6 Certification and Other Requirements for Small Business Contractors .................................. 10 Certification Requirements for Government-Wide Contracting Programs ....................... 12 Agency-Specific Contracting Programs........................................... 12
Set-Asides and Sole-Source Awards .............................................................................................. 14
SBA Contracting Programs ........................................................................................................... 15
Prime Contracting Programs .................................................... 15 Small Business Mentor-Protégé Programs and Joint Ventures ............................................... 15
8(a) Program ........17 Subcontracting Policies ............................................................................................................. 15
Historically Underutilized Business Zone Program .... 18 Technical Assistance for Small Business Contract Seekers ...................................................... 18
Service-Disabled Veteran-Owned Small Business Procurement Program 19 Procurement Processes and Personnel ....................... 18
Women-Owned Small Business Program ......................................................................... 19
Subcontracting Programs ............ 20 The Role of Procurement Officials ............................................................................................ 20
Other Federal Agency Contracting Programs ............... 21 The Roles of the Office of Small and Disadvantaged Business Utilization and SBA Personnel ................................................................. 21
Department of Transportation and Environmental Protection Agency Disadvantaged
Business Enterprise Programs .............................................................................................. 21
Contracting Preferences for Indian Tribes and Native American-Owned and -
Controlled Businesses ..................... 23 Procurement Center Representatives, Commercial Market Representatives, and Business Opportunity Specialists ..................................................................................... 24
Subcontracting Programs for Small Disadvantaged Businesses 23 Select Post-Award Requirements ............................................. 25
Other Small Business Programs of Interest ................................................................................... 25
The SBA 7(j) Management and Technical Assistance Program 24 Subcontracting Plan Reviews .............................................. 25
SBA Surety Bond Guarantee Program ............................................. 24 Prompt Payments ....................................... 26
Small Business Mentor-Protégé Programs .............................................................................. 27
Small Business Procurement Goals 24 Accelerated Payments ............................................................................................... 28
Certificate of Competency Program ................ 25 Conclusion ...................................................................................... 32
Post-Award Requirements ...................................................... 26 Tables Table 1. Statutory Federal Small Business Procurement Goals ....................................................... 33
Small Business Subcontracting Plan Reviews 3 Table 2. Federal Procurement Goals and Percentage of Federal Contract Dollars Awarded to Small Businesses, by Type of Small Business ........................................................................ 33
Prompt Payments. 5 Table 3. Conditions for Small Business Set-Asides .................................................................................................................... 34
Accelerated Payments . 8 Table 4. Sole-Source Award Limitations ............................................................................................................ 35
Concluding Observations ........... 9 Appendixes Appendix A. SBA’s Surety Bond Guarantee Program ................................................................................................... 35

Figures
Figure 1. Small Business Contracting, Performance, by Type of Small Business, FY2005-
FY2021 .................................. 27 Appendix B. Small Business Size Protests ..................................................................................................... 32

Tables
Table 1. Federal Procurement Goals and Percentage of FY2021 Federal Contract Dollars
Awarded to Small Businesses, by Type .............. 28 Appendix C. Procurement Center Representatives ........................................................................ 30
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29 Contacts
Author Information ........................................................................................................................ 3730

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An Overview of Small Business Contracting

Introduction
During World War II and then again after the outbreak of fighting in Korea, Congress found that
the existence of thousands of small business concerns was being threatened by war-induced
shortages of materials coupled with an inability to obtain defense contracts or financial
assistance.1 Concerned that many small businesses might fail without government assistance, in
1953, Congress passed and President Dwight Eisenhower signed into law the Small Business Act
(P.L. 83-163), which authorizedThe size of the federal government as a buyer creates economic impacts that continue to interest policymakers. From FY2020 to FY2022, the government spent in the range of $600 to $700 billion on contracts,1 and represents the largest buyer of goods and services in the world.2 This report describes the various federal requirements, programs, and personnel involved in promoting federal contracting and subcontracting with small businesses. It covers requirements and programs for certain types of small businesses: small disadvantaged businesses (SDBs), SDBs participating the SBA’s “8(a) Business Development Program,” Historically Underutilized Business Zone (HUBZone) small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs). Small businesses and these types of “socioeconomic” small businesses may receive contracting preferences, which limit competition to certain firms (through a contract set-aside) or receive contract awards without competition (through a sole-source contract award). The Small Business Administration (SBA) has significant involvement with all of these contracting programs at agencies across the executive branch, although agency purchasing staff execute contracting activities, including implementation of contracting preferences. The report also discusses the roles and responsibilities of various federal procurement officers as well as the role of agency Offices of Small and Disadvantaged Business Utilization (OSDBUs). In the Small Business Act (P.L. 83-163), which established the Small Business Administration the Small Business Administration (SBA),3 Congress declared a policy of promoting(SBA).2 The act specifies that
it is the declared policy of Congress to promote the interests of small businesses the interests of small businesses in order to to “preserve free “preserve free
competitive enterprise.”competitive enterprise.” Congress specified that one of the ways to preserve free competitive
enterprise was to insure4 The Small Business Act further specifies that small businesses that small businesses receivedshould receive a “fair proportion” of federal contracts and a “fair proportion” of federal contracts and
subcontracts:
subcontracts.5 The act states: It is the declared policy of the Congress that the Government should aid, counsel, assist, It is the declared policy of the Congress that the Government should aid, counsel, assist,
and protect, insofar as is possible, the interests of small-business concerns in order to and protect, insofar as is possible, the interests of small-business concerns in order to
preserve free competitive enterprise, to insure that a fair proportion of the total purchases preserve free competitive enterprise, to insure that a fair proportion of the total purchases
and contracts or subcontracts for property and services for the Government (including but and contracts or subcontracts for property and services for the Government (including but
not limited to contracts or subcontracts for maintenance, repair, and construction) be placed not limited to contracts or subcontracts for maintenance, repair, and construction) be placed
with small-business enterprises, to insure that a fair proportion of the total sales of with small-business enterprises, to insure that a fair proportion of the total sales of
Government property be made to such enterprises, and to maintain and strengthen the
overall economy of the Nation.3
Congress indicated that its intent in supporting small businesses was not to “favor small business
at the expense of its larger competitors. Our only purpose in supporting the creation and effective
operation of the SBA is to equalize the scales when necessary to guarantee the continued vigor of
our competitive free enterprise system.”4
More recently, a House committee report indicated that the primary rationale for small business
contracting programs
is the positive economic benefits they provide, as well as assisting small businesses
overcome the complexities of the system. The economic benefits of these programs can be
seen in two primary areas—market competition and local economic development. First,
[these] programs … are designed to increase and diversify small contractors with the intent
of expanding the federal supplier base. This leads to increased competition, which results
in higher quality, greater product variety, and lower prices. Second, these contracting
initiatives lower barriers to entry in a wide range of markets for small businesses. This

1 U.S. Congress, Senate Select Committee on Small Business, Small Business Administration, committee print, 83rd
Cong., 1st sess., August 10, 1953 (Washington: GPO, 1953), p. iii. Also, see U.S. Congress, House Committee on
Banking and Currency, Small Business Act of 1953, report to accompany H.R. 5141, 83rd Cong., 1st sess., May 28,
1953, H.Rept. 83-494 (Washington: GPO, 1953).
2 1 U.S. Government Accountability Office, A Snapshot of Government-Wide Contracting for FY 2022, August 15, 2023; U.S. Government Accountability Office, A Snapshot of Government-Wide Contracting for FY 2021, August 25, 2022; U.S. Government Accountability Office, A Snapshot of Government-Wide Contracting for FY 2020, June 22, 2021. 2 U.S. General Services Administration, “Federal Acquisition Policy Division,” at https://www.gsa.gov/policy-regulations/policy/acquisition-policy/office-of-acquisition-policy/governmentwide-acq-policy/federal-acquisition-policy-division. 3 On July 31, 1951, the Small Defense Plants Administration (SDPA) was created by an amendment to P.L. 81-774, the On July 31, 1951, the Small Defense Plants Administration (SDPA) was created by an amendment to P.L. 81-774, the
Defense Production Act of 1950, and was given “primary responsibility in the field of channeling defense contracts to Defense Production Act of 1950, and was given “primary responsibility in the field of channeling defense contracts to
small producers.” As hostilities with Korea subsided, so did the perceived need for the SDPA. Congress granted the small producers.” As hostilities with Korea subsided, so did the perceived need for the SDPA. Congress granted the
Small Business Administration (SBA) similar authority to promote small business contracting with Small Business Administration (SBA) similar authority to promote small business contracting with federal agencies,
but with all federal agencies, as opposed to focusing on the Department of Defense. See U.S. Congress, Senate Select all federal agencies, as opposed to focusing on the Department of Defense. See U.S. Congress, Senate Select
Committee on Small Business, Committee on Small Business, Small Business Administration, committee print, 83rd Cong., 1st sess., August 10, 1953 , committee print, 83rd Cong., 1st sess., August 10, 1953
(Washington: GPO, 1953), p. iv. (Washington: GPO, 1953), p. iv.
3 15 U.S.C. §631(a); and4 As stated in the Small Business Act, “It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise.” P.L. 83-163, the Small Business Act of 1953 (as amended), see https://www.govinfo.gov/app/ P.L. 83-163, the Small Business Act of 1953 (as amended), see https://www.govinfo.gov/app/
details/COMPS-1834.details/COMPS-1834.
4 U.S. Congress, Senate Select Committee on Small Business, Small Business Administration, committee print, 83rd
Cong., 1st sess., August 10, 1953 (Washington: GPO, 1953), p. v.
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provides greater market access for small firms’ goods and services. From an economic
perspective, such access is critical to generating positive macroeconomic benefits,
including higher job creation, wage growth, and greater income distribution.5
Over the years, Congress has approved legislation to support small business in various ways. For
example, the SBA administers several types of programs to support small businesses, including
loan guaranty and venture capital programs to enhance small business access to capital;
contracting programs to increase small business opportunities in federal contracting; direct loan
programs for businesses, homeowners, and renters to assist their recovery from natural disasters;
and small business management and technical assistance training programs to assist business
formation and expansion.
In recent years, congressional interest in the SBA’s programs has become especially acute given
the Coronavirus Disease 2019 (COVID-19) pandemic’s widespread adverse economic impact on
the national economy generally and small businesses in particular.
This report describes the various federal programs, requirements, procurement officers, and
procurement offices involved in promoting federal contracting and subcontracting with small
businesses, small disadvantaged businesses (SDBs), SDBs participating the SBA’s “8(a) Business
Development Program,” Historically Underutilized Business Zone (HUBZone) small businesses,
women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses
(SDVOSBs). The SBA administers many, but not all, of these programs.
It examines the following federal requirements and authorities in promoting contracting and
subcontracting with small businesses:
1. The requirement that federal agencies generally reserve contracts that have an
anticipated value greater than the micro-purchase threshold (currently $10,000)
but not greater than the simplified acquisition threshold (currently $250,000)
exclusively for small businesses unless the contracting officer is unable to obtain
offers from two or more small businesses that are competitive with market prices
and the quality and delivery of the goods or services being purchased.6
2. The establishment of small business procurement goals, both government-wide
and agency specific, to promote the awarding of contracts to small businesses.
3. The requirement that federal agencies generally set aside contracts that have an
anticipated value exceeding the simplified acquisition threshold exclusively for
small businesses when there is a reasonable expectation that offers will be
obtained from at least two responsible small businesses offering the products of
different small businesses (Rule of Two) and the award will be made at a fair
market price.7

5 U.S. Congress, House Committee on Small Business, Small Business Contracting Program Improvements Act, report
to accompany H.R. 3867, 110th Cong., 1st sess., October 22, 2007, H.Rept. 110-400 (Washington: GPO, 2007), p. 4.
6 Federal Acquisition Regulation (FAR) §19.502-2.
7 “For acquisitions of supplies or services that have an anticipated dollar value exceeding the simplified acquisition
threshold … the contracting officer shall first consider an acquisition for the small business socioeconomic contracting
programs (i.e., 8(a), HUBZone, SDVOSB, or WOSB programs) before considering a small business set-aside (see
19.502-2(b)). However, if a requirement has been accepted by the Small Business Administration (SBA) under the 8(a)
Program, it must remain in the 8(a) Program unless the SBA agrees to its release in accordance with 13 C.F.R. parts
124, 125, and 126.” FAR §19.203(c).
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4. The authority provided federal agencies to make sole-source awards to small
businesses when the award could not otherwise be made (e.g., only a single
source is available, under urgent and compelling circumstances).
5. The authority provided federal agencies to set aside contracts for, or grant other
contracting preference to, specific types of small businesses (e.g., 8(a) small
businesses, HUBZone small businesses, WOSBs, and SDVOSBs) and to specific
types of businesses generally (e.g., the Buy Indian Act).
It discusses the SBA’s oversight and responsibilities concerning the small business goaling
program, small business mentor-protégé programs, the 7(j) management and training program,
and the surety bond guaranty program.
It also discusses the role of the Office of Small and Disadvantaged Business Utilization
(OSDBU), located in each federal agency, in promoting contracting with small businesses, and
examines the role and responsibilities of various federal procurement officers, including
procurement center representatives, commercial market representatives, and business opportunity
specialists, in promoting small business contracting opportunities.
This report concludes with a brief discussion of the strong bipartisan support for small business
contracting programs. However, that does not mean that these programs face no opposition, or
that issues have not been raised concerning the impact and operations of specific programs. For
example, small business advocates note that implementing regulations in the Federal Acquisition
Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences
by excluding specific types of contracts, such as those listed in the Federal Supply Schedules,
from FAR requirements pertaining to small business contracting.8 Advocates want the federal
government to enact policies that reduce or eliminate exclusions that narrow the reach of small

8 FAR §8.405-5 indicates that the small business preference programs are not mandatory in this subpart (blanket
purchase agreements and Federal Supply Schedules). Federal agencies may, at their discretion, set aside orders under
the Federal Supply Schedules and blanket purchase agreements for small businesses.
The Federal Supply Schedule program “provides Federal agencies with a simplified process of acquiring commercial
supplies and services in varying quantities while obtaining volume discounts. Indefinite-delivery contracts are awarded
using competitive procedures to firms. The firms provide supplies and services at stated prices for given periods of
time, for delivery within a stated geographic area such as the 48 contiguous states, the District of Columbia, Alaska,
Hawaii, and overseas. …Although GSA [General Services Administration] awards most Federal Supply Schedule
contracts, it may authorize other agencies to award schedule contracts and publish schedules. For example, the
Department of Veterans Affairs awards schedule contracts for certain medical and nonperishable subsistence items.”
FAR §38.101.
A blanket purchase agreement (BPA) is “a simplified method of filling anticipated repetitive needs for supplies or
services by establishing “charge accounts” with qualified sources of supply. …BPAs should be established for use by
an organization responsible for providing supplies for its own operations or for other offices, installations, projects, or
functions. Such organizations, for example, may be organized supply points, separate independent or detached field
parties, or one-person posts or activities. …The use of BPAs does not exempt an agency from the responsibility for
keeping obligations and expenditures within available funds.” FAR §13.303-1.
For an argument advocating regulatory changes that might require the mandatory application of set-asides to orders in
the same manner that law and regulation currently require for contracts, see Interagency Task Force on Federal
Contracting Opportunities for Small Businesses, Report, September 2010, pp. 8-10, at https://www.sba.gov/sites/
default/files/2018-02/contracting_task_force_report_0.pdf.
The U.S. Supreme Court ruled in 2016, in Kingdomware Technologies, Inc. v. United States, that the Department of
Veterans Affairs (VA) cannot continue its former practice of making purchases through the Federal Supply Schedules
without first considering whether the contract could be set aside for veteran-owned small businesses (VSOBs) due to
language in P.L. 109-461, the Veterans Benefits, Health Care, and Information Technology Act of 2006, that required
VA specifically to promote contract awards to VOSBs.
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business contracting preferences. Critics have questioned some of these programs’ effectiveness,
in terms of promoting both small business opportunities to win federal contracts and a more
diversified, robust economy.9
Basic Contracting Requirements
Federal Contractors
With a few exceptions, businesses interested in bidding on a federal contract must obtain a
Unique Entity Identifier (i.e., a distinct 12-character, alpha-numeric identification value) for each
of the business’s physical locations.10 Businesses apply for and receive this identification value
when they register with the federal government’s System for Award Management (SAM).11
Government agencies use SAM for several purposes, including to find contractors.12
Businesses also must match their products and services to a North American Industry
Classification System (NAICS) code. Businesses generally have a primary NAICS code, and may
have multiple NAICS codes if they sell multiple products and services.13
Businesses that identify themselves as a small business in SAM must (1) meet the Small Business
Act’s definition of a small business and (2) not exceed size standards established, and updated
periodically, by the SBA.14
The Small Business Act defines a small business as one that
 is organized for profit;
 has a place of business in the United States;
 operates primarily within the United States or makes a significant contribution to
the U.S. economy through payment of taxes or use of American products,
materials, or labor;

9 For example, see Henry Beale and Nicola Deas, “The HUBZone Report,” prepared for the SBA, Office of Advocacy,
May 2008, pp. i, ii, 124-131, at https://www.sba.gov/sites/default/files/rs325tot.pdf; and Clifford A. Grammich,
Thomas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Small Business and Defense Acquisitions: A
Review of Policies and Current Practices (Santa Monica, CA: RAND, 2011), pp. xii, 15, 16, at https://www.rand.org/
content/dam/rand/pubs/monographs/2011/RAND_MG443.pdf.
10 For additional information concerning the Unique Entity Identifier requirement, see U.S. General Services
Administration (GSA), “Unique Entity Identifier Update,” at https://www.gsa.gov/about-us/organization/federal-
acquisition-service/office-of-systems-management/integrated-award-environment-iae/iae-systems-information-
kit/unique-entity-identifier-update.
11 SBA, “Federal Contracting Guide: Basic Requirements,” at https://www.sba.gov/federal-contracting/contracting-
guide/basic-requirements. For additional information and analysis, see CRS Report R44490, Unique Identification
Codes for Federal Contractors: DUNS Numbers and CAGE Codes, by L. Elaine Halchin; and CRS Report RS22536,
Overview of the Federal Procurement Process and Resources, by L. Elaine Halchin.
12 SBA, “Register with SAM,” at https://www.sba.gov/federal-contracting/contracting-guide/basic-
requirements#section-header-8.
13 U.S. Bureau of the Census, “North American Industry Classification System,” at https://www.census.gov/eos/www/
naics/.
14 P.L. 111-240, the Small Business Jobs Act of 2010, requires the SBA to conduct a detailed review of not less than
one-third of the SBA’s industry size standards every 18 months beginning on the new law’s date of enactment
(September 27, 2010) and ensure that each size standard is reviewed at least once every five years.
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 is independently owned and operated; and
 is not dominant in its field on a national basis.15
The business may be a sole proprietorship, partnership, corporation, or any other legal form.16
The Small Business Act authorizes the SBA to establish size standards to ensure that only small
businesses are provided SBA assistance. The SBA currently uses two types of size standards to
determine SBA program eligibility: industry-specific size standards and alternative size
standards, for some lending and venture capital investment programs based on the applicant’s
maximum tangible net worth and average net income after federal taxes.17 The SBA’s industry-
specific size standards are used to determine eligibility for federal small business contracting
purposes.
The SBA determines if a business is small by comparing that business’s economic characteristics
(typically number of employees or average annual receipts) to size standards listed in the SBA’s
Table of Small Business Size Standards. The table has size standards for 1,036 industrial
classifications in the North American Industrial Classification System. Businesses that exceed the
applicable size standard for their primary industry do not meet the requirement of being small.
The SBA’s size standards are designed to (1) encourage competition within each industry and
(2) ensure that SBA assistance is provided only to firms that are not dominant in their field on a
national basis. The size standards are derived through an assessment of four economic factors:
(1) the average firm size, (2) the average assets size as a proxy of start-up costs and entry barriers,
(3) the four-firm concentration ratio (the cumulative share of total industry receipts of that
industry’s four biggest firms) as a measure of industry competition, and (4) the size distribution
of firms.18 The SBA also considers the ability of small businesses to compete for federal
contracting opportunities and, when necessary, several secondary factors “as they are relevant to

15 15 U.S.C. §632(a); and 13 C.F.R. §121.105. Affiliations between businesses, or relationships allowing one party
control or the power of control over another, generally count in size determinations. Businesses can thus be determined
to be other than small because of their involvement in joint ventures, subcontracting arrangements, or franchise or
license agreements, among other things, provided that their employment or income, plus those of their affiliate(s),
exceed the pertinent size threshold. See 13 C.F.R. §121.103.
16 For additional information and analysis of the SBA’s size standards, see CRS Report R40860, Small Business Size
Standards: A Historical Analysis of Contemporary Issues, by Robert Jay Dilger, R. Corinne Blackford, and Anthony A.
Cilluffo.
17 The SBA’s 7(a) loan guarantee program allows businesses to qualify as small if they meet the SBA’s size standard
for the industry in which the applicant is primarily engaged, or a maximum tangible net worth of not more than $15
million and average after-tax net income after federal taxes (excluding any carry-over losses) of not more than $5
million for two full fiscal years before the date of application. 15 U.S.C. §632(a)(2-3) and 15 U.S.C. §632(a)(5)(B).
Businesses participating in the SBA’s 504/Certified Development Company (504/CDC) loan guaranty program are
deemed small if they did not have a tangible net worth in excess of $15 million and did not have an average net income
in excess of $5 million after taxes (excluding any carry-over losses) for the preceding two years before the date of
application. 15 U.S.C. §632(a)(5)(B).
The SBA’s Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the
SBA’s size standard for the industry in which the applicant is primarily engaged, or a maximum tangible net worth of
not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5
million. 15 U.S.C. §662(12)(A-B); and SBA, “Small Business Size Standards: Inflation Adjustment to Monetary Based
Size Standards,” 79 Federal Register 33647-33669, June 12, 2014.
18 SBA, Office of Government Contracting and Business Development, SBA Size Standards Methodology, April 2019,
pp. 29, 30, at https://www.sba.gov/sites/default/files/2019-04/
SBA%20Size%20Standards%20Methodology%20April%2011%2C%202019.pdf (hereinafter SBA, Office of
Government Contracting and Business Development, SBA Size Standards Methodology, April 2019).
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the industries and the interests of small businesses, including technological change, competition
among industries, industry growth trends, and impacts of size standard revisions on small
businesses.”19
Historically, the SBA has used the number of employees to determine if manufacturing and
mining companies are small (ranging from fewer than 50 employees for some industries to fewer
than 1,500 employees for others) and average annual receipts for most other industries (ranging
from no more than $1 million for some industries to no more than $40 million for others).20
Federal Agencies
To make it easier to determine if an offeror meets the SBA’s definition of a small business, prior
to soliciting bids, federal agencies are required to classify a product or service being acquired in
only one (NAICS code) industry, “whose definition best describes the principal nature of the
product or service being acquired even though for other purposes it could be classified in more
than one.”21 When acquiring a product or service that could be classified in two or more
industries with different size standards, contracting officers must “apply the size standard for the
industry accounting for the greatest percentage of the contract price.”22 If a solicitation calls for
more than one item and allows offers to be submitted on any or all of the items, “an offeror must
meet the size standard for each item it offers to furnish.”23 If a solicitation calling for more than
one item requires offers on all or none of the items, “an offeror may qualify as a small business
by meeting the size standard for the item accounting for the greatest percentage of the total
contract price.”24
With several notable exceptions (e.g., HUBZone small businesses, SBA 8(a) program
participants, WOSBs, and veteran-owned small businesses [VOSBs] and SDVOSBs seeking
contracts with the Department of Veterans Affairs), businesses generally self-certify their status as
small when they register their business in the SAM database.25
The contracting officer is required to accept an offeror’s representation in a specific bid or
proposal that it is a small business unless “(1) another offeror or interested party challenges the

19 SBA, Office of Government Contracting and Business Development, SBA Size Standards Methodology, April 2019,
p. 1. Any changes to size standards must follow the rulemaking procedures of the Administrative Procedure Act. A
proposed rule changing a size standard is first published in the Federal Register, allowing for public comment. It must
include documentation establishing that a significant problem exists that requires a revision of the size standard, plus an
economic analysis of the change. Comments from the public, plus any other new information, are reviewed and
evaluated before a final rule is promulgated establishing a new size standard.
20 SBA, Office of Government Contracting and Business Development, SBA Size Standards Methodology, April 2019,
p. 28.
21 FAR §19.102(c).
22 FAR §19.102(d).
23 FAR §19.102(e).
24 FAR §19.102(e).
25 P.L. 116-283, the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, requires
the Department of Veterans Affairs (VA), by January 1, 2023, to transfer the maintenance of its SDVOSB database to
the SBA, provide the SBA compensation for doing so, and abolish VA’s Center for Verification and Evaluation and
transfer its function to the SBA. The SBA is required to establish a government-wide SDVOSB certification and
periodic recertification process by January 1, 2023. VA is to continue to determine whether an individual qualifies as a
service-disabled veteran.
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concern’s small business representation or (2) the contracting officer has a reason to question the
representation.”26
If an offeror’s small business status is challenged, the contracting officer is generally not allowed
to award the contract until the SBA has made a size determination or 15 business days after the
SBA receives the protest, whichever occurs first.27 The SBA’s Office of Government Contracting
Area Office (Area Office) serving the area in which the headquarters of the offeror is located
initially reviews the protest.28 The Area Office is required, by regulation, to determine the
offeror’s size status within 15 business days after receipt of the protest, or “within any extension
of time granted by the contracting officer.”29 If the SBA does not make a determination within the
required time, the contracting officer “may award the contract after determining in writing that
there is an immediate need to award the contract and that waiting until SBA makes its
determination will be disadvantageous to the government.”30
An appeal of the Area Office’s decision may be filed with the SBA’s Office of Hearings and
Appeals (OHA). If the OHA accepts the appeal for consideration and finds the protested concern
to be ineligible for award, the contracting officer must “terminate the contract unless termination
is not in the best interests of the government, in keeping with the circumstances described in the
[aforementioned] written determination. However, the contracting officer shall not exercise any
options or award further task or delivery orders.”31 Furthermore, a concern cannot become
eligible for a specific award after the SBA has determined that it is not a small business, even if
the concern takes action to meet the definition of a small business.32
The SBA or the federal agency may suspend or debar a firm from future government contracts for
misrepresenting its size status. In addition, individuals that knowingly misrepresent a business’s
size to secure a federal contract can be subject to civil and criminal penalties.33

26 FAR §19.301-1(b).
27 The contracting officer may award the contract if he or she “determines in writing that an award must be made to
protect the public interest.” FAR §19.302(g)(1).
28 FAR §19.302(c)(1). “An offeror, the SBA, or another interested party may protest the small business representation
of an offeror in a specific offer. However, for competitive 8(a) contracts, the filing of a protest is limited to an offeror,
the contracting officer, or the SBA.” FAR §19.302(a)(2). “The protest, or confirmation if the protest was initiated
orally, shall be in writing and shall contain the basis for the protest with specific, detailed evidence to support the
allegation that the offeror is not small. The SBA will dismiss any protest that does not contain specific grounds for the
protest.” FAR §19.302(c)(2). “The protest shall include a referral letter written by the contracting officer with
information pertaining to the solicitation.” FAR §19.302(c)(3). “In order to affect a specific solicitation, a protest must
be timely.” FAR §19.302(d). “To be timely, a protest … must be received … by the close of business of the fifth
business day after bid opening (in sealed bid acquisitions) or receipt of the special notification from the contracting
officer that identifies the apparently successful offeror (in negotiated acquisitions).” FAR §19.302(d)(1). “…a protest
filed by the contracting officer or the SBA is generally always considered timely whether filed before or after award.”
FAR §19.302(d)(2).
29 FAR §19.302(f)(1).
30 FAR §19.302(g)(2).
31 FAR §19.302(h).
32 FAR §19.301-1(c).
33 13 C.F.R. §121.108; 18 U.S.C. §287; and 18 U.S.C. §1001. For additional information and analysis, see CRS Report
R45322, Selected Legal Tools for Maintaining Government Contractor Accountability, by David H. Carpenter and
Kathleen Ann Ruane.
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The Pre-Award Process
Federal Agency Requirements
15 U.S.C. §644(e)(1) states, “To the maximum extent practicable, procurement strategies used by
a Federal department or agency having contracting authority shall facilitate the maximum
participation of small business concerns as prime contractors, subcontractors, and suppliers.” To
accomplish this goal, FAR regulations (FAR §19.202-1) require contracting officers, when
applicable, to take the following actions prior to awarding a federal contract:
1. “Divide proposed acquisitions of supplies and services (except construction) into
reasonably small lots (not less than economic production runs) to permit offers
on quantities less than the total requirement.”
2. “Plan acquisitions such that, if practicable, more than one small business concern
may perform the work, if the work exceeds the amount for which a surety may be
guaranteed by the SBA against loss under 15 U.S.C. §694b [generally $6.5
million, or $10 million if the contracting officer certifies that the higher amount
is necessary].”
3. “Ensure that delivery schedules are established on a realistic basis that will
encourage small business participation to the extent consistent with the actual
requirements of the Government.”
4. “Encourage prime contractors to subcontract with small business concerns
[primarily through the agency’s role in negotiating an acceptable small business
subcontracting plan with prime contractors on contracts anticipated to exceed
$750,000 or $1.5 million for construction contracts].”34
5. “Provide a copy of the proposed acquisition package to the SBA procurement
center representative [PCR, duties are described later]” for his or her review,
comment and recommendation, or, if a PCR is not assigned, to the SBA Area
Office serving the area in which the procuring activity is located at least 30 days
prior to the issuance of the solicitation if (i) The proposed acquisition is for
supplies or services currently being provided by a small business and the
proposed acquisition is of a quantity or estimated dollar value, the magnitude of
which makes it unlikely that small businesses can compete for the prime contract;
(ii) The proposed acquisition is for construction and seeks to package or
consolidate discrete construction projects and the magnitude of this consolidation
makes it unlikely that small businesses can compete for the prime contract; or
(iii) The proposed acquisition is for a consolidated or bundled requirement.…
The contracting officer shall provide all information relative to the justification
for the consolidation or bundling, including the acquisition plan or strategy and if

34 Subcontracting plans are not required from small businesses, for personal services contracts, for contracts or contract
modifications that will be performed entirely outside of the United States and its outlying areas, or for modifications
that were within the scope of the contract. “[A]ny contractor or subcontractor failing to comply in good faith with the
requirements of the subcontracting plan is in material breach of its contract.” FAR §19.702(c). In addition, “Any
contractor receiving a contract with a value greater than the simplified acquisition threshold must agree in the contract
that small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small
business, small disadvantaged business, and women-owned small business concerns will have the maximum
practicable opportunity to participate in contract performance consistent with its efficient performance.” FAR §19.702.
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the acquisition involves substantial bundling, the information identified in [FAR]
7.107-4.35 The contracting officer shall also provide the same information to the
agency Office of Small and Disadvantaged Business Utilization [duties are
described later].”
6. “Provide a statement explaining why the (i) Proposed acquisition cannot be
divided into reasonably small lots (not less than economic production runs) to
permit offers on quantities less than the total requirement; (ii) Delivery schedules
cannot be established on a realistic basis that will encourage small business
participation to the extent consistent with the actual requirements of the
government; (iii) Proposed acquisition cannot be structured so as to make it
likely that small businesses can compete for the prime contract; (iv) Consolidated
construction project cannot be acquired as separate discrete projects; or (v)
Consolidation or bundling is necessary and justified.”
7. “Process the 30-day notification concurrently with other processing steps
required prior to the issuance of the solicitation.”
8. “If the contracting officer rejects the SBA procurement center representative’s
recommendation … document the basis for the rejection and notify the SBA
procurement center representative [who (as described later) may appeal the
rejection to the chief of the contracting office and, ultimately, to the agency
head].”36
The Role of SBA Procurement Center Representatives
The SBA may assign one or more procurement center representatives (PCRs) to any contracting
activity or contract administration office to implement the SBA’s policies and programs. The
SBA currently has 43 PCRs located in the SBA’s six Area Offices.37 PCRs are required to comply
with the contracting agency’s directives governing the conduct of contracting personnel and the
release of contract information.38
PCR duties include the following:
 Review proposed acquisitions to recommend “the setting aside of selected
acquisitions not unilaterally set aside by the contracting officer;” new qualified

35 FAR §7.017-4(2)(b) states “…when the proposed acquisition strategy involves substantial bundling, the agency shall
document in its strategy—(1) The specific benefits anticipated to be derived from substantial bundling; (2) An
assessment of the specific impediments to participation by small business concerns as contractors that result from
substantial bundling; (3) Actions designed to maximize small business participation as contractors, including provisions
that encourage small business teaming; (4) Actions designed to maximize small business participation as subcontractors
(including suppliers) at any tier under the contract, or order, that may be awarded to meet the requirements; (5) The
determination that the anticipated benefits of the proposed bundled contract or order justify its use; and (6) Alternative
strategies that would reduce or minimize the scope of the bundling, and the rationale for not choosing those
alternatives.”
36 FAR §19.202-1. See FAR §19.505 for a description of the appeals process.
37 SBA, “Procurement Center Representative Directory,” accessed on January 18, 2022, at https://www.sba.gov/
federal-contracting/counseling-help/procurement-center-representative-directory. There were three vacancies.
38 FAR §19.402(a)(1).
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small business sources; and the feasibility of breaking out components of the
contract for competitive acquisitions.39
 Review proposed acquisition packages. If the PCR (or, if a PCR is not assigned,
the SBA Area Office serving the area in which the procuring activity is located)
“believes that the acquisition, as proposed, makes it unlikely that small
businesses can compete for the prime contract,” the PCR can recommend any
alternate contracting method that he or she “reasonably believes will increase
small business prime contracting opportunities.” The recommendation must be
made to the contracting officer within 15 days after the package’s receipt.40
 Recommend small businesses “for inclusion on a list of concerns to be solicited
in a specific acquisition.”41
 Appeal to the contracting office’s chief “any contracting officer’s determination
not to solicit a concern recommended by the SBA for a particular acquisition,
when not doing so results in no small business being solicited.” This appeal may
be further appealed to the agency head.42
 Conduct periodic reviews of the agency’s contracting activity, including the
agency’s assessment of any required small business subcontracting plan, “to
ascertain whether the agency is complying with the small business policies in this
regulation.”43
 Sponsor and participate in conferences and training “designed to increase small
business participation in the contracting activities of the office.”44
The Role of the Office of Small and Disadvantaged Business
Utilization
Every federal agency (except the SBA) that has procurement powers is required to have an
OSDBU, whose director, by statute, reports directly to the head of the agency and has supervisory
authority over agency staff performing certain procurement functions.45 The OSDBU’s primary
responsibility is to ensure that small businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small
businesses are treated fairly and that they have an opportunity to compete and be selected for a
fair amount of the agency’s contract dollars. Among its statutory responsibilities are the
following:
 “Identify proposed solicitations that involve significant bundling of contract
requirements, and work with the agency acquisition officials and the
Administration to revise the procurement strategies for such proposed

39 FAR §19.402(c)(1).
40 FAR §19.402(c)(2).
41 FAR §19.402(c)(3).
42 FAR §19.402(c)(4). See FAR §19.505 for a description of the appeals process.
43 FAR §19.402(c)(5).
44 FAR §19.402(c)(6).
45 For a discussion of the extent to which Offices of Small and Disadvantaged Business Utilization have implemented
these statutory requirements, see U.S. Government Accountability Office (GAO), Small Business Contracting: Actions
Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates, GAO-
17-675, August 25, 2017, pp. 1-4, at https://www.gao.gov/assets/690/686766.pdf.
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solicitations where appropriate to increase the probability of participation by
small businesses as prime contractors, or to facilitate small business participation
as subcontractors and suppliers, if a solicitation for a bundled contract is to be
issued.”46
 Assist small businesses “to obtain payments, required late payment interest
penalties, or information regarding payments due to the concern from an
executive agency or a contractor.”47
 Assign “a small business technical adviser to each office to which the SBA has
assigned” a PCR. The small business technical advisor “shall be a full-time
employee of the procuring activity, well qualified, technically trained and
familiar with the supplies or services purchased at the activity; and whose
principal duty shall be to assist” the PCR.48
 Provide the agency’s “Chief Acquisition Officer and senior procurement
executive … with advice and comments on acquisition strategies, market
research, and justifications [related to limitations on the consolidation of
contracts as a means to provide small businesses appropriate opportunities to
participate as prime contractors and subcontractors].”49
 Provide training to small businesses and contract specialists, provided that the
training does not interfere with the director carrying out his or her other
responsibilities.50
 Ensure that a small business that notifies the PCR prior to a contract’s award that
“a solicitation, request for proposal, or request for quotation unduly restricts [its]
ability … to compete for the award … is aware of other resources and processes
available to address unduly restrictive provisions … even if such resources and
processes are provided by such agency, the Administration, the Comptroller
General, or a Department of Defense (DOD) procurement technical assistance
program [described below].”51
 Review all subcontracting plans “to ensure that the plan provides maximum
practicable opportunity for small business concerns to participate in the
performance of the contract to which the plan applies.”52
In accordance with P.L. 109-163, the National Defense Authorization Act of 2006, the DOD
renamed its OSDBU the Office of Small Business Programs (OSBP). The act also redesignated
the Army, Navy, and Air Force’s OSDBUs to OSBPs of the Department of the Army, Navy, and
Air Force, respectively.

46 15 U.S.C. §644(k)(5).
47 15 U.S.C. §644(k)(6).
48 15 U.S.C. §644(k)(8).
49 15 U.S.C. §644(k)(12).
50 15 U.S.C. §644(k)(13).
51 15 U.S.C. §644(k)(17).
52 15 U.S.C. §644(k)(20).
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The Roles of Other Procurement Officers and Offices
At the agency level, procurement department heads (sometimes titled senior procurement
executive) are responsible for implementing small business programs at their agencies, including
achieving program goals. In general, procurement department staff who work on small business
issues (often titled small business specialists) coordinate with OSDBU directors on their
agencies’ small business programs.53
Chief acquisition officers provide a focal point for acquisition in agency operations. Their key
functions include “monitoring and evaluating agency acquisition activities, increasing the use of
full and open competition, increasing performance-based contracting, making acquisition
decisions, managing agency acquisition policy, acquisition career management, acquisition
resources planning, and conducting acquisition assessments.”54
The SBA must assign a breakout procurement center representative (breakout PCR) to each
major procurement center. A major procurement center is, in the opinion of the SBA
Administrator, a procurement center that purchases substantial dollar amounts of other than
commercial items, and has the potential to incur significant savings as a result of the placement of
a breakout PCR.55
The breakout PCR advocates for (1) the appropriate use of full and open competition, and (2) the
breakout of items, “when appropriate and while maintaining the integrity of the system in which
such items are used.”56 The breakout PCR is in addition to the PCR.
When a breakout PCR is assigned, the SBA must assign at least two co-located small business
technical advisors. SBA breakout PCRs and technical advisors must comply with the contracting
agency’s directives governing the conduct of contracting personnel and the release of contract
information. The SBA must obtain security clearances for its breakout PCRs and technical
advisors as required by the contracting agency.57
The SBA has commercial market representatives who, among other duties, help prime contractors
find small businesses that are capable of performing subcontracts; provide counseling on the
contractor’s responsibility to maximize subcontracting opportunities for small businesses; and
conduct periodic reviews of contractors awarded contracts requiring an acceptable subcontracting
plan that provides small businesses “the maximum practicable opportunity to participate in
contract performance consistent with its efficient performance” (generally any solicitation to
perform a contract that is expected to exceed $750,000 ($1.5 million for construction) and that
has subcontracting possibilities).58

53 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select
Requirements for Small Business Advocates, GAO-17-675, August 25, 2017, p. 7, at https://www.gao.gov/assets/690/
686766.pdf (hereinafter GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review
Compliance with Select Requirements for Small Business Advocates).
54 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select
Requirements for Small Business Advocates, pp. 7-8.
55 15 U.S.C. §644(l)(6); and FAR §19.403(a).
56 FAR §19.403(a).
57 FAR §19.403(a).
58 15 U.S.C. §633(h)(1). For additional information on subcontracting plan requirements, see FAR §19.702(a)(1); and
15 U.S.C. §637(d)(3). Also, see GAO, Improvements Needed to Help Ensure Reliability of SBA’s Performance Data on
Procurement Center Representatives, GAO-11-549R, June 15, 2011, pp. 4-7, 30, at https://www.gao.gov/products/
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The SBA’s 140 business opportunity specialists provide, among other duties, guidance,
counseling, and referrals for assistance with technical, management, financial, or other matters
intended to improve the competitive viability of SBA 8(a) program participants.59 They provide
8(a) program participants comprehensive assessments of the firm’s strengths and weaknesses;
monitor and document their compliance with 8(a) program requirements; advise them on
compliance with contracting regulations after the award of a 8(a) program contract or
subcontract; review and monitor their compliance with mentor-protégé agreements; represent the
interests of the SBA Administrator and small businesses in the award, modification, and
administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving
the 8(a) program.60
The Small Business Procurement Advisory Council (SBPAC), whose members are composed of
the SBA Administrator (or his or her designee), the director of the Minority Business
Development Agency, and the head of each OSDBU in each federal agency having procurement
powers, has the following statutory duties:
1. Develop positions on proposed procurement regulations affecting the small
business community.
2. Submit comments reflecting such positions to appropriate regulatory authorities.
3. Conduct reviews of each OSDBU to determine the office’s compliance with its
statutory requirements.
4. Identify best practices for maximizing small business utilization in federal
contracting that may be implemented by federal agencies having procurement
powers.
5. Submit annually, to the House Committee on Small Business and Senate
Committee on Small Business and Entrepreneurship, a report describing (1) the
comments submitted to appropriate regulatory authorities, including any
outcomes related to the comments; (2) the results of its review of each OSDBU;
and (3) best practices identified for maximizing small business contracting.61
The Defense Logistic Agency’s Procurement Technical Assistance Program (PTAC) helps
“businesses pursue and perform under contracts with the Department of Defense, other federal
agencies, state and local governments and with government prime contractors.”62 Most of the
assistance provided by the 100 PTACs and their more than 300 local offices is free.63 PTAC

GAO-11-549R. For additional information on CMR duties and responsibilities see SBA, “Subcontracting Assistance
Program Post Award,” SOP 60 03 7, effective July 17, 2018, at https://www.sba.gov/sites/default/files/2018-07/2018-
07-17%20Final%20Subcontracting%20Program%20SOP_1.pdf.
59 U.S. Congress, House Committee on Small Business, Subcommittee on Contracting and Infrastructure, Oversight of
the SBA’s Women-Owned Small Business Federal Contract Program, hearing, 116th Cong., 1st sess., May 16, 2019,
H.Hrg. 116-021 (Washington: GPO, 2019), p. 39.
60 15 U.S.C. §633(g)(1).
61 15 U.S.C. §644a(b).
62 DOD, Defense Logistics Agency, “Procurement Technical Assistance Program,” at https://www.dla.mil/
SmallBusiness/PTAP/.
63 DOD, Defense Logistics Agency, “Procurement Technical Assistance Centers: States and Territories,” at
https://www.dla.mil/SmallBusiness/PTAP/AllLocations/; and SBA, “Find Local Assistance: Procurement Technical
Assistance Centers,” at https://www.sba.gov/local-assistance/find/?type=
Procurement%20Technical%20Assistance%20Center&pageNumber=2.
Procurement Technical Assistance Center (PTACs) are located in all 50 states, Washington, DC, Puerto Rico, Guam,
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support to businesses includes registration in systems such as the System for Award Management
(SAM), identification of contract opportunities, and help in understanding requirements and in
preparing and submitting bids.64
Set-Asides and Sole-Source Awards
The Competition in Contracting Act of 1984 generally requires “full and open competition” for
government procurement contracts.65 However, various provisions of the Small Business Act
authorize or, in some cases, require federal agencies to provide for other than “full and open
competition through the use of competitive procedures” when contracting with small businesses.
For example, as mentioned, federal agencies are generally required to reserve contracts that have
an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater
than the simplified acquisition threshold (currently $250,000) exclusively for small businesses
unless the contracting officer is unable to obtain offers from two or more small businesses that are
competitive with market prices and the quality and delivery of the goods or services being
purchased.66
In addition, federal agencies
 are generally required to set aside contracts that have an anticipated value
exceeding the simplified acquisition threshold exclusively for small businesses
when there is a reasonable expectation by the contracting officer that offers will
be obtained by at least two responsible small businesses offering the products of
different small businesses (Rule of Two) and the award will be made at a fair
market price;67
 may similarly set aside contracts exceeding the simplified acquisition threshold
for competition reserved for specific types of small businesses (e.g., 8(a) small
businesses, HUBZone small businesses, WOSBs and SDVOSBs);68
 may enter into negotiations directly with particular types of small businesses
(e.g., a sole-source award) when the award could not otherwise be made (e.g.,

and the Northern Mariana Islands.
64 DOD, Defense Logistics Agency, “Procurement Technical Assistance Program,” at https://www.dla.mil/
SmallBusiness/PTAP/.
65 41 U.S.C. §253(b)(1); 41 U.S.C. §259(b); and, the Deficit Reduction Act of 1984 (Title VII, the Competition in
Contracting Act).
66 15 U.S.C. §644(j)(1). As mentioned, certain regulations implementing this provision of the Small Business Act
effectively narrows its scope. For example, certain small business contracts awarded or performed overseas are not
necessarily required to be set aside for small businesses, and the small business provisions contained in Part 19 of the
FAR generally do not apply to blanket purchase agreements and orders placed against Federal Supply Schedule
contracts.
67 15 U.S.C. §644(a). A set-aside is commonly used to refer to a competition in which only small businesses may
compete. However, some set-asides involve small purchases that may be made by means of simplified acquisition
procedures that entail less than “full and open competition,” and by sealed bidding or contracting by negotiation that is
more commonly associated with set-asides of larger contracts.
68 15 U.S.C. §637(a) for 8(a) participants; 15 U.S.C. §657a for HUBZone small businesses; 15 U.S.C. §637(m) for
WOSBs; and 15 U.S.C. §657f for SDVOSBs.
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only a single source is available or under urgent and compelling
circumstances);69 and
 are required to grant HUBZone small businesses a price evaluation preference of
not more than 10% in open and unrestricted competitions.70
SBA Contracting Programs71
Several SBA programs assist small businesses in obtaining and performing federal contracts and
subcontracts. These include various prime contracting programs; subcontracting programs; and
other assistance (e.g., contracting technical training assistance and oversight of the federal small
business goaling program and the Surety Bond Guarantee program).
Prime Contracting Programs
Several contracting programs allow small businesses to compete only with similar firms for
government contracts or receive sole-source awards in circumstances in which such awards could
not be made to other firms. These programs provide small businesses an opportunity to win
government contracts without having to compete against larger and more experienced companies.
8(a) Program72
The 8(a) Business Development Program (commonly known as the 8(a) program) provides
business development assistance to businesses owned and controlled by persons who are socially
and economically disadvantaged, have good character, and demonstrate a potential for success.73
Although the 8(a) program was originally established for the benefit of disadvantaged
individuals, in the 1980s, Congress expanded the program to include small businesses owned by
four disadvantaged groups. Small businesses owned by Alaska Native Corporations (ANCs),
Community Development Corporations (CDCs), Indian tribes, and Native Hawaiian
Organizations (NHOs) are also eligible to participate in the 8(a) program under somewhat
different requirements.

69 15 U.S.C. §637(a) for 8(a) participants; 15 U.S.C. §657a for HUBZone small businesses; 15 U.S.C. §637(m) for
WOSBs; and 15 U.S.C. §657f for SDVOSBs.
70 15 U.S.C. §657a(b)(3).
71 These programs apply government-wide but are implemented under the authority of the Small Business Act,
pursuant to regulations promulgated by the SBA that determine, in part, eligibility for the programs.
72 For additional information and analysis, see CRS Report R44844, SBA’s “8(a) Program”: Overview, History, and
Current Issues, by Robert Jay Dilger and R. Corinne Blackford.
73 Section 8(a) of the Small Business Act, P.L. 85-536, as amended, can be found at 15 U.S.C. §637(a). Regulations are
in 13 C.F.R. §124.
The 8(a) program takes its name from one of the sections of the Small Business Act that authorizes it. The program is also
governed by Section 7(j) of the act. The Clinton Administration changed the program’s name from the Minority Small
Business and Capital Ownership Development Program to the 8(a) Business Development program in 1988 “to emphasize that
individuals need not be members of minority groups and to stress the importance of assisting participating firms in their
overall business development.” See SBA, “Small Business Size Regulations: 8(a) Business Development/Small
Disadvantaged Business Status Determinations; Rules of Procedure Governing Cases Before the Office of Hearings and
Appeals,” 63 Federal Register 35727, June 30, 1998.
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An Overview of Small Business Contracting

For individually owned small businesses, African Americans, Hispanics, Native Americans
(including American Indians, Eskimos, Aleuts, and Native Hawaiians), Asian-Pacific Americans,
and Subcontinent Asian Americans are presumed to be socially and economically
disadvantaged.74 Other individuals can also qualify as socially and economically disadvantaged
on a case-by-case basis.
The SBA uses a three-part test for determining economic disadvantage relating to the degree of
applicant’s diminished credit and capital opportunities:
1. net worth of less than $750,000 (excluding ownership interest in the applicant’s
business, equity in their primary personal residence, and funds invested in an
official retirement account);
2. generally no more than $350,000 in average adjusted gross income over the
preceding three years; and
3. no more than $6 million in assets (excluding funds invested in an official
retirement account).75
For group-owned small businesses, by statute, ANCs are deemed to be economically
disadvantaged, and CDCs are similarly treated as economically disadvantaged. In contrast, Indian
tribes and NHOs must establish economic disadvantage.
5 P.L. 83-163, the Small Business Act of 1953 (as amended), see https://www.govinfo.gov/app/details/COMPS-1834. Congressional Research Service 1 An Overview of Small Business Contracting Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.6 When the act was signed into law in 1953, Congress found that World War II and Korean War-induced materials’ shortages combined with an inability to obtain defense contracts or financial assistance had threatened the existence of thousands of small businesses.7 Congress indicated that it therefore intended to “equalize the scales when necessary to guarantee the continued vigor of our competitive free enterprise system.”8 By 2007, a House committee report explained that the primary rationale for small business contracting programs “is the positive economic benefits they provide, as well as assisting small businesses overcome the complexities of the [procurement] system.”9 Small Business Procurement Goals Legislative History of Small Business Procurement Goals Since 1978, federal agency heads have been required to establish small business procurement goals in consultation with the SBA, “that realistically reflect the potential of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals” to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting prime contract and subcontract award goals to the SBA.10 In 1988, Congress required the President to establish annual government-wide goals for federal contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals.11 Through the same legislation, P.L. 100-656, the Business Opportunity Development Reform Act of 1988, Congress set a minimum government-wide small business procurement goal, requiring that small businesses receive “not less than 20 percent of the total value of all prime contract awards for each fiscal year” and that small businesses owned and controlled by socially and economically disadvantaged individuals receive 6 15 U.S.C. §631(a); and P.L. 83-163, the Small Business Act of 1953 (as amended), see https://www.govinfo.gov/app/details/COMPS-1834. 7 U.S. Congress, Senate Select Committee on Small Business, Small Business Administration, committee print, 83rd Cong., 1st sess., August 10, 1953 (Washington: GPO, 1953), p. iii. Also, see U.S. Congress, House Committee on Banking and Currency, Small Business Act of 1953, report to accompany H.R. 5141, 83rd Cong., 1st sess., May 28, 1953, H.Rept. 83-494 (Washington: GPO, 1953). 8 U.S. Congress, Senate Select Committee on Small Business, Small Business Administration, committee print, 83rd Cong., 1st sess., August 10, 1953 (Washington: GPO, 1953), p. v. 9 U.S. Congress, House Committee on Small Business, Small Business Contracting Program Improvements Act, report to accompany H.R. 3867, 110th Cong., 1st sess., October 22, 2007, H.Rept. 110-400 (Washington: GPO, 2007), p. 4. The report states, “The economic benefits of these programs can be seen in two primary areas—market competition and local economic development. First, [these] programs … are designed to increase and diversify small contractors with the intent of expanding the federal supplier base. This leads to increased competition, which results in higher quality, greater product variety, and lower prices. Second, these contracting initiatives lower barriers to entry in a wide range of markets for small businesses. This provides greater market access for small firms’ goods and services. From an economic perspective, such access is critical to generating positive macroeconomic benefits, including higher job creation, wage growth, and greater income distribution.” 10 15 U.S.C. §644(g)(2); and P.L. 95-507, a bill to amend the Small Business Act and the Small Business Investment Act of 1958. Prime contracts are made between the government and a business whereas subcontracts are between a prime contractor and other businesses. 11 P.L. 100-656, the Business Opportunity Development Reform Act of 1988, codified at 15 U.S.C. §644(g)(1). Congressional Research Service 2 link to page 12 An Overview of Small Business Contracting “not less than 5 percent of the total value of all prime contract and subcontract awards for each fiscal year.”12 This law also directed each federal agency to “have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.”13 The law further required SBA to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress.14 Over the years, government-wide procurement goals for both prime and subcontract dollars have been established for small businesses generally (P.L. 100-656 and P.L. 105-135); small businesses owned by socially and economically disadvantaged individuals (P.L. 100-656); women-owned small businesses (P.L. 103-355); small businesses located within a HUBZone (P.L. 105-135); and small businesses owned by service-disabled veterans (P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999). There are five government-wide statutory small business procurement goals set by Congress: Table 1. Statutory Federal Small Business Procurement Goals Type of Firm Goal Measure of Contract Awards Small Businesses 23% Dol ar value of prime contract awards Small Disadvantaged Businesses (SDBs)a 5% Dol ar value of prime and subcontract awards Women-Owned Small Businesses (WOSBs) 5% Dol ar value of prime and subcontract awards Service-Disabled Veteran-Owned Small Businesses 5% Dol ar value of prime and subcontract (SDVOSBs) awards HUB (Historically Underutilized Business) Zone Small 3% Dol ar value of prime and subcontract Businesses awards Source: 15 U.S.C. §644(g)(1)(A); P.L. 118-31. Notes: Prime contract awards are made directly to a business from an agency. Some federal prime contracts require a contractor to subcontract with small businesses to create more opportunities for those firms. P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024, increased the SDVOSB goal from 3% to 5%. Executive action increased the statutory SDB goal; in FY2024, agencies must col ectively award at least 13% of contract spending to SDBs, per Office of Management and Budget Memorandum M-24-01, in order to increase this share of award dol ars to 15% by 2025. a. SDBs are small businesses owned and control ed by socially and economically disadvantaged individuals. These firms must meet criteria described in SBA regulations at 13 C.F.R. §124.1001. While all 8(a) Business Development Program participant firms qualify as SDBs, not all SDBs are in the 8(a) program. 12 P.L. 100-656, the Business Opportunity Development Reform Act of 1988, codified at 15 U.S.C. §644(g)(1). The government-wide minimum participation goal for small businesses was increased from 20% to 23% by P.L. 105-135, the Small Business Reauthorization Act of 1997. 13 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988. 14 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988. Congressional Research Service 3 An Overview of Small Business Contracting Agency-Level Goal-Setting The SBA negotiates small business procurement goals with each federal agency and establishes a small business eligible baseline for evaluating the agency’s performance.15 The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by the Federal Acquisition Regulation, acquisitions on behalf of foreign governments, and contracts not reported in the General Services Administration’s (GSA’s) Federal Procurement Data System—Next Generation, or FPDS-NG (such as government procurement card purchases and contracts valued less than $10,000).16 During the goal negotiation process, the SBA consults with agencies to establish annual goals for small business participation in contracting and subcontracting that collectively add up to the government-wide goals in statute. If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution.17 SBA added Small Disadvantaged Business goals to the negotiation process in FY2022, per OMB Memorandum M-22-03.18 SBA sets agency goals for HUBZone businesses, WOSBs, and SDVOSBs at the statutory level; it bases subcontracting goals on recent attainment levels.19 An agency’s head is required to “make consistent efforts to annually expand participation by small business concerns from each industry category.”20 Small Business Procurement Scorecards and Reports Once goals are set, the SBA then evaluates agencies’ performance against their negotiated goals and presents the results in the SBA’s annual Small Business Procurement Scorecards.21 The SBA 15 According to a 2001 GAO report, the SBA began to specify what types of contracts the Federal Procurement Data System would exclude when determining agency compliance with federal contracting goals in FY1998. Prior to FY1998, “agencies reported their small business achievements directly to SBA and excluded from their calculations certain types of contracts, such as those for which small businesses had a limited or no chance to compete. SBA then published an annual report summarizing each agency’s achievements. SBA officials said that in some cases they were not aware of all exclusions the agencies made when reporting their numbers.” GAO, Small Business: More Transparency Needed in Prime Contract Goal Program, GAO-01-551, August 1, 2001, pp. 9-10, at http://www.gao.gov/assets/240/231854.pdf. 16 SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2018 Goaling Guidelines,” p. 3; and GSA, Federal Procurement Data System—Next Generation, “What’s In FPDS-NG,” at https://www.fpds.gov/wiki/index.php/FPDS-NG_FAQ. 17 SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2018 Goaling Guidelines,” August 30, 2017, p. 4, at https://www.sba.gov/sites/default/files/2018-06/FY18_Small_Business_Goaling_Guidelines.pdf (hereinafter SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2018 Goaling Guidelines”). 18 Memorandum from Jason S. Miller, Deputy Director for Management, Office of Management and Budget, to Heads of Executive Departments and Agencies, December 2, 2021, p. 2, https://www.whitehouse.gov/wp-content/uploads/2021/12/M-22-03.pdf. 19 SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2023 Goaling Guidelines,” p. 6. 20 15 U.S.C. §644(g)(2). 21 Current and past Scorecards are available at https://www.sba.gov/document/support-small-business-procurement-scorecard-overview. The Scorecard “grading methodology” is described by the SBA for each fiscal year, in documents available at https://www.sba.gov/document/support-contracting-scorecard-grading-methodology. Congressional Research Service 4 link to page 8 An Overview of Small Business Contracting uses FPDS-NG data, which are also published in GSA’s annual Small Business Goaling Report,22 available through SAM.gov. GSA is also required to produce an annual report that must include “all procurements made for the period covered by the report and may not exclude any contract awarded.”23 Agencies can take credit in every category that is applicable to the recipient of the contract. For example, “when counting goaling achievements, a contract awarded to a Service-Disabled Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business (SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-Owned Small Business (WOSB) goal. However, these category counts are not summed to triple the total count. The Sum of Parts Does Not Equal the Whole (italics in original).”24 Agency goal attainment is an aspirational pursuit without punitive consequences for failure to meet goals. Any agency that does not achieve a goal must submit a “corrective action report” to the SBA, denoting the reasons it failed to achieve the goal and proposing a “corrective action plan.”25 The SBA’s Small Business Procurement Scorecards and GSA’s Small Business Goaling Report are distributed widely, receive media attention, and heighten public awareness of small business contracting. Agency performance as reported in the SBA’s Small Business Procurement Scorecards may also be referenced by Members during congressional debates and hearings. As shown in Table 2, the Small Business Procurement Scorecard data show that the government has met the prime award goals for small businesses generally, as well as for SDVOSBs, over the past five fiscal years. It has also met the subcontract award goals for small and WOSBs over the same time period. Table 2. Federal Procurement Goals and Percentage of Federal Contract Dollars Awarded to Small Businesses, by Type of Small Business Percentage Percentage Percentage Percentage Percentage Federal Dollars Dollars Dollars Dollars Dollars Business Type Goal Awarded Awarded Awarded Awarded Awarded FY2022 FY2021 FY2020 FY2019 FY2018 Small Business - Prime 23% 26.50% 27.23% 26.02% 26.50% 25.05% - Subcontract 31.08% 30.87% 32.46% 33.27% 32.10% SDB - Prime Contractor 5%a 11.38% 11.01% 10.54% 10.29% 9.65% - Subcontractor 4.55% 4.44% 4.40% 4.17% 4.90% WOSB 5% - Prime Contractor 4.57% 4.63% 4.85% 5.19% 4.75% 22 GSA’s Small Business Goaling Reports are available at https://sam.gov/reports/awards/static. 23 15 U.S.C. §644(h)(3)(A)(ii). Current and past reports are available at https://www.gsa.gov/policy-regulations/policy/acquisition-policy/small-business-reports. 24 SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2018 Goaling Guidelines,” p. 5. “The exception to this non-additive rule is for total Small Disadvantaged Business (SDB), which is the sum of 8(a) and non-8(a) SDBs. Each special type of small business is first of all a small business. That also means Federal procurements awarded to SDVOSB will also have been awarded to Veteran-Owned Small Business (VOSB).” 25 SBA, Office of Policy, Planning and Liaison, Office of Government Contracting and Business Development, “FY 2023 Goaling Guidelines,” p. 8. Congressional Research Service 5 An Overview of Small Business Contracting Percentage Percentage Percentage Percentage Percentage Federal Dollars Dollars Dollars Dollars Dollars Business Type Goal Awarded Awarded Awarded Awarded Awarded FY2022 FY2021 FY2020 FY2019 FY2018 - Subcontractor 5.14% 5.24% 5.62% 5.25% 5.50% HUBZone - Prime Contractor 3% 2.65% 2.53% 2.44% 2.28% 2.05% - Subcontractor 1.68% 1.60% 1.65% 1.37% 1.40% SDVOSB - Prime Contractor 3%b 4.57% 4.41% 4.28% 4.39% 4.27% - Subcontractor 2.16% 2.25% 2.14% 1.95% 2.10% Sources: SBA, Government-wide FY2018-2022 Small Business Procurement Scorecard. Notes: SBA excludes certain contracts when procurement data is unavailable or because the work cannot realistically be performed by small businesses. According to the SBA’s FY2024 Goaling Guidelines, excluded contracts include acquisitions on behalf of foreign governments; contracts awarded to mandatory sources (which include Federal Prison Industries contracts and those with nonprofit agencies employing persons who are blind or have other significant disabilities); contracts funded with non-appropriated, agency-generated funds; Tricare health care program contracts; and Department of Veterans Affairs Community Care Network contracts. Purchases valued at less than $10,000 are also excluded because they are not tracked in the Federal Procurement Data System. The value of contracts with these exclusions is referred to as the “small business eligible” value. a. Executive action has increased the statutory SDB goal, seeking to increase this share of award dol ars to 15% by 2025. In FY2022, agencies were required to col ectively award at least 11% of contract spending to SDBs, per Office of Management and Budget Memorandum M-22-03. In FY2023, they were required to col ectively award at least 12% to SDBs, per Office of Management and Budget Memorandum M-23-01. In FY2024, they must col ectively award at least 13% to SDBs, per Office of Management and Budget Memorandum M-24-01. P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024, increased the SDVOSB goal from 3% to 5%. Small Business Contracting Preferences The Competition in Contracting Act of 1984 generally requires “full and open competition” for government procurement contracts.26 However, various provisions of the Small Business Act authorize or, in some cases, require federal agencies to provide small businesses a preference when making a contract award.27 Preferences for small business contractors may take the form of 26 41 U.S.C. §3301; and the Deficit Reduction Act of 1984 (Title VII, the Competition in Contracting Act). The Competition in Contracting Act (CICA) of 1984 (originally enacted as part of the Deficit Reduction Act of 1984, P.L. 98-369, §§2701-2753) requires that contracts be entered into after “full and open competition through the use of competitive procedures” unless otherwise authorized by law. CICA addresses small business set-asides by allowing “procurement of property or services ... using competitive procedures, but excluding other than small business concerns” 10 U.S.C. §2304(b)(2) and 41 U.S.C. §253(b)(2). 27 Set-aside authorities are codified in different places in the U.S. Code, where contracts and socioeconomic contracting programs are covered (15 U.S.C. §644(j)(1); 15 U.S.C. §637(a) for SDBs and 8(a) program participants; 15 U.S.C. §657a for HUBZone small businesses; 15 U.S.C. §637(m) for WOSBs; and 15 U.S.C. §657f for SDVOSBs). Congressional Research Service 6 link to page 11 link to page 11 link to page 12 An Overview of Small Business Contracting contract set-asides and sole-source awards; while set-asides limit the competition for an award to small firms, a sole-source award is made directly to a firm without competition.28 Federal agencies are required to set-aside contracts for small businesses under certain conditions, and are generally encouraged to do so when possible.29 Set-asides may be “total” or “partial,” depending on the market research findings of purchasing agencies.30 Agencies consider the value of a contract and the number of available small businesses able to complete required work. Table 3 summarizes agency requirements to make small business set-asides and Table 4 shows the conditions and limitations for sole-source awards to small businesses. In the case of Multiple Award Contracts (MACs),31 agencies may make a partial set-aside for socioeconomic small businesses.32 Agencies may also make a small business reserve, to award MACs to a socioeconomic small business under full and open competition.33 Frequently-used terms related to small business contracting preferences are defined below. Glossary Micro-purchase threshold $10,000, per Section 806 of the NDAA for FY2018 (P.L. 115-91) “Responsible” prospective contractor To be determined responsible, a prospective contractor must generally have adequate financial resources to perform the contract; be able to comply with the required or proposed delivery or performance schedule; have a satisfactory performance record; have a satisfactory record of integrity and business ethics; have the necessary organization, experience, skil s, equipment, and facilities; and be otherwise qualified under laws and regulations (48 C.F.R. §9.104-1). Rule of two Agencies set aside contracts for bids by small businesses when there is a reasonable expectation of obtaining offers from two or more 28 A “price evaluation preference” is another kind of preference used. Agencies are required to grant HUBZone small businesses a price evaluation preference of not more than 10% in open and unrestricted competitions. 29 15 U.S.C. §644(j)(1). Certain regulations implementing this provision of the Small Business Act effectively narrow its scope. For example, certain small business contracts awarded or performed overseas are not necessarily required to be set aside for small businesses, and the small business provisions contained in Part 19 of the Federal Acquisition Regulation (Part 48 of the Code of Federal Regulations) generally do not apply to Blanket Purchase Agreements and orders placed against Federal Supply Schedule contracts. 30 If market research “indicates that a total set-aside is not appropriate,” and a contract can be divided “into distinct portions,” contracting officers must “set aside a portion or portions of an acquisition, except for construction, for exclusive small business participation.” 48 C.F.R. §19.502-3(a). 31 A multiple-award contract describes a type of Indefinite Delivery, Indefinite Quantity (IDIQ) contract awarded to multiple vendors under a single solicitation. For information on IDIQs, see CRS In Focus IF12558, Indefinite Delivery, Indefinite Quantity Contracts, by Dominick A. Fiorentino and Alexandra G. Neenan. 32 48 C.F.R. §19.502-4. Contracting officers may also set aside orders placed under multiple-award contracts for socioeconomic small businesses (48 C.F.R. §19.504). Socioeconomic small businesses refers, collectively, to small disadvantaged (and 8(a) program participant) businesses, women-owned small businesses, service-disabled veteran-owned small businesses and HUBZone businesses. 33 48 C.F.R. §19.501(a)(2). In a 2024 memorandum from the Office of Federal Procurement Policy under the Office of Management and Budget, agencies were advised to set aside orders over the micro-purchase threshold for small businesses “when the contracting officer determines there is a reasonable expectation of obtaining offers from two or more small business contract holders under the multiple-award contract that are competitive in terms of market prices, quality, and delivery.” See Office of Federal Procurement Policy, “Increasing Small Business Participation on Multiple-Award Contracts,” memorandum for chief acquisition officers senior procurement executives, January 25, 2024, p. 4, at https://www.whitehouse.gov/wp-content/uploads/2024/01/REV_Increasing-Opportunities-to-Small-Businesses-under-MACs-CATS-Final-Copy-1-25-24.pdf. Congressional Research Service 7 link to page 11 link to page 12 An Overview of Small Business Contracting responsible small businesses that are competitive in terms of market prices, quality, and delivery (48 C.F.R. §19.502). Simplified Acquisition Threshold $250,000, per Section 805 of the NDAA for FY2018 (P.L. 115-91) Small business A firm that meets Small Business Administration size criteria (13 C.F.R. §121.201). Small business set-aside Contract restricted to offers by small businesses Sole-source award Contract awarded to a single firm without competition from other offerors As shown in Table 3, when a contract award’s value is expected to be between the “micro-purchase threshold” ($10,000) and “simplified acquisition threshold” ($250,000), an agency must award the contract to a small business “unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery.”34 The agency will create a “total” small business set-aside under these circumstances. Furthermore, regulations direct an agency to make an award to a firm if it is the only firm that makes an “acceptable offer” in response to a set-aside and is “a responsible small business concern.”35 For contracts above the simplified acquisition threshold, agencies must also generally set aside contracts exclusively for small businesses as long as a contracting officer expects that offers will be obtained from at least two responsible small businesses and the award will be made at a fair market price.36 Before making a small business set-aside for acquisitions above this threshold, a contracting officer must “first consider an acquisition for the small business socioeconomic contracting programs (i.e., 8(a), HUBZone, SDVOSB, or WOSB programs).”37 Table 3. Conditions for Small Business Set-Asides Number of Anticipated Small Contract Award Acquisition Business Set-Aside Valuea Procedure Offerors Requirement Regulations Below “micro-purchase Purchase card — — 48 C.F.R. §13.201 threshold” ($10,000) preferred Between “micro- Small business 2+ Total set-aside or sole- 48 C.F.R. §19.502-2(a) purchase threshold” set-aside source award ($10,000) and “simplified acquisition threshold” ($250,000) 34 48 C.F.R. §19.502-2(a). 35 48 C.F.R. §19.502-2(a). “If the contracting officer receives only one acceptable offer from a responsible small business concern in response to a set-aside, the contracting officer should make an award to that firm.” The set-aside is “withdrawn” and the contract is “resolicited on an unrestricted basis” when a “the contracting officer receives no acceptable offers from responsible small business concerns.” 36 48 C.F.R. §19.502-2(b). In addition to the expectation that offers will be obtained from at least two responsible small businesses and the award will be made at a fair market price, a contracting officer must also have “a reasonable expectation of obtaining from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of cost, performances, and schedules.” 37 48 C.F.R. §19.203(c). However, if a requirement has been accepted by the SBA under the 8(a) Program, it must remain in the 8(a) Program unless the SBA agrees to its release. Congressional Research Service 8 link to page 12 link to page 12 link to page 13 link to page 13 An Overview of Small Business Contracting Number of Anticipated Small Contract Award Acquisition Business Set-Aside Valuea Procedure Offerors Requirement Regulations Above “simplified Small business 2+ Total or partial set- 48 C.F.R. §19.502-2(b); acquisition threshold” set-aside aside; socioeconomic 48 C.F.R. §19.502-3; ($250,000) program consideration 48 C.F.R. §19.203(c). Source: 48 C.F.R. §13.201; 48 C.F.R. §19.502-2; 48 C.F.R. §19.502-3; 48 C.F.R. §19.203(c). a. The Federal Acquisition Regulatory Council has the responsibility of adjusting each acquisition-related dol ar threshold on October 1, of each year that is evenly divisible by five. As a result, these thresholds may differ from those in statute. The next adjustment for inflation wil take place on October 1, 2025. 41 U.S.C. §1908(c)(2). Agencies may make sole-source awards to small businesses and socioeconomic small businesses, subject to limits on the value of such awards shown in Table 4. Sole-source contract award limits generally range from $4 million to $7.5 million. Group-owned firms in the 8(a) Business Development Program (e.g., Alaska Native Corporations, Native Hawaiian Organizations) may receive sole-source awards in excess of the limits for individually-owned firms. Table 4. Sole-Source Award Limitations Type of Small Sole-Source Business Award Limit Regulations Statutes Small Business $250,000 48 C.F.R. §19.502- 15 U.S.C. §644(j) 2(a) 8(a) Program $4.5 mil ion ($7.5 48 C.F.R. §19.805- 15 U.S.C. Participanta mil ion for 1(b)(2) §637(a)(16)(A) manufacturing contracts) Alaska Native No limit, written 48 C.F.R. §19.805- P.L. 100-656, Corporation (ANC) justification 1(b)(2); 13 C.F.R. §602(a), 102 Stat. or Indian Tribe- required for §124.506(b)(5) 3887-88 (November Owned 8(a) contracts in excess 15, 1988) (codified of $25 mil ion ($100 at 15 U.S.C. §637 mil ion for DoD note) contracts)b Native Hawaiian No limit for DoD 48 C.F.R. §219.805- See P.L. 109-148, (NHO) 8(a) contracts, written 1(b)(2)(A)-(B); 13 §8020, 119 Stat. justification C.F.R. 2702-03 (December required for §124.506(b)(5) 30, 2005) contracts in excess of $100 mil ion WOSBs $4.5 mil ion ($7 48 C.F.R. 15 U.S.C. §637(m) mil ion for §19.1506(a)-(c) manufacturing contracts) SDVOSBs $4 mil ion ($7 13 C.F.R. §128.405 15 U.S.C. §657f(c) mil ion for manufacturing contracts) Congressional Research Service 9 link to page 13 An Overview of Small Business Contracting Type of Small Sole-Source Business Award Limit Regulations Statutes VOSBs (VA only)c $5 mil ion 48 C.F.R. §819.7007 38 U.S.C. §8127(c) and 48 C.F.R. §819.7008 HUBZone $4.5 mil ion ($7.5 48 C.F.R. §19.1306 15 U.S.C. mil ion for §657a(c)(2)(A) manufacturing contracts) Source: 48 C.F.R. §19.502-2(a); 48 C.F.R. §19.805-1(b)(2); 48 C.F.R. §19.805-1(b)(2); 13 C.F.R. §124.506(b)(5); 48 C.F.R. §219.805-1(b)(2)(A)-(B); 13 C.F.R. §124.506(b)(5); 48 C.F.R. §19.1506(a)-(c); 13 C.F.R. §128.405; 48 C.F.R. §819.7007 and 48 C.F.R. §819.7008; 48 C.F.R. §19.1306; 15 U.S.C. §637(a); 15 U.S.C. §657a; 15 U.S.C. §637(m); 38 U.S.C. §8127(c) for VOSBs; and 15 U.S.C. §657f. Notes: Sole-source award limits include a contract’s anticipated total value, including any options. a. Sole-source awards in excess of the above thresholds may be made only when (1) there is not a reasonable expectation that at least two eligible and responsible 8(a) firms wil submit offers at a fair market price; or (2) the SBA accepts the contract on behalf of certain group-owned firms (e.g., ANCs). When an 8(a) contract’s anticipated value, including options, is less than $4.5 mil ion (or $7.5 mil ion for manufacturing contracts), the contract is typically awarded on a sole-source basis without competition and when the anticipated value exceeds these thresholds, it generally must be awarded via a set-aside (48 C.F.R. §19.805-1; and 15 U.S.C. §637(a)(16)(A)). Once they have been awarded more than $168,500,000 in 8(a) contract awards, participant firms owned by individuals may not receive any additional 8(a) sole-source awards, though they can stil receive set-asides. This amount is set forth at 13 C.F.R. §124.519. SBA will not count awards of less than $250,000 towards this limit. b. P.L. 111-84, the National Defense Authorization Act for Fiscal Year 2010, required federal contracting officers to execute written justifications and obtain approval for sole-source contracts in excess of $20 mil ion, a threshold that was increased through regulatory updates, to $25 mil ion, effective October 1, 2020, to account for inflation. P.L. 116-92, the National Defense Authorization Act for Fiscal Year 2020, increased this threshold to $100 mil ion for DOD (but not for other agencies). c. The Department of Veterans Affairs has its own contracting preferences for veteran-owned small businesses (VOSBs), known as the Veterans First program. It is the only agency with a program for VOSBs. Certification and Other Requirements for Small Business Contractors Businesses interested in bidding on a federal contract must register with the federal government’s System for Award Management (SAM) at SAM.gov.38 Government agencies use SAM for several purposes, including to find contractors.39 Businesses also must match their products and services to a North American Industry Classification System (NAICS) code, a step that is especially important for firms interested in small business contracting preferences, because they must meet the SBA’s small business size standards, which depend on a firm’s NAICS code. Businesses generally have a primary NAICS code, and may have multiple NAICS codes if they sell multiple products and services.40 38 SBA, “Federal Contracting Guide: Basic Requirements,” at https://www.sba.gov/federal-contracting/contracting-guide/basic-requirements. 39 SBA, “Register with SAM,” at https://www.sba.gov/federal-contracting/contracting-guide/basic-requirements#section-header-8. 40 U.S. Bureau of the Census, “North American Industry Classification System,” at https://www.census.gov/eos/www/naics/. Congressional Research Service 10 An Overview of Small Business Contracting Businesses that identify themselves as a small business in SAM must (1) meet the Small Business Act’s definition of a small business, and (2) not exceed the SBA’s established size standards, which are updated periodically.41 The Small Business Act defines a small business as one that • is organized for profit;42 • has a place of business in the United States; • operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; • is independently owned and operated; and • is not dominant in its field on a national basis.43 The Small Business Act authorizes the SBA to establish size standards to determine small business program eligibility. SBA has established two types of standards: industry-specific size standards and alternative size standards for certain lending and venture capital investment programs.44 The SBA’s industry-specific size standards are used to determine eligibility for federal small business contracting purposes. A business can compare its number of employees or average annual receipts (depending on its industry) to size standards listed in the SBA’s Table of Small 41 P.L. 111-240, the Small Business Jobs Act of 2010, requires the SBA to conduct a detailed review of not less than one-third of the SBA’s industry size standards every 18 months beginning on the new law’s date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years. For additional information and analysis of the SBA’s size standards, see CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary Issues, by R. Corinne Blackford and Anthony A. Cilluffo. 42 The business may be a sole proprietorship, partnership, corporation, or any other legal form. 43 15 U.S.C. §632(a); and 13 C.F.R. §121.105. Affiliations between businesses, or relationships allowing one party control or the power of control over another, generally count in size determinations. Businesses can thus be determined to be other than small because of their involvement in joint ventures, subcontracting arrangements, or franchise or license agreements, among other things, provided that their employment or income, plus those of their affiliate(s), exceed the pertinent size threshold. See 13 C.F.R. §121.103. 44 Alternative standards are based on the applicant’s maximum tangible net worth and average net income after federal taxes. The SBA’s 7(a) Business and Certified Development Company (CDC/504) Loan Programs allow businesses to qualify as small if they meet the SBA’s size standard for the industry in which the applicant is primarily engaged, or have a maximum tangible net worth of not more than $20 million and average after-tax net income after federal taxes (excluding any carry-over losses) of not more than $6.5 million for two full fiscal years before the date of application. These thresholds were adjusted for inflation through SBA rule-making in March 2024. 15 U.S.C. §632(a)(2-3); 15 U.S.C. §632(a)(5)(B); U.S. Small Business Administration, “Small Business Size Standards: Adjustment of Alternative Size Standard for SBA’s 7(a) and CDC/504 Loan Programs for Inflation; and Surety Bond Limits: Adjustments for Inflation,” 89 Federal Register 11703, February 15, 2024. Businesses participating in the SBA’s 504/Certified Development Company (504/CDC) loan guaranty program are deemed small if they did not have a tangible net worth in excess of $15 million and did not have an average net income in excess of $5 million after taxes (excluding any carry-over losses) for the preceding two years before the date of application. 15 U.S.C. §632(a)(5)(B). The SBA’s Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA’s size standard for the industry in which the applicant is primarily engaged, or have a maximum tangible net worth of not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. 15 U.S.C. §662(12)(A-B); and SBA, “Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards,” 79 Federal Register 33647-33669, June 12, 2014. Congressional Research Service 11 An Overview of Small Business Contracting Business Size Standards.45 The table has standards for over 1,000 NAICS codes. Businesses that exceed the applicable size standard for their primary industry do not meet the requirement of being small. Certification Requirements for Government-Wide Contracting Programs46 Small businesses generally self-certify their status as small when they register their business in the SAM database. Firms that wish to compete only with similar firms for government contracts (through contract set-asides), or receive sole-source awards through a socioeconomic small business contracting program (e.g., HUBZone small businesses, SBA 8(a) program participants, WOSBs, and veteran-owned small businesses [VOSBs] and SDVOSBs), are subject to certification requirements.47 Each socioeconomic program has its own eligibility and certification requirements outlined in regulations. Firms may obtain certification through the SBA’s online certification platform at certify.sba.gov. The contracting officer is required to accept an offeror’s status representation in a specific bid or proposal that it is a small business unless “(1) another offeror or interested party challenges the concern’s small business representation or (2) the contracting officer has a reason to question the representation.”48 Procedures for filing a challenge, or “protest,” are outlined in SBA regulations.49 8(a) Program50 The 8(a) Business Development Program provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged,51 have good 45 The table is available at https://www.sba.gov/document/support-table-size-standards or in the Code of Federal Regulations at 13 C.F.R. §121.201. Firms may also look up their NAICS code in the table or use the SBA’s Size Standards Tool available on its website available at https://www.sba.gov/size-standards/index.html. 46 These programs apply government-wide but are implemented under the authority of the Small Business Act, pursuant to regulations promulgated by the SBA that determine, in part, eligibility for the programs. 47 Section 862 of P.L. 116-283, the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, required the SBA to establish a government-wide SDVOSB certification and periodic recertification process that replaced a veteran certification process previously handled by the Department of Veterans Affairs (VA). VA continues to determine whether an individual qualifies as a service-disabled veteran. 48 48 C.F.R. §19.301-1(b). 49 Size-related protest procedures are outlined at 13 C.F.R. §121.1001-§121.1008. Socioeconomic status protest procedures are outlined at 13 C.F.R. §124.1002 for SDBs, 13 C.F.R. §126.800-126.805 for HUBZone firms, 13 C.F.R. §128.500 for SDVOSBs (and veteran-owned small businesses), and 13 C.F.R. §127.600-§127.605 for WOSBs. Note that “The eligibility of a[n 8(a) Program] Participant for a sole source or competitive 8(a) requirement may not be challenged by another Participant or any other party, either to SBA or any administrative forum as part of a bid or other contract protest” (13 C.F.R. §124.517(a)). 50 Federal agencies are authorized to award contracts for goods or services, or to perform Federal agencies are authorized to award contracts for goods or services, or to perform
construction work, to the SBA for subcontracting to 8(a) construction work, to the SBA for subcontracting to 8(a) firmsprogram participants. The SBA is authorized to delegate . The SBA is authorized to delegate
the function of executing contracts to the procuring agencies and often does so. Once the SBA has the function of executing contracts to the procuring agencies and often does so. Once the SBA has
accepted a contract for the 8(a) program, the contract is awarded through either a set-aside or on a accepted a contract for the 8(a) program, the contract is awarded through either a set-aside or on a
sole-source basis, with the contract amount generally determining the acquisition method used. sole-source basis, with the contract amount generally determining the acquisition method used.
For individually owned small businesses, when the contract’s anticipated total value, including
any options, is $4.5 million or less ($7.5 million or less for manufacturing contracts), the contract
is normally awarded without competition (as a sole-source award).76 In contrast, when the
contract’s anticipated value exceeds these thresholds, the contract generally must be awarded via
a set-aside with competition limited to 8(a) firms so long as there is a reasonable expectation that
at least two eligible and responsible 8(a) firms will submit offers and the award can be made at
fair market price.77
Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible
for 8(a) set-asides and may receive sole-source awards valued at $4.5 million or less ($7.5 million

74 Asian Pacific Americans are those whose country of origin is Burma, Thailand, Malaysia, Indonesia, Singapore,
Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia, Vietnam, Korea, the Philippines, U.S. Trust
Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia,
Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru.
Subcontinent Asian Americans are those whose country of origin is India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the
Maldives Islands, or Nepal. 13 C.F.R. §124.103(b).
75 SBA, “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business Certification,” 85
Federal Register 27650-27665, May 11, 2020.
76 FAR §19.805-1. The Federal Acquisition Regulatory Council has the responsibility of adjusting each acquisition-
related dollar threshold (including those for the 8(a), HUBZone, Service-Disabled Veteran-Owned, and Women-
Owned Small Business contracting programs), on October 1, of each year that is evenly divisible by five. The next
adjustment for inflation will take place on October 1, 2025. As a result, these thresholds may differ from those in
statute. See 13 C.F.R. §124.506(a); and 41 U.S.C. §1908(c)(2).
77 15 U.S.C. §637(a)(1)(D)(ii); and SBA, “Conforming Statutory Amendments and Technical Corrections to Small
Business Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018.
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or less for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also
receive sole-source awards in excess of $4.5 million ($7.5 million for manufacturing contracts)
even when contracting officers reasonably expect that at least two eligible and responsible 8(a)
firms will submit offers and the award can be made at fair market price.78 NHO-owned firms may
receive sole-source awards from the Department of Defense under the same conditions.79
The SBA also provides technical assistance and training to 8(a) firms. Firms generally participate
in the 8(a) program for no more than nine years.For more information on this program, see CRS In Focus IF12458, The SBA’s 8(a) Business Development Program, by R. Corinne Blackford; and CRS Insight IN12245, SBA’s 8(a) Business Development Program Responds to District Court Ruling, by R. Corinne Blackford. 51 Prior to a ruling in a 2023 district court case, Ultima Servs. Corp. v. U.S. Department of Agriculture, the SBA applied a “presumption of social disadvantage” to individuals applying for its 8(a) program from the following groups: Asian Pacific Americans, Black Americans, Hispanic Americans, Subcontinent Asian Americans, and Native Americans. (continued...) Congressional Research Service 12 An Overview of Small Business Contracting character, and demonstrate a potential for success.52 The program creates federal contracting preferences such as contract set-asides and sole-source contracts in addition to authorizing SBA to provide business development support, including mentorship, training, and counseling to eligible firms. After nine years in the program, the program goal is for firms to successfully compete for federal contracts without 8(a) program assistance. A participating business may “graduate” from or exit the program after nine or fewer years but once a participant has left the program, neither the firm nor the owner of that firm is eligible to participate in the program again.53 Although the 8(a) program was originally established for the benefit of disadvantaged individuals, in the 1980s, Congress expanded the program to include small businesses owned by four groups: small businesses owned by Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes, and Native Hawaiian Organizations (NHOs) are eligible to participate in the 8(a) program under somewhat different requirements.54 Firms apply to the program through the SBA’s online certification platform at certify.sba.gov, submitting a variety of documents regarding firm ownership, governance, finances, and personal information. Applicants were required to attest to membership in one of these groups or provide a personal narrative regarding their social disadvantage to the SBA if they did not belong to one of the groups. Since the ruling, in which the court ruled that SBA cannot presume social disadvantage based on ethnic or racial group membership, any program participant who previously relied on the presumption of social disadvantage for program eligibility has to submit a narrative to SBA and program applicants must also submit narratives describing evidence of their disadvantaged status. 52 Section 8(a) of the Small Business Act, P.L. 85-536, as amended, can be found at 15 U.S.C. §637(a). Regulations are in 13 C.F.R. §124. The program is also governed by Section 7(j) of the act. The Clinton Administration changed the program’s name from the Minority Small Business and Capital Ownership Development Program to the 8(a) Business Development program in 1988 “to emphasize that individuals need not be members of minority groups and to stress the importance of assisting participating firms in their overall business development.” See SBA, “Small Business Size Regulations: 8(a) Business Development/Small Disadvantaged Business Status Determinations; Rules of Procedure Governing Cases Before the Office of Hearings and Appeals,” 63 Federal Register 35727, June 30, 1998. 53 In an effort to assist small businesses adversely In an effort to assist small businesses adversely
affected by the COVID-19 pandemic, P.L. 116-260, the Economic Aid to Hard-Hit Small affected by the COVID-19 pandemic, P.L. 116-260, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations
Act of 2021), provided businesses participating in the 8(a) program on or before September 9, Act of 2021), provided businesses participating in the 8(a) program on or before September 9,
2020, the 2020, the option to extend their participation in the program for one year. 54 If ANCs, CDCs, NHOs, and Indian tribes own multiple businesses, these groups may participate more than once via a firm that has not previously participated in the program. Firms owned by ANCs, CDCs, NHOs, and Indian tribes are also not subject to the maximum total award amount ($168,500,000) and may continue to receive sole-source awards beyond it. ANCs and CDCs are similarly treated as economically disadvantaged. In contrast, Indian tribes and NHOs must establish economic disadvantage. Firms owned by ANCs and Indian tribes can also receive sole-source awards in excess of $4.5 million ($7.5 million for manufacturing contracts) even when contracting officers reasonably expect that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price (option to extend their participation in the program for one year.
In FY2021, the federal government awarded $34.4 billion to 8(a) firms:
 $20.0 billion was awarded with an 8(a) preference ($8.7 billion through an 8(a)
set-aside and $11.3 billion through an 8(a) sole-source award);80
 $6.6 billion was awarded to an 8(a) firm in open competition with other firms;
and
 $7.8 billion was awarded with another small business preference (e.g., set-asides
and sole-source awards for small businesses generally and for HUBZone firms,
women-owned small businesses, and service-disabled veteran-owned small
businesses).81

78 P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); and 48 C.F.R. P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); and 48 C.F.R.
§19.805-1(b)(2)§19.805-1(b)(2)). NHO-owned firms may receive sole-source awards from the Department of Defense under the same conditions (.
P.L. 111-84, the National Defense Authorization Act for Fiscal Year 2010, required federal contracting officers to
execute written justifications and obtain approval for sole-source contracts in excess of $20 million awarded under the
authority of §8(a) analogous to those required for sole-source contracts awarded under the general contracting
authorities. The $20 million threshold was increased through a regulatory update to $22 million, effective October 1,
2015, and to $25 million, effective October 1, 2020, to account for inflation. P.L. 116-92, the National Defense
Authorization Act for Fiscal Year 2020, increased this threshold to $100 million for the Department of Defense. See
Department of Defense, General Services Administration, and National Aeronautics and Space Administration,
“Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds,” 80 Federal Register 38296,
July 2, 2015; and Department of Defense, General Services Administration, and National Aeronautics and Space
Administration, “Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds,” 85 Federal
Register 62485, October 2, 2020.
79 DOD’s authority to make sole-source awards to NHO-owned firms of contracts exceeding $4.5 million ($7.5 million DOD’s authority to make sole-source awards to NHO-owned firms of contracts exceeding $4.5 million ($7.5 million
for manufacturing contracts) even if contracting officers reasonably expect that offers will be received from at least two for manufacturing contracts) even if contracting officers reasonably expect that offers will be received from at least two
responsible small businesses existed on a temporary basis in 2004-2006, and became permanent in 2006responsible small businesses existed on a temporary basis in 2004-2006, and became permanent in 2006. See (see P.L. 109- P.L. 109-
148, Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, 148, Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico,
and Pandemic Influenza Act of 2006, §8020, 119 Stat. 2702-03 (December 30, 2005); 48 C.F.R. §219.805-1(b)(2)(A)-and Pandemic Influenza Act of 2006, §8020, 119 Stat. 2702-03 (December 30, 2005); 48 C.F.R. §219.805-1(b)(2)(A)-
(B).
80 The General Services Administration’s (GSA) FY2021 Small Business Goaling Report indicates that 8(a) firms were
awarded $19.5 billion with a federal contracting preference in FY2021. The amount cited in the text is somewhat
different because federal contracting data is updated daily and the amount cited in the text was generated at a later date,
includes more robust indefinite delivery vehicle (IDV) contracting data than what is included in the Small Business
Goaling Report, and does not double count contract awards. See GSA, “FY2021 Small Business Goaling Report,” at
https://sam.gov/api/prod/databank/v1/reports/static/download?fileName=Small%20Business%20Goaling%20FY%202
021&fileType=PDF.
81 Data generated using GSA, “Sam.Gov data bank,” July 26, 2022, at https://sam.gov/reports/awards/adhoc.
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Historically Underutilized Business Zone Program82
This program assists small businesses located in Historically Underutilized Business Zones
(HUBZones) through set-asides, sole-source awards (so long as the award can be made at a fair
and reasonable price, and the anticipated total value of the contract, including any options, is $4.5
million or less, or $7.5 million or less for manufacturing contracts) and price evaluation
preferences (of up to 10%) in full and open competitions.83 The HUBZone program targets
assistance to small businesses located in areas with low income, high poverty, or high
unemployment.84 To be certified as a HUBZone small business, at least 35% of the small
business’s employees must generally reside in a HUBZone.
In FY2021, the federal government awarded $14.0 billion to HUBZone-certified small
businesses:
 $2.4 billion was awarded with a HUBZone preference ($2.1 billion through a
HUBZone set-aside, $62.1 million through a HUBZone sole-source award and
$144.1 million through a HUBZone price-evaluation preference);
 $3.9 billion was awarded to HUBZone-certified small businesses in open
competition with other firms; and
 $7.7 billion was awarded with another small business preference (e.g., set-asides
and sole-source awards for small businesses generally and for 8(a), women-
owned, and service-disabled veteran-owned small businesses).85
Service-Disabled Veteran-Owned Small Business Procurement Program86
This program allows agencies to set aside contracts for SDVOSBs.87 Also, federal agencies may
award sole-source contracts to SDVOSBs so long as the award can be made at a fair and

82 For additional information and analysis, see CRS Report R41268, Small Business Administration HUBZone
Program, by Robert Jay Dilger and R. Corinne Blackford.
83 FAR §19.1306; 15 U.S.C. §657a(b)(2-3); and 41 U.S.C. §1980.
84 For specific criteria, see 15 U.S.C. §632(p)(4); and 13 C.F.R. §126.103.
85 Data generated using GSA, “Sam.Gov data bank,” July 26, 2022, at https://sam.gov/reports/awards/adhoc.
The General Services Administration’s (GSA) FY2021 Small Business Goaling Report indicates that HUBZone firms
were awarded $13.8 billion in FY2021. The amount cited in the text is somewhat different because federal contracting
data is updated daily and the amount cited in the text was generated at a later date, includes more robust indefinite
delivery vehicle (IDV) contracting data than what is included in the Small Business Goaling Report, and does not
double count contract awards. See GSA, “FY2021 Small Business Goaling Report,” at
https://sam.gov/api/prod/databank/v1/reports/static/download?fileName=Small%20Business%20Goaling%20FY%202
021&fileType=PDF.
86 For further information and analysis of the SDVOSB Procurement program, see CRS Report R46906, Service-
Disabled Veteran-Owned Small Business Procurement Program, by Robert Jay Dilger and R. Corinne Blackford.
87 A service-disabled veteran “is a person who served in the active military, naval, or air service, and who was
discharged or released under conditions other than dishonorable, and whose disability was incurred or aggravated in
line of duty in the active military, naval, or air service.” To be considered a service-disabled veteran, “the veteran must
have an adjudication letter from the Veterans Administration (VA), a Department of Defense Form 214, Certificate of
Release or Discharge from Active Duty, or a Statement of Service from the National Archives and Records
Administration, stating that the veteran has a service-connected disability.” There is no minimum disability rating
threshold. Also, the business must be small, as defined in Section 3(q) of the Small Business Act (15 U.S.C. §632(q))
and the SBA’s implementing regulations (13 C.F.R. §125). See Department of Veterans Affairs, Office of Small
Business Programs, “Service-Disabled Veteran-Owned Small Business,” at https://business.defense.gov/Small-
Business/SDVOSB/.
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reasonable price, and the anticipated total value of the contract, including any options, is $4
million or less ($7 million or less for manufacturing contracts).88 For this program, veterans and
service-related disabilities are defined as they are under the statutes governing veterans affairs.89
In FY2021, the federal government awarded $24.7 billion to SDVOSBs:
 $11.0 billion was awarded with a SDVOSB preference ($10.6 billion through a
SDVOSB set-aside and $382.1 million through a SDVOSB sole-source award);
 $6.0 billion was awarded to a SDVOSB in open competition with other firms;
and
 $7.7 billion was awarded with another small business preference (e.g., set-asides
and sole-source awards for small businesses generally and for HUBZone firms,
8(a) firms, and WOSBs).90
Women-Owned Small Business Program91
Under this program, contracts may be set aside for economically disadvantaged WOSBs in
industries in which women are underrepresented and substantially underrepresented.92 Federal
agencies may award sole-source contracts to WOSBs so long as the award can be made at a fair
and reasonable price, and the anticipated total value of the contract, including any options, is $4.5
million or less ($7 million or less for manufacturing contracts).93
To be eligible for the WOSB program, a business must be
 small, as determined by the SBA;
 at least 51% owned and controlled by women who are U.S. citizens;

88 FAR §19.1406; 15 U.S.C. §657f(a-b); and 41 U.S.C. §1980.
89 38 U.S.C. §8127(f). Veteran-owned small businesses and service-disabled veteran-owned small businesses are
eligible for separate preferences in procurements conducted by the Department of Veterans Affairs under the authority
of P.L. 109-461, the Veterans Benefits, Health Care, and Information Technology Act of 2006, as amended by P.L.
110-389, the Veterans’ Benefits Improvements Act of 2008.
90 Data generated using GSA, “Sam.Gov data bank,” July 26, 2022, at https://sam.gov/reports/awards/adhoc.
The GSA FY2021 Small Business Goaling Report indicates that SDVOSBs were awarded $24.5 billion in FY2021.
The amount cited in the text is somewhat different because federal contracting data is updated daily and the amount
cited in the text was generated at a later date, includes more robust indefinite delivery vehicle (IDV) contracting data
than what is included in the Small Business Goaling Report, and does not double count contract awards. See GSA,
“FY2021 Small Business Goaling Report,” at
https://sam.gov/api/prod/databank/v1/reports/static/download?fileName=Small%20Business%20Goaling%20FY%202
021&fileType=PDF.
91 For further information and analysis of the WOSB federal contacting program, see CRS Report R46322, SBA
Women-Owned Small Business Federal Contracting Program, by Robert Jay Dilger and R. Corinne Blackford.
92 The SBA has identified 364 six-digit North American Industry Classification System (NAICS) industry codes (out of
1,023) in which federal agencies may set aside federal contracts exceeding the micro-purchase threshold (currently
$10,000) (B)). Congressional Research Service 13 An Overview of Small Business Contracting Historically Underutilized Business Zone (HUBZone) Program55 The HUBZone program provides federal contracting preferences to small businesses located in SBA-designated areas called HUBZones. SBA designates these areas based on Census data that indicate levels of high poverty, high unemployment, or low income, or if they are located in qualified disaster areas, on Indian reservations, around some closed military installations, or in governor-designated places that meet certain criteria.56 It is the only federal contracting program that assists firms based on their geographic location rather than their size and/or the characteristics of their owners (e.g., contracting programs for small businesses, disabled-veteran owned small businesses). HUBZones are shown in an online HUBZone map, updated by the SBA according to a five-year revision cycle, as required by the National Defense Authorization Act for Fiscal Year 2018.57 Program benefits include contract set-asides, sole-source awards, and price-evaluation preferences.58 The government has not met the government-wide HUBZone procurement goal, in part because there are relatively fewer HUBZone firms (roughly 3,500-4,000) compared to other socioeconomic small businesses.59 Service-Disabled Veteran-Owned Small Business Procurement Program60 The SDVOSB program is the only government-wide procurement preference program for veterans. SDVOSBs are eligible for contract set asides and sole-source contract awards if they: meet small business size standards; are at least 51% unconditionally and directly owned and controlled by one or more service-disabled veterans; have one or more service-disabled veterans manage day-to-day operations and make long-term decisions; and be owned by one or more eligible veterans that have a service-connected disability.61 In cases where a veteran has a permanent and severe disability, a veteran’s spouse or permanent caregiver may qualify as an eligible SDVOSB owner.62 In addition, some eligible SDVOSBs may be owned and controlled by a deceased veteran’s surviving spouse.63 55 For more information on this program, see CRS In Focus IF12428, The SBA’s Historically Underutilized Business Zone (HUBZone) Program, by R. Corinne Blackford. 56 Governors may petition SBA annually to designate HUBZones in areas of their state that (1) are located outside of an urbanized area, (2) have a population of 50,000 or fewer, and (3) have an unemployment rate that is at least 120% of the unemployment rate for the nation or state in which it is located, whichever is less. However, the total number of areas in each petition may not exceed 10% of the total number of the covered (or eligible) areas in the state. 57 Section 1701 of P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018. The online HUBZone map is available at https://preview-maps.certify.sba.gov/hubzone/map/help. 58 Described at 13 C.F.R. §126.613(a)(1), a price evaluation preference is granted where a contracting officer will award a contract in full and open competition. In these situations, the officer will “deem the price offered by a certified HUBZone small business concern to be lower than the price offered by another [non-small business] offeror.” 59 SAM.gov, entity search, accessed March 14, 2024. For comparison, there are roughly 36,000 SDVOSBs registered in SAM.gov. 60 For more information on this program, see CRS Report R47226, Federal Contracting by Veteran-Owned Small Businesses: An Overview and Analysis of Contemporary Issues, by R. Corinne Blackford; and CRS Insight IN12313, Service-Disabled Veteran-Owned Small Business Contracting Program Changes, by R. Corinne Blackford. 61 13 C.F.R. §128.200; 38 U.S.C. §101(2) defines “veteran.” 62 48 C.F.R. §802.101. The veteran must have had a 100% service-connected disability rating. 63 48 C.F.R. §802.101; 15 U.S.C. §632(q). The veteran must have died as a direct result of a service-connected disability. Congressional Research Service 14 An Overview of Small Business Contracting Women-Owned Small Business Program64 Under this program,65 WOSBs are eligible for set-asides and sole-source opportunities in certain industries where they are “substantially underrepresented,” while economically disadvantaged WOSBs (EDWOSBs) are eligible for such opportunities in all industries in which WOSBs are either “underrepresented” or “substantially underrepresented.” At the direction of Congress, the SBA identifies WOSB program-eligible industries by determining how underrepresented WOSBs are among federal contractors in each industry.66 The government has met the WOSB procurement goal twice since it was authorized in 1994 and the SBA has proposed removal of WOSB NAICS industry restrictions to “attract more participants to the WOSB Program and remove a major impediment to widespread program usage by agencies.”67 Agency-Specific Contracting Programs Federal agencies may also set aside contracts or make sole-source awards to small businesses not participating in any other program under certain conditions. For example, the Departments of the Interior, Veterans Affairs, and Transportation have programs that promote contracting with small businesses, as does the Environmental Protection Agency. These agencies’ programs are briefly described below. Buy Indian Act Contracting Preferences Under authority provided by the Buy Indian Act of 1910,68 the Department of the Interior’s (DOI) Bureau of Indian Affairs, Bureau of Indian Education, and the offices of the Assistant Secretary-Indian Affairs and the Department of Health and Human Services’ Indian Health Service provide contracting preferences to qualified Indian tribes and Native American-owned and -controlled businesses.69 Relatedly, the Department of Defense’s Indian Incentive Program encourages prime contractors with a subcontract worth at least $500,000 to subcontract with qualified Indian tribes, 64 For more information on this program, see CRS In Focus IF12476, SBA’s Women-Owned Small Business Contracting Program, by R. Corinne Blackford; and CRS Insight IN11912, Update to Industries Eligible for the Women-Owned Small Business Contracting Program, by R. Corinne Blackford. 65 The SBA has identified North American Industry Classification System (NAICS) industry codes in which federal agencies may set aside federal contracts exceeding the micro-purchase threshold exclusively for WOSBs (including economically disadvantaged WOSBs) because those industries were exclusively for WOSBs (including economically disadvantaged WOSBs) because those industries were
identified as ones in which WOSBs are substantially underrepresented. The SBA has also identified identified as ones in which WOSBs are substantially underrepresented. The SBA has also identified 80 six-digit
NAICS industry codes (out of 1,023)NAICS industry codes that may be set aside exclusively for economically disadvantaged WOSBs that may be set aside exclusively for economically disadvantaged WOSBs
because those industries were identified as ones in which WOSBs are because those industries were identified as ones in which WOSBs are underrepresented. See U.S. Small Business Administration, “Women Owned Small Business Federal Contracting Program: Identification of Eligible Industries,” 87 Federal Register 15468-15481, March 18, 2022. 66 Congress proposed a contract set-aside for WOSBs (including EDWOSBs) in the Equity in Contracting for Women Act of 2000 (H.R. 4897). This language was incorporated into the Small Business Reauthorization Act of 2000, which was included in P.L. 106-554, the Consolidated Appropriations Act, 2001. Congress authorized sole-source contracts for WOSBs (including EDWOSBs) in the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 (FY2015 NDAA; P.L. 113-291). 67 SBA, FY2025 Congressional Budget Justification and FY2023 Annual Performance Report, pp. 14-15, at https://www.sba.gov/document/report-congressional-budget-justification-annual-performance-report. 68 Buy Indian Act of 1910 as amended; 25 U.S.C. §47. 69 GAO, Buy Indian Act: Bureau of Indian Affairs and Indian Health Service Need Greater Insight into Implementation at Regional Offices, GAO-15-588, July 9, 2015, at https://www.gao.gov/products/GAO-15-588; and U.S. Department of the Interior, Office of Indian Energy and Economic Development, “The Buy Indian Opportunity,” at https://www.bia.gov/as-ia/ieed/online-primers-economic-development-glance. Congressional Research Service 15 An Overview of Small Business Contracting Native American-owned and -controlled businesses, and Native Hawaiian small businesses by providing a 5% rebate on the amount subcontracted to these businesses.70 Department of Veterans Affairs Veterans First Program71 The VA has established its own SDVOSB and VOSB contracting preferences, known as the Veterans First program. According to this program’s regulations, VA contracting officers must set aside contracts for SDVOSBs and VOSBs where the “rule of two” is met,72 granting priority consideration to SDVOSBs.73 Both SDVOSBs and VOSBs receive priority consideration before any other type of small business and the complete order of priority is as follows: (1) SDVOSB, (2) VOSB, (3) 8(a) or HUBZone small business, and (4) other small businesses with preference of some kind.74 The prioritization of certain types of small business concerns is not a feature of the government-wide small business contract preference programs and is unique to the VA. Department of Transportation Disadvantaged Business Enterprise Program75 The Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program aims to prevent discrimination against DBEs by providing them equal opportunity to compete for federally funded transportation contracts. Congress has maintained a cumulative national goal of at least 10% contracting by DBEs where federal highway, transit, or airport project assistance is used.76 Although DOT, like all executive agencies, establishes agency procurement goals for contracting with small disadvantaged businesses, this program is distinct from that effort because it applies to the contracts awarded by state and local governments that receive DOT grant assistance from certain DOT agencies.77 Firm eligibility for the DBE program differs somewhat from the SBA’s 8(a) program, although a DBE must meet SBA size criteria and other revenue limitations. Environmental Protection Agency Disadvantaged Business Enterprise Program Under the Environmental Protection Agency (EPA) DBE program, the EPA Administrator aims to award not less than 10% of research funding relating to the Clean Air Act Amendments of 1999 to 70 U.S. Department of Defense, Office of Small Business Programs, “Indian Incentive Program (IIP),” at https://business.defense.gov/Programs/Indian-Incentive-Program/. 71 For more information on this program, see CRS Report R47226, Federal Contracting by Veteran-Owned Small Businesses: An Overview and Analysis of Contemporary Issues, by R. Corinne Blackford. 72 38 U.S.C. §8127(d). The rule of two is met when “the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans or small business concerns owned and controlled by veterans with service-connected disabilities will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 73 48 C.F.R. §819.7004. 74 48 C.F.R. §819.7004. 75 For more information on this program, see CRS In Focus IF12055, The U.S. DOT Disadvantaged Business Enterprise Program, by R. Corinne Blackford. 76 underrepresented. See SBA, “Qualifying NAICS
for the Women-Owned Small Business Federal Contracting program,” effective October 1, 2017, at
https://www.sba.gov/document/support—qualifying-naics-women-owned-small-business-federal-contracting-program.
93 FAR §19.1506; 15 U.S.C. §637(m); and 41 U.S.C. §1980.
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 have women manage the day-to-day operations and also make long-term
decisions; and
 be certified by a federal agency, a state government, the SBA, or a national
certifying entity approved by the SBA.94
To qualify as an economically disadvantaged WOSB, the owner must also demonstrate that her
ability to compete in the free enterprise system has been impaired due to diminished capital and
credit opportunities as compared with others in the same or similar line of business. The SBA
uses the same three-part test used in the 8(a) program to determine economic disadvantage
relating to the degree of the applicant’s diminished credit and capital opportunities:
1. net worth of less than $750,000 (excluding ownership interest in the applicant’s
business, equity in their primary personal residence, and funds invested in an
official retirement account);
2. generally no more than $350,000 in average adjusted gross income over the
preceding three years; and
3. no more than $6 million in assets (excluding funds invested in an official
retirement account).95
In FY2021, the federal government awarded $24.3 billion to WOSBs:
 $1.2 billion was awarded with a WOSB preference ($1.1 billion through a
WOSB set-aside award and $106.1 million through a WOSB sole-source award);
 $8.6 billion was awarded to a WOSB in open competition with other firms; and
 $14.6 billion was awarded with another small business preference (e.g., set-
asides and sole-source awards for small businesses generally and for HUBZone
firms, 8(a) firms, and SDVOSBs).96
Subcontracting Programs
Federal contracting officers are required to provide the SBA’s PCR (or, if a PCR is not assigned,
the SBA Area Office serving the procuring activity area) a “reasonable period of time” to review
any solicitation requiring submission of a small business subcontracting plan and to submit
advisory findings before the solicitation is issued.97 The PCR’s advisory comments regarding the

94 15 U.S.C. §632(n); 15 U.S.C. §637(m)(2); and 13 C.F.R. §127.200.
95 SBA, “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business Certification,” 85
Federal Register 27650-27665, May 11, 2020.
96 Data generated using GSA, “Sam.Gov data bank,” July 26, 2022, at https://sam.gov/reports/awards/adhoc.
The GSA FY2021 Small Business Goaling Report indicates that WOSBs were awarded $25.0 billion in FY2021. The
amount cited in the text is somewhat different because federal contracting data is updated daily and the amount cited in
the text was generated at a later date, includes more robust indefinite delivery vehicle (IDV) contracting data than what
is included in the Small Business Goaling Report, and does not double count contract awards. See GSA, “FY2021
Small Business Goaling Report,” at
https://sam.gov/api/prod/databank/v1/reports/static/download?fileName=Small%20Business%20Goaling%20FY%202
021&fileType=PDF.
97 FAR §19.705-3.
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small business subcontracting plan’s acceptability must be submitted, in writing, to the
appropriate contracting officer within five working days after the plan’s receipt.98
As mentioned, the SBA’s commercial market representatives help prime contractors find small
businesses to perform subcontracts; counsel contractors on their responsibility to maximize
subcontracting opportunities for small businesses; and conduct periodic reviews, often in concert
with a SBA PCR, of contractors awarded contracts that require an acceptable small P.L. 117-58
business subcontracting plan.99
Other Federal Agency Contracting Programs
Federal agencies may also set aside contracts or make sole-source awards to small businesses not
participating in any other program under certain conditions.
Department of Transportation and Environmental Protection
Agency Disadvantaged Business Enterprise Programs
The Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) Program’s
origin can be traced to DOT’s implementation in 1980 of a minority/women’s business enterprise
(MBE) program to encourage DOT grant recipients to contract with MBEs. DOT’s MBE program
was “established by regulation under the authority of Title VI of the Civil Rights Act of 1964 and
other nondiscrimination statutes that apply to DOT financial assistance programs.”100 In 1983,
P.L. 97-424, the Surface Transportation Assistance Act of 1982, required DOT’s Secretary,
“except to the extent that the Secretary determines otherwise,” to insure that “not less than 10 per
centum of the amounts authorized to be appropriated under this Act [federal highway and mass
transit programs] shall be expended with” socially and economically disadvantaged individuals as
defined by the SBA. The SBA does not presume that women are socially disadvantaged.
To comply with the act’s requirements, in 1983, DOT created the Disadvantaged Business
Enterprise (DBE) Program for the Federal Highway Administration (FHWA) and Urban Mass
Transportation Administration (UMTA). DOT’s MBE program continued to be applicable to all
DOT agencies but applied to the FHWA and UMTA only to the extent that it did not supersede the
new DBE program. Because the act used the SBA definition for disadvantaged individuals,
WOSBs were not presumed to be a DBE.101 However, WOSBs could seek certification as a DBE
on an individual basis with evidence of their being socially and economically disadvantaged.
In 1987, P.L. 100-17, the Surface Transportation and Uniform Relocation Assistance Act of 1987,
among other provisions, added women to the list of individuals presumed to be socially
disadvantaged for DBE purposes. Also in 1987, P.L. 100-223, the Airport and Airway Safety and

98 SBA, “Prime Contracts Program,” SOP 60 02 8, effective October 27, 2013, p. 15, at https://www.sba.gov/sites/
default/files/sops/Prime_Contracts_SOP-60-02-8.pdf.
99 15 U.S.C. §633(h)(1). For additional information on subcontracting plan requirements, see FAR §19.702(a)(1); and
15 U.S.C. §637(d)(3).
100 Department of Transportation (DOT), “Disadvantaged Business Enterprise (DBE) Program,” at
https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise.
101 U.S. Congress, House Committee on Small Business, Subcommittee on SBA and SBIC Authority, Minority
Enterprise, and General Small Business, Review of the 10-Percent Set-Aside Program (Section 105(f) of the Surface
Transportation Assistance Act of 1982, hearings, 99th Cong., 1st sess., April 17, 1985 (Washington: GPO, 1985), p. 1.
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Capacity Expansion Act of 1987, required DOT to include the Federal Aviation Administration’s
(FAA) airport financial assistance program in the DBE program.102 The act required airport
owners and operators “to ensure that, to the maximum extent practicable” at least 10% of all
airport concessioners are DBEs.103
Congress has reauthorized the DOT DBE program several times since its inception; most recently Congress has reauthorized the DOT DBE program several times since its inception; most recently
in P.L. 117-58, the Infrastructure Investment and Jobs Act.in P.L. 117-58, the Infrastructure Investment and Jobs Act.
The Infrastructure Investment and Jobs Act provides, that, except to the extent the Secretary of
Transportation determines otherwise, not less than 10% of the amounts made available for any
Surface Transportation program, including the Federal-Aid to Highways program (other than
tribal transportation funds), any Transit program, and the Highway Safety Research and
Development program (Section 403 of title 23, United States Code), “shall be expended through
small business concerns owned and controlled by socially and economically disadvantaged
individuals.” As mentioned, FAA’s airport financial assistance program also participates in the
DBE program under separate statutory authority, and DOT has a separate DBE program for
airport concessions.104
A DBE is a for-profit small business owned and 77 Those agencies are the Federal Highway Administration (FHWA), National Highway Traffic Safety Administration (NHTSA), Federal Transit Administration (FTA), and Federal Aviation Administration (FAA). The program is implemented through DOT regulations published at Title 49, Parts 23 and 26, of the C.F.R. A DBE is defined by criteria from both Small Business Administration (SBA) and DOT regulations. Congressional Research Service 16 An Overview of Small Business Contracting DBEs.78 In addition, at least 8% of federal funding awarded in support of certain EPA authorized programs, including grants, loans, and contracts for wastewater treatment and leaking underground storage tanks, must be awarded to businesses or other organizations owned or controlled by socially and economically controlled by socially and economically
disadvantaged individuals.105 Eligibility for the DBE program differs somewhat from the SBA’s
8(a) program. For example, under the DBE program, women are presumed to be socially
disadvantaged individuals. Also, to be regarded as economically disadvantaged for DBE
purposes, an individual must have a personal net worth (excluding ownership interest in the firm
and equity in his or her primary personal residence) that does not exceed $1.32 million. As
mentioned, the SBA’s 8(a) program has a three-part test for being deemed economically
disadvantaged, including personal net worth of less than $750,000 (excluding ownership interest
in the applicant’s business, equity in their primary personal residence, and funds invested in an
official retirement account).

102 DOT, “Participation by Minority Business Enterprise in Department of Transportation Programs,” 53 Federal
Register 18285, May 23, 1988.
103 The Federal Aviation Administration’s (FAA’s) participation in the DBE program and the separate airport
concessions program have been statutorily amended over time; but because these two programs are permanently
authorized, they do not require statutory reauthorization in the same manner as surface transportation DBE programs.
The Federal Highway Administration’s and Urban Mass Transit Administration’s (later the Federal Transit
Administration’s) participation in the DBE program are not permanently authorized. Their participation in the DBE
program has been reauthorized, and their program requirements have been amended through highway and mass transit
reauthorization acts. As a result, FAA DBE program requirements (e.g., related to size standards) and surface
transportation DBE program requirements have been addressed in different acts and, while similar, are not identical.
104 49 C.F.R. Part 23. “As recipients of DOT financial assistance, state and local transportation agencies … certify the
eligibility of DBE firms to participate in their DOT-assisted contracts; establish narrowly-tailored goals for the
participation of disadvantaged entrepreneurs; and evaluate their DOT-assisted contracts throughout the year and
establish contract-specific DBE subcontracting goals as necessary to achieve the overall goal of the agency…. DOT is
responsible for developing the rules and regulations for the national DBE program; providing guidance and conducting
oversight to make sure that these rules and regulations are followed by the recipients of DOT funds; and considering
appeals from state/local certification decisions.” DOT, “Definition of a Disadvantaged Business Enterprise,” at
https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/definition-disadvantaged-business-
enterprise.
105 DOT, “Definition of a Disadvantaged Business Enterprise,” at https://www.transportation.gov/civil-rights/
disadvantaged-business-enterprise/definition-disadvantaged-business-enterprise (hereinafter DOT, “Definition of a
Disadvantaged Business Enterprise”).
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The DBE must also meet SBA size criteria and cannot have average annual gross receipts over
the preceding three fiscal years that exceed $26.29 million for participation in Federal Highway
Administration and Federal Transit Administration-assisted work.106 P.L. 115-254, the FAA
Reauthorization Act of 2018, removed the gross receipts cap for Federal Aviation Administration-
assisted work.107 Size limits for the airport concessions DBE program are higher.108
The DOT DBE program’s eight objectives are to
1. ensure nondiscrimination in the award and administration of DOT-assisted
contracts in the department’s highway, transit, and airport financial assistance
programs;
2. create a level playing field on which DBEs can compete fairly for DOT-assisted
contracts;
3. ensure that the department’s DBE program is narrowly tailored in accordance
with applicable law;
4. ensure that only firms that fully meet the program’s eligibility standards are
permitted to participate as DBEs;
5. help remove DBE-participation barriers in DOT-assisted contracts;
6. promote the use of DBEs in all types of federally assisted contracts and
procurement activities conducted by recipients;
7. assist the development of firms that can compete successfully in the marketplace
outside the DBE program; and
8. provide appropriate flexibility to recipients of federal financial assistance in
establishing and providing opportunities for DBEs.109
The Environmental Protection Agency (EPA) DBE program was authorized by P.L. 101-549, the
Clean Air Act Amendments of 1990. The act requires the EPA Administrator to award, to the
extent practicable, not less than 10% of the act’s research funding to DBEs. Eligibility for the
EPA’s 10% set-aside differs somewhat from the 8(a) program. For example, the act presumes that
Black Americans, Hispanic Americans, Native Americans, Asian Americans, women, and
disabled Americans are socially disadvantaged. Also eligible are historically black colleges and
universities, colleges and universities with at least a 40% Hispanic student body, minority
institutions as defined pursuant to the General Education Provision Act, and private and voluntary
organizations controlled by social and economically disadvantaged individuals.
P.L. 102-389, the Departments of Veterans Affairs and Housing and Urban Development, and
Independent Agencies Appropriations Act, 1993, requires the EPA Administrator to award, to the
fullest extent possible, at least 8% of federal funding awarded in support of EPA authorized
programs, including grants, loans, and contracts for wastewater treatment and leaking

106 DOT is required to adjust the DBE gross receipts cap annually to account for inflation.
107 DOT, “Definition of a Disadvantaged Business Enterprise;” and Department of Transportation, “Disadvantaged
Business Enterprise Program; Inflationary Adjustment,” 85 Federal Register 80646-80648, December 14, 2020.
108 With a few noted exceptions, businesses participating in the airports concessions DBE program cannot have average
annual gross receipts over the preceding three fiscal years that exceed $56.42 million. Banks and financial institutions
must have no more than $1 billion in assets, car rental companies can have no more than $75.23 million in average
annual gross receipts over the preceding three fiscal years, automobile dealers may have no more than 350 employees,
and pay telephone companies can have no more than 1,500 employees. See 49 C.F.R. §23.33.
109 49 C.F.R. §26.1.
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underground storage tanks, to businesses or other organizations owned or controlled by socially
and economically disadvantaged individuals, including historically black colleges and universities
and women.
Individuals claiming economic disadvantage status must have an initial and continued personal
net worth of less than $750,000.110 To be certified by the EPA as a DBE, applicants must first
attempt to be certified by the SBA, DOT, or a tribal, state, or local government, or by an
independent private organization. EPA will consider applications for DBE certification only from
firms or organizations that have been denied certification from these aforementioned entities.
The EPA DBE program’s four objectives are to
1. ensure nondiscrimination in the award of contracts under EPA financial
assistance agreements;
2. operate harmoniously with the U.S. Supreme Court’s decision in Adarand
Constructors, Inc. v. Pena, 515 U.S. 200 (1995);
3. help remove barriers to the participation of DBEs in the award of contracts under
EPA financial assistance agreements; and
4. provide appropriate flexibility to recipients of EPA financial assistance in
establishing and providing contracting opportunities for DBEs.111
In addition, P.L. 95-28, the Public Works Employment Act of 1977, requires, “except to the extent
that the Secretary [of Commerce] determines otherwise,” that at least 10% of Economic
Development Administration local public works project grants “shall be expended for minority
business enterprises.”112
Contracting Preferences for Indian Tribes and Native American-
Owned and -Controlled Businesses
Several federal programs provide contracting preferences for qualified Indian tribes and Native
American-owned and -controlled businesses. Although these programs are not necessarily
targeted at small businesses, many Native American-owned and -controlled small businesses
participate in them. For example, under authority provided by the Buy Indian Act of 1910 (as
amended, 25 U.S.C. §47), the Department of the Interior’s Bureau of Indian Affairs, Bureau of
Indian Education, and the offices of the Assistant Secretary-Indian Affairs and the Department of
Health and Human Services’ Indian Health Service provide contracting preferences to qualified
Indian tribes and Native American-owned and -controlled businesses.113 In addition, the
Department of Defense’s Indian Incentive Program encourages prime contractors with a
subcontract worth at least $500,000 to subcontract with qualified Indian tribes, Native American-

110 40 C.F.R. §33.202(c); and 40 C.F.R. §33.203(c).
111 Environmental Protection Agency, “Disadvantaged Business Enterprise Program Under EPA Assistance
Agreements (DBE Program),” at https://www.epa.gov/grants/disadvantaged-business-enterprise-program-under-epa-
assistance-agreements-dbe-program.
112 See 42 U.S.C. §6705(f)(2).
113 GAO, Buy Indian Act: Bureau of Indian Affairs and Indian Health Service Need Greater Insight into
Implementation at Regional Offices, GAO-15-588, July 9, 2015, at https://www.gao.gov/products/GAO-15-588; and
U.S. Department of the Interior, Office of Indian Energy and Economic Development, “The Buy Indian Opportunity,”
at https://www.bia.gov/as-ia/ieed/online-primers-economic-development-glance.
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owned and -controlled businesses, and Native Hawaiian small businesses by providing a 5%
rebate on the amount subcontracted to these businesses.114
Subcontracting Programs for Small Disadvantaged Businesses
Other federal programs promote subcontracting with small disadvantaged businesses (SDBs).
SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally
owned and controlled by socially or economically disadvantaged individuals or groups.
Individuals owning and controlling non-8(a) SDBs must generally satisfy the same eligibility
requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the
same way that 8(a) firms do.
Federal agencies must negotiate “subcontracting plans” with the apparently successful bidder or
offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals
for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe
efforts that will be made to ensure that SDBs “have an equitable opportunity to compete for
subcontracts.”115 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.
As of July 29, 2022, the SBA’s Dynamic Small Business Search database included 6,504 SBA-
certified 8(a) firms and 146,868 self-certified SDBs.116
Other Small Business Programs of Interest
The SBA 7(j) Management and Technical Assistance Program
The SBA’s 7(j) Management and Technical Assistance program “provides training to small
businesses that are owned and controlled by economically and socially disadvantaged individuals
and small business located in areas of high unemployment or low income, certified 8(a) and
HUBZone firms, and economically disadvantaged women-owned small businesses.”117 Training
includes “consulting in a wide range of business activities, including marketing, accounting,
opportunity development and capture, contract management, compliance, and financial
analysis.”118 Eligible firms work directly with their respective SBA district office to enroll in the
program.
In FY2021, the 7(j) Management and Technical Assistance program assisted 11,900 small
businesses.119

114 U.S. Department of Defense, Office of Small Business Programs, “Indian Incentive Program (IIP),” at
https://business.defense.gov/Programs/Indian-Incentive-Program/.
115 15 U.S.C. §637(d)(6)(c).
116 SBA, “Dynamic Small Business Search,” at http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
117disadvantaged individuals, including historically black colleges and universities and women-owned businesses.79 To be certified by the EPA as a DBE, applicants must first attempt to be certified by the SBA, DOT, or a tribal, state, or local government, or by an independent private organization. EPA will consider applications for DBE certification only from firms or organizations that have been denied certification from these aforementioned entities. Eligibility criteria for the agency’s “8% statute” and its “10% statute” programs differ, and those programs are each different from the eligibility criteria for the DOT DBE program and the SBA’s 8(a) program.80 Small Business Mentor-Protégé Programs and Joint Ventures81 Small business mentor-protégé programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships. Protégés may receive financial, technical, or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives. The SBA maintains a list of mentor-protégé agreements that are in place, which “can be used for market research and to help contracting officials as they award contracts.”82 The federal government currently has several mentor-protégé programs to assist small businesses in various ways. • The SBA’s All Small Mentor-Protégé Program is a government-wide program designed to assist small businesses in obtaining and performing federal contracts.83 Mentors may (1) form joint ventures with protégés that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in protégé firms; (3) lend or subcontract to protégé firms; and (4) provide technical or management assistance to their protégés.84 78 The EPA’s DBE program was authorized by P.L. 101-549, the Clean Air Act Amendments of 1990. 79 As required by P.L. 102-389, the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1993. 80 40 C.F.R. §33.202-§33.205. 81 For additional information and analysis of federal small business mentor-protégé programs, see CRS Report R41722, Small Business Mentor-Protégé Programs, by Robert Jay Dilger and R. Corinne Blackford. 82 See SBA, “Active Mentor-Protégé Agreements,” at https://www.sba.gov/document/support-active-mentor-protege-agreements. As of January 1, 2018, there were 63 active Department of Defense (DOD) mentor-protégé agreements. See DOD, Office of Small Business Programs, “Active MPP [Mentor-Protégé Program] Agreements,” at https://business.defense.gov/Programs/Mentor-Protege-Program/Protege-Eligibility-Requirements/. 83 Certification is required for both mentors and mentees, and can be completed through the SBA’s online certification platform at certify.sba.gov. 84 SBA, “SBA Mentor-Protégé Program,” at https://www.sba.gov/federal-contracting/contracting-assistance-programs/sba-mentor-protege-program; SBA, “Small Business Mentor Protégé Programs,” 81 Federal Register 48558-48595, July 25, 2016; and SBA, “Consolidation of Mentor-Protégé Programs and Other Government Contracting Amendments,” 85 Federal Register 66146-66199, October 16, 2020. Congressional Research Service 17 link to page 5 link to page 5 An Overview of Small Business Contracting • The Department of Defense (DOD) Mentor-Protégé Program, in contrast, is agency-specific. It assists various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts. Mentors may (1) make advance or progress payments to their protégés that DOD reimburses; (2) award subcontracts to their protégés on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in protégé firms; and (4) provide or arrange for other assistance.85 Other agencies also have agency-specific mentor-protégé programs to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts. The Department of Homeland Security (DHS), for example, has a mentor-protégé program wherein mentors may provide protégés with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance. Because these programs are not based in statute, as are the SBA and DOD programs, they generally rely upon preexisting authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor participation. Subcontracting Policies For small businesses, participating in federal contracts as subcontractors can offer an important pathway to government contracting work and is one of the ways that the federal government can help maintain a diversity of suppliers. As mentioned, there are annual goals for the amount of federal contract dollars subcontracted with small businesses (see “Small Business Procurement Goals”). The federal government maintains a policy of “maximum practicable” subcontracting opportunities for small businesses and socioeconomic small businesses via prime contracts above the simplified acquisition threshold.86 Federal prime contractors that receive awards of $750,000 or more ($1.5 million or more for construction contracts) must submit a small business subcontracting plan to their purchasing agency.87 Agency contracting officers review subcontracting plans during the pre-award process,88 determine whether a subcontracting plan is “acceptable,”89 and may assess small business subcontracting plans as one evaluation factor when choosing a contractor during the “source selection” process.90 85 Program authority is found at 10 U.S.C. §4902; program implementation regulations are in the Defense Federal Acquisition Regulations Supplement (DFARS), in Appendix I and DFARS Subpart 219.71. 86 48 C.F.R. §19.702. For contracts of this size, prime contractors must agree to maximize participation by small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, HUBZone small businesses, small disadvantaged businesses, and women-owned small businesses, “consistent with its [the contract’s] efficient performance.” 87 48 C.F.R. §19.704. Per 48 C.F.R. §19.702(b), prime contractors exempt from the requirement to submit a subcontracting plan include small business concerns, personal service contractors, and contractors performing work entirely outside of the United States or its outlying areas. 88 48 C.F.R. §19.705-4. 89 48 C.F.R. §19.705-4(d). 90 In a negotiated contracting process where a contract is not a set-aside for small businesses and that involves consolidation or bundling of contract requirements, if there is a “significant opportunity” for subcontracting, contracting officers must consider proposed subcontractor participation when evaluating a contract offer. 48 C.F.R. §15.304(c)(4). Congressional Research Service 18 An Overview of Small Business Contracting Other policies related to subcontracting include the “nonmanufacturer rule”91 and regulations that limit the amount of small business contracting dollars flowing through small firms to larger ones.92 More information on small business subcontracting policy is available in CRS Report R47585, An Overview of Small Business Subcontracting: In Brief. Technical Assistance for Small Business Contract Seekers Direct assistance for contractors and prospective contractors includes directories and databases of opportunities, as well as technical assistance provided by the Small Business Administration (SBA) and Department of Defense (DOD). Agencies offer forecasts of prime contracting opportunities as well as prime contractor directories for prospective small business subcontractors. Forecasts are published for planning purposes but do not represent an invitation for bids or a request for proposals. Some agencies may publish potential opportunities by geographic area, such as the Department of Veterans Affairs (VA), which hosts a searchable map of future VA contracting requirements.93 The SBA and DOD have programs dedicated to individually assisting both federal prime contractors and subcontractors. SBA’s offerings also include its standard suite of “technical assistance,” which can assist small businesses with federal contracting as well as other kinds of counseling and training.94 Small Business Development Centers, dispersed across the country and U.S. territories, are the SBA’s flagship technical assistance resource for small businesses. SBA also advertises online courses as well as a Subcontracting Assistance Program that are available by contacting the SBA directly.95 The SBA’s Empower to Grow program (formerly known as the 7(j) Management and Technical Assistance program) offers “individualized coaching and training to help disadvantaged small businesses and others grow with government contracts.”96 The program is available to businesses located in areas of high unemployment or low income, or owned by low-income individuals, certified 8(a) and HUBZone firms, and economically disadvantaged WOSBs.97 Eligible firms may work directly with their SBA district office to enroll in the program.98 91 13 C.F.R. §121.406. The nonmanufacturer rule affects firm eligibility for certain contracting preferences when an agency is purchasing manufactured products. It requires that a firm be the manufacturer of the end item being procured or that it supply a product manufactured by another small business. It applies to socioeconomic small businesses contracting preferences above the micro-purchase threshold, and to both socioeconomic and other small business contracting preferences above the simplified acquisition threshold. Waivers to the rule may be granted, per 13 C.F.R. §§121.1201-1206. 92 Prime contractors that receive a small business preference typically may not pay more than 50% of the federal dollars they receive to firms that are “not similarly situated,” i.e., firms that are not a small business or the specific type of small business that received the contract (13 C.F.R. §125.6). These regulations are known as the “limitations on subcontracting.” 93 Department of Veterans Affairs, “VA Forecast of Contracting Opportunities: State Map Search,” at https://www.vendorportal.ecms.va.gov/evp/fco/StateMap.aspx. 94 SBA, “Counseling and Help,” https://www.sba.gov/federal-contracting/counseling-help. 95 This directory is available at https://business.defense.gov/Acquisition/Subcontracting/Subcontracting-For-Small-Business/. 96 SBA, “Empower to Grow,” at https://www.sba.gov/sba-learning-platform/empower-grow. 97 Ibid.; SBA, SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 72, at https://www.sba.gov/, p. 72, at https://www.sba.gov/
document/report-congressional-budget-justification-annual-performance-report. document/report-congressional-budget-justification-annual-performance-report.
11898 SBA, SBA, FY2023 Congressional Budget Justification and FY2021 Annual Performance Report, p. 69, at , p. 69, at
https://www.sba.gov/document/report-congressional-budget-justification-annual-performance-report (hereinafter SBA, https://www.sba.gov/document/report-congressional-budget-justification-annual-performance-report (hereinafter SBA,
FY2023 Congressional Budget Justification and FY2021 Annual Performance Report)).
119 SBA, FY2023 Congressional Budget Justification and FY2021 Annual Performance Report, p. 71. .
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SBA Surety Bond Guarantee Program120
The SBA’s Surety Bond Guarantee program aims to increase small businesses’ access to federal,
state, and local government contracting, as well as private-sector contracts, by guaranteeing bid,
performance, and payment bonds for small businesses that cannot obtain surety bonds through
regular commercial channels.121 The program guarantees individual contracts of up to $6.5
million and up to $10 million if a federal contracting officer certifies that such a guarantee is
necessary. The SBA’s guarantee ranges from not to exceed 80% to not to exceed 90% of the
surety’s loss if a default occurs.122 In FY2021, the SBA guaranteed 9,633 bid and final surety
bonds with a total contract value of nearly $7.0 billion.123
A surety bond is a three-party instrument between a surety (someone who agrees to be
responsible for the debt or obligation of another), a contractor, and a project owner. The
agreement binds the contractor to comply with the terms and conditions of a contract. If the
contractor is unable to successfully perform the contract, the surety assumes the contractor’s
responsibilities and ensures that the project is completed. The surety bond reduces the risk
associated with contracting.124
Surety bonds are meant to encourage project owners to contract with small businesses that may
not have the credit history or prior experience of larger businesses and may be at greater risk of
failing to comply with the contract’s terms and conditions.125
Surety bonds are important to small businesses interested in competing for federal contracts
because the federal government requires prime contractors—prior to the award of a federal
contract exceeding $150,000 for the construction, alteration, or repair of any building or public
work of the United States—to furnish a performance bond issued by a surety satisfactory to the
contracting officer in an amount that the officer considers adequate to protect the government.126

120 For additional information and analysis, see CRS Report R42037, SBA Surety Bond Guarantee Program, by Robert
Jay Dilger and R. Corinne Blackford.
121 Ancillary bonds are also eligible if they are incidental and essential to a contract for which the SBA has guaranteed
a final bond. A reclamation bond is eligible if it is issued to reclaim an abandoned mine site and for a project
undertaken for a specific period of time.
122 P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, includes a provision that increased the
Preferred Surety Bond Guarantee Program’s guarantee rate from not to exceed 70% to not to exceed 90% of losses
starting one year from enactment (effective November 25, 2016).
123 SBA, FY2023 Congressional Budget Justification and FY2021 Annual Performance Report, p. 41.
124 SBA, “Surety Bonds,” at https://www.sba.gov/funding-programs/surety-bonds.
125 SBA, “Surety Bonds.”
126 The threshold amount was originally set at $2,000 in 1935 under P.L. 74-321, An Act Requiring Contracts for the
Construction, Alteration, and Repair of Any Public Building or Public Work of the United States to be Accompanied
by a Performance Bond Protecting the United States and an Additional Bond for the Protection of Persons Furnishing
Material or Labor for the Construction, Alteration, or Repair of Said Public Buildings or Public Work [the Miller Act
of 1935], 49 Stat. 793 (August 24, 1935) (codified at 40 U.S.C. §3131(a)(b)). Also, see Department of Defense,
General Services Administration, and National Aeronautics and Space Administration, “Federal Acquisition
Regulation; Inflation Adjustment of Acquisition-Related Thresholds,” 75 Federal Register 53130, August 30, 2010.
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26DOD’s Under Secretary of Defense for Acquisition and Sustainment oversees the APEX Accelerators program for contractors. Formerly known as Procurement Technical Assistance Centers, APEX Accelerators help small businesses “determine whether they are ready for government opportunities,” complete necessary registration processes, network with procurement staff and other contractors, “navigate solicitations,” and even “resolve [contract] performance issues.”99 The program “focuses on building a [sic] strong, sustainable, and resilient U.S. supply chains by assisting a wide range of businesses that pursue and perform under contracts with the DoD, other federal agencies, state and local governments and with government prime contractors.”100 Manufacturing Extension Partnership National Network Centers (MEP Centers) also assist small business contractors, specifically in the manufacturing sector. MEP Centers are located in all 50 states and Puerto Rico. MEP is based at the National Institute of Standards and Technology (NIST), which provides funding for the MEP National Network.101 The Department of Transportation’s OSDBU oversees a network of regional Small Business Transportation Resource Centers (SBTRCs) to assist small disadvantaged transportation businesses (including but not limited to DBEs). SBTRCs “work closely with the transportation contracting community and other technical assistance providers” and provide all services free of charge.102 OSDBUs provide direct support for small business contractors and subcontractors, especially with regard to specific contracts. OSDBUs are required to assist small businesses “to obtain payments, required late payment interest penalties, or information regarding payments due to the [small business] concern from an executive agency or a contractor.”103 OSDBUs must also help small businesses that are awarded contracts or subcontracts to find “resources for education and training on compliance with contracting regulations.”104 Procurement Processes and Personnel The procurement process through which an agency purchases goods or services involves agency solicitation of contract offers and the use of various “source selection methods” to evaluate offerors’ submissions.105 “At a minimum, a solicitation identifies what an agency wants to buy, provides instructions to would-be offerors, identifies the source selection method that will be used to evaluate offers, and includes a deadline for the submission of bids or proposals.”106 Contracting officers may solicit “sealed bids” without negotiation with offerors, or negotiate a contract with prospective contractors through “negotiated contracting.” Agencies may also use the General Services Administration’s (GSA’s) Federal Supply Schedule, a list of products and services 99 APEX Accelerators, “What We Do,” https://www.apexaccelerators.us/#/about-us. 100 Ibid. 101 U.S. Department of Commerce, National Institute of Standards and Technology, Manufacturing Extension Partnership (MEP), “About NIST MEP,” accessed March 11, 2024. 102 U.S. DOT Office of Small and Disadvantaged Business Utilization, “Regional Assistance,” at https://www.transportation.gov/osdbu/SBTRCs. 103 15 U.S.C. §644(k)(6). 104 15 U.S.C. §644(k)(19). 105 For more information on the procurement process, see CRS Report RS22536, Overview of the Federal Procurement Process and Resources, by Dominick A. Fiorentino. 106 Ibid. Congressional Research Service 20 An Overview of Small Business Contracting available from GSA-selected vendors. Contracting officers may use contracting preferences such as contract set-asides (total or partial), reserves, and sole-source awards in an effort to reach their agency small business contracting goals. The Role of Procurement Officials Various personnel within purchasing agencies as well as at the Small Business Administration play a role in facilitating small business contracting and subcontracting. Agency contracting officers determine an appropriate method for procuring required goods or services, issue contract solicitations that provide instructions to offerors or bidders, identify the “source selection method” to be used (sealed bidding or negotiated contracting), and evaluate offerors’ submissions. They also award the contract and conduct contract administration, which may include contract performance monitoring, contract modifications, and invoice processing and payments to the contractor.107 At the agency level, procurement department heads (sometimes titled senior procurement executives) are responsible for implementing small business programs at their agencies, including achieving program goals. In general, procurement department staff who work on small business issues (often titled small business specialists) coordinate with Office of Small and Disadvantaged Business Utilization directors (see discussion below) on their agencies’ small business programs.108 Chief acquisition officers provide a focal point for acquisition in agency operations. Their key functions include “monitoring and evaluating agency acquisition activities, increasing the use of full and open competition, increasing performance-based contracting, making acquisition decisions, managing agency acquisition policy, acquisition career management, acquisition resources planning, and conducting acquisition assessments.”109 In order to help “facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers” as required by law,110 federal acquisition regulations111 require contracting officers, when applicable, to take certain actions prior to awarding a federal contract, including to: 1. “Divide proposed acquisitions of supplies and services (except construction) into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement.”112 2. “Plan acquisitions such that, if practicable, more than one small business concern may perform the work, if the work exceeds the amount for which a surety may be guaranteed by the SBA against loss under 15 U.S.C. §694b [generally $6.5 107 Ibid. 108 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates, GAO-17-675, August 25, 2017, p. 7, at https://www.gao.gov/assets/690/686766.pdf (hereinafter GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates). 109 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates, pp. 7-8. 110 15 U.S.C. §644(e)(1) states, “To the maximum extent practicable, procurement strategies used by a Federal department or agency having contracting authority shall facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers.” 111 48 C.F.R. §19.202-1. 112 48 C.F.R. §19.202-1(a). 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An Overview of Small Business Contracting

Small Business Mentor-Protégé Programs127
Small business mentor-protégé programs typically seek to pair new businesses with more
experienced businesses in mutually beneficial relationships. Protégés may receive financial,
technical, or management assistance from mentors in obtaining and performing federal contracts
or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may
receive credit toward subcontracting goals, reimbursement of certain expenses, or other
incentives.
The federal government currently has several mentor-protégé programs to assist small businesses
in various ways.
 The SBA’s All Small Mentor-Protégé Program is a government-wide program
designed to assist small businesses in obtaining and performing federal contracts.
Mentors may (1) form joint ventures with protégés that are eligible to perform
federal contracts set aside for small businesses; (2) make certain equity
investments in protégé firms; (3) lend or subcontract to protégé firms; and (4)
provide technical or management assistance to their protégés.128
 The Department of Defense (DOD) Mentor-Protégé Program, in contrast, is
agency-specific. It assists various types of small businesses and other entities in
obtaining and performing DOD subcontracts and serving as suppliers on DOD
contracts. Mentors may (1) make advance or progress payments to their protégés
that DOD reimburses; (2) award subcontracts to their protégés on a
noncompetitive basis when they would not otherwise be able to do so; (3) lend
money to or make investments in protégé firms; and (4) provide or arrange for
other assistance.129
Other agencies also have agency-specific mentor-protégé programs to assist various types of
small businesses or other entities in obtaining and performing subcontracts under agency prime
contracts. The Department of Homeland Security (DHS), for example, has a mentor-protégé
program wherein mentors may provide protégés with rent-free use of facilities or equipment,
temporary personnel for training, property, loans, or other assistance. Because these programs are
not based in statute, unlike the SBA and DOD programs, they generally rely upon preexisting
authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor
participation.
Currently, more than 1,700 mentor-protégé agreements are in place, even though there are issues
with the accuracy and thoroughness of some federal agency records.130

127 For additional information and analysis of federal small business mentor-protégé programs, see CRS Report
R41722, Small Business Mentor-Protégé Programs, by Robert Jay Dilger and R. Corinne Blackford.
128 SBA, “SBA Mentor-Protégé Program,” at https://www.sba.gov/federal-contracting/contracting-assistance-programs/
sba-mentor-protege-program; SBA, “Small Business Mentor Protégé Programs,” 81 Federal Register 48558-48595,
July 25, 2016; and SBA, “Consolidation of Mentor-Protégé Programs and Other Government Contracting
Amendments,” 85 Federal Register 66146-66199, October 16, 2020.
129 10 U.S.C. §2302note: Mentor-Protégé Pilot Program.
130 As of June 1, 2022, the SBA’s All Small Mentor-Protégé program had 1,565 active mentor-protégé agreements. See
SBA, “Active mentor-protégé agreements,” at https://www.sba.gov/document/support-active-mentor-protege-
agreements.
As of January 1, 2018, there were 63 active Department of Defense (DOD) mentor-protégé agreements. See DOD,
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An Overview of Small Business Contracting

Small Business Procurement Goals
Since 1978, federal agency heads have been required to establish federal procurement goals, in
consultation with the SBA, “that realistically reflect the potential of small business concerns and
small business concerns owned and controlled by socially and economically disadvantaged
individuals” to participate in federal procurement. Each agency is required, at the conclusion of
each fiscal year, to report its progress in meeting the goals to the SBA.131
In 1988, Congress authorized the President annually to establish government-wide minimum
participation goals for procurement contracts awarded to small businesses and small businesses
owned and controlled by socially and economically disadvantaged individuals. Congress required
the government-wide minimum participation goal for small businesses to be “not less than 20%
of the total value of all prime contract awards for each fiscal year” and “not less than 5% of the
total value of all prime contract and subcontract awards for each fiscal year” for small businesses
owned and controlled by socially and economically disadvantaged individuals.132
Each federal agency was also directed to “have an annual goal that presents, for that agency, the
maximum practicable opportunity for small business concerns and small business concerns
owned and controlled by socially and economically disadvantaged individuals to participate in the
performance of contracts let by such agency.”133 The SBA was also required to report to the
President annually on the attainment of the goals and to include the information in an annual
report to Congress.134 The SBA negotiates the goals with each federal agency and establishes a
small business eligible baseline for evaluating the agency’s performance.135 The agency head is
required to “make consistent efforts to annually expand participation by small business concerns
from each industry category.”136 If the SBA and the agency cannot agree on the goals, the agency
may submit the case to the Office of Management and Budget (OMB) Office of Federal
Procurement Policy (OFPP) for resolution.137

Office of Small Business Programs, “Active MPP [Mentor-Protégé Program] Agreements,” at
https://business.defense.gov/Programs/Mentor-Protege-Program/Protege-Eligibility-Requirements/.
131 15 U.S.C. §644(g)(2); and P.L. 95-507, a bill to amend the Small Business Act and the Small Business Investment
Act of 1958.
132 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988. The
government-wide minimum participation goal for small businesses was increased from 20% to 23% by P.L. 105-135,
the Small Business Reauthorization Act of 1997.
133 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988.
134 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988.
135 According to a 2001 GAO report, the SBA began to specify what types of contracts the Federal Procurement Data
System would exclude when determining agency compliance with federal contracting goals in FY1998. Prior to
FY1998, “agencies reported their small business achievements directly to SBA and excluded from their calculations
certain types of contracts, such as those for which small businesses had a limited or no chance to compete. SBA then
published an annual report summarizing each agency’s achievements. SBA officials said that in some cases they were
not aware of all exclusions the agencies made when reporting their numbers.” GAO, Small Business: More
Transparency Needed in Prime Contract Goal Program, GAO-01-551, August 1, 2001, pp. 9-10, at
http://www.gao.gov/assets/240/231854.pdf.
136 15 U.S.C. §644(g)(2).
137 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” August 30, 2017, p. 4, at https://www.sba.gov/sites/default/files/2018-06/
FY18_Small_Business_Goaling_Guidelines.pdf (hereinafter SBA, Office of Policy, Planning & Liaison, Office of
Government Contracting & Business Development, “FY 2018 Goaling Guidelines”).
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An Overview of Small Business Contracting million, or $10 million if the contracting officer certifies that the higher amount is necessary].”113 3. “Ensure that delivery schedules are established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the Government.”114 4. In certain circumstances, “[p]rovide a copy of the proposed acquisition package and other reasonably obtainable information related to the acquisition” to certain SBA personnel for review, comment and recommendation; the same information is also provided to the agency Office of Small and Disadvantaged Business Utilization [whose role is described below]”115 5. If applicable, “Provide a statement” explaining why an acquisition “cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement;” or why an acquisition “cannot be structured so as to make it likely that small businesses can compete for the prime contract;” or why “[c]onsolidation or bundling is necessary and justified.”116 Before awarding a federal contract, the contracting officer must also affirmatively determine that the business is responsible to perform the contract. If the contracting officer determines that an apparent successful small business offeror lacks certain elements of responsibility, the SBA may issue a Certificate of Competency (COC) that permits the contracting officer to award the contract to the small business.117 Under the COC program, the SBA certifies to contracting officers that a small business concern meets responsibility requirements for receiving and performing a specific government contract. 113 48 C.F.R. §19.202-1(b). 114 48 C.F.R. §19.202-1(c). 115 48 C.F.R. §19.202-1(e). This must be done at least 30 days prior to the issuance of the solicitation “if (i) The proposed acquisition is for supplies or services currently being provided by a small business and the proposed acquisition is of a quantity or estimated dollar value, the magnitude of which makes it unlikely that small businesses can compete for the prime contract; (ii) The proposed acquisition is for construction and seeks to package or consolidate discrete construction projects and the magnitude of this consolidation makes it unlikely that small businesses can compete for the prime contract; or (iii) The proposed acquisition is for a consolidated or bundled requirement.… The contracting officer shall provide all information relative to the justification for the consolidation or bundling, including the acquisition plan or strategy and if the acquisition involves substantial bundling, the information identified in [FAR] 7.107-4FAR.” 116 48 C.F.R. §19.202-1(e)(2). 117 If the contracting officer determines that an apparent successful small business offeror lacks certain elements of responsibility (e.g., is unable to fulfill the requirements of a specific government procurement because it lacks capability, competency, capacity, credit, integrity, perseverance, tenacity, or limitations on subcontracting), the officer is required to refer the matter in writing to the SBA for review and a possible Certificate of Competency (COC), even if the next acceptable offer is also from a small business (15 U.S.C. §637(b)(7); and 48 C.F.R. §19.601(a-e)). The COC certifies in writing that the small business meets all required elements of responsibility for the purpose of receiving and performing a specific government contract. The “COC program empowers the SBA to certify to contracting officers as to all elements of responsibility of any small business concern to receive and perform a specific government contract. The COC program does not extend to questions concerning regulatory requirements imposed and enforced by other federal agencies” (48 C.F.R. §19.601(b)). Congressional Research Service 22 link to page 32 An Overview of Small Business Contracting

The Roles of the Office of Small and Disadvantaged Business Utilization and SBA Personnel Each agency with procurement authority has an Office of Small and Disadvantaged Business Utilization (OSDBU), and may have SBA staff known as Procurement Center Representatives (PCRs) assigned to them as well. OSDBU statutory responsibilities include consultation with agency procurement officials and SBA staff, in addition to assistance for small business contractors and subcontractors.118 OSDBUs participate in the development of each purchasing agency’s small business contracting strategy, and coordinate with agency procurement professionals on day-to-day purchasing tasks. To facilitate collaboration with agency procurement officials on small business policy, OSDBUs liaise with PCRs.119 Procurement Center Representatives, Commercial Market Representatives, and Business Opportunity Specialists The SBA must assign a procurement center representative to each major procurement center. A major procurement center is, in the opinion of the SBA Administrator, one that purchases substantial dollar amounts of goods or services, including goods or services that are commercially available.120 The PCRs cover different agencies and regions of the country, and perform such tasks as reviewing proposed agency acquisitions to recommend contract set-asides for small businesses; recommending ways to improve acquisition competition; and recommending contracting method alternatives when the PCR “believes that the acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract.”121 Federal contracting officers are required to provide the SBA’s PCR (or, if a PCR is not assigned, the SBA Area Office serving the procuring activity area) a “reasonable period of time” to review any solicitation requiring submission of a small business subcontracting plan and to submit advisory findings before the solicitation is issued.122 The SBA has commercial market representatives (CMRs) who, among other duties, help prime contractors find small businesses to perform subcontracts; counsel contractors on their responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews, often in concert with an SBA PCR, of contractors awarded contracts that require an acceptable small business subcontracting plan.123 118 15 U.S.C. §644(k). For additional information on OSDBUs, see CRS Report R47851, Offices of Small and Disadvantaged Business Utilization: An Overview, by R. Corinne Blackford. 119 15 U.S.C. §644(k)(8). 120 15 U.S.C. §644(l)(6); and 48 C.F.R. §19.402(a). Generally speaking, commercial products are those that are “customarily used by the general public or by nongovernmental entities for purposes other than governmental purposes.” Commercial services are those procured to support commercial products. 48 C.F.R. §2.101, “Commercial product,” and 48 C.F.R. §2.101, “Commercial service.” 121 PCR duties are further described in Appendix C. 122 48 C.F.R. §19.705-3. The PCR’s advisory comments regarding the small business subcontracting plan’s acceptability must be submitted, in writing, to the appropriate contracting officer within five working days after the plan’s receipt (see SBA, “Prime Contracts Program,” SOP 60 02 8, effective October 27, 2013, p. 15, at https://www.sba.gov/sites/default/files/sops/Prime_Contracts_SOP-60-02-8.pdf). 123 15 U.S.C. §633(h)(1)(D). For additional information on subcontracting plan requirements, see 48 C.F.R. (continued...) Congressional Research Service 23 link to page 27 link to page 27 link to page 27 link to page 28 An Overview of Small Business Contracting The SBA’s business opportunity specialists provide, among other duties, guidance, counseling, and referrals for assistance with technical, management, financial, or other matters intended to improve the competitive viability of SBA 8(a) program participants.124 They provide 8(a) program participants comprehensive assessments of the firm’s strengths and weaknesses; monitor and document their compliance with 8(a) program requirements; advise them on compliance with contracting regulations after the award of a 8(a) program contract or subcontract; review and monitor their compliance with mentor-protégé agreements; represent the interests of the SBA Administrator and small businesses in the award, modification, and administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving the 8(a) program.125 Select Post-Award Requirements As mentioned, the SBA’s CMRs conduct periodic compliance reviews of contractors awarded contracts that require an acceptable small business subcontracting plan (see “Subcontracting Plan Reviews”).126 In addition, once the contract is completed, federal agencies are required to pay the contractor on a timely basis (see “Prompt Payments”) and pay interest penalties for late payments. Federal agencies may also pay contractors before the contract’s payment’s due date (see “Accelerated Payments”).127 Subcontracting Plan Reviews CMRs may conduct hundreds of compliance reviews in a fiscal year, selecting a sample of prime contracts from the Federal Procurement Data System that have individual subcontracting plans. Reviewers seek to “determine whether prime contractors that are not small businesses complied with their post-award subcontracting responsibilities outlined in the subcontracting plan to ensure small business subcontracts are being properly awarded and reported.”128 Prompt Payments Once a contract is awarded, federal agencies are generally required to pay interest to prime contractors on any invoice payments the agency fails to make by the date(s) specified in the §19.702(a)(1); and 15 U.S.C. §637(d)(3). Contracts requiring a subcontracting plan are generally those that exceed $750,000 ($1.5 million for construction) and have subcontracting possibilities. More information on small business subcontracting policy is available in CRS Report R47585, An Overview of Small Business Subcontracting: In Brief, by R. Corinne Blackford. 124 U.S. Congress, House Committee on Small Business, Subcommittee on Contracting and Infrastructure, Oversight of the SBA’s Women-Owned Small Business Federal Contract Program, hearing, 116th Cong., 1st sess., May 16, 2019, H.Hrg. 116-021 (Washington: GPO, 2019), p. 39. 125 15 U.S.C. §633(g)(1). 126 15 U.S.C. §633(h). CMRs also conduct “performance reviews” on contractors with a small business subcontracting plan, while a contract is still ongoing. The goal of these is to determine the progress of a contractor in reaching its subcontracting plan goals. U.S. Government Accountability Office, Some Contracting Officers Face Challenges Assessing Compliance with the Good Faith Standard, GAO-24-106225, November 9, 2023, pp. 7-8. 127 The Federal Acquisition Regulation (FAR) stipulates that performance-based payments are the “preferred Government financing method when the contracting officer finds them practical,” although other types of payments exist. Performance-based payments are the payment of funds to a contractor after the “successful accomplishment or the event or performance criterion for which payment is requested.” U.S. General Services Administration, U.S. Department of Defense (DOD), U.S. National Aeronautics and Space Association, Federal Acquisition Regulation, Section 52.232-32, “Performance-Based Payments.” 128 U.S. Government Accountability Office, Oversight of Contractor Compliance with Subcontracting Plans Needs Improvement, GAO-20-464, May 28, 2020, p. 35, https://www.gao.gov/assets/gao-20-464.pdf. Congressional Research Service 24 An Overview of Small Business Contracting contract, or within 30 days of receipt of a proper invoice for the amount due if no date is specified in the contract.129 Similar requirements exist for prime contractors in paying subcontractors on construction contracts. These requirements are especially important for small businesses in the construction industry.130 If the contracting officer determines that a prime contractor on a contract that requires an acceptable subcontracting plan has a history of unjustified, untimely payments to contractors, the contracting officer must record the contractor’s identity, describe the circumstances under which the contractor may be determined to have a history of unjustified, untimely payments to subcontractors, and include the contractor’s identity in, and make publicly available through, the Federal Awardee Performance and Integrity Information System.131 This information is used by federal agencies to “evaluate the business ethics and quality of prospective contractors competing for Federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.”132 Accelerated Payments Federal agencies are permitted to make an accelerated payment up to seven days before the required payment date in a federal contract, or earlier if the agency deems it necessary on a case-by-case basis if, after receiving a proper invoice, it is in the best interest of the government, and any of the following is true: • the invoice in under $2,500; • the payment is to a small business; or • the payment is related to an emergency, disaster, or military deployment.133 Agencies are required to establish an accelerated payment date for small business prime contractors, with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract.134 In addition, they are required to establish an accelerated payment 129 31 U.S.C. §3903(a); and P.L. 97-177, the Prompt Payment Act. Among other things, a proper invoice contains (1) the name of the contractor, the invoice date, and the contract number; (2) a description of the goods rendered and the shipping and payment terms; (3) other substantiating documentation or information required under the contract; and (4) the name, title, telephone number, and complete mailing address of the person to whom payment should be sent. 31 U.S.C. §3901(a); and 48 C.F.R. §32.905(b)(1)(i)-(x). The interest rate to be used is that determined by the Secretary of the Treasury twice a year under the Contract Disputes Act. 31 U.S.C. §3902(a). 130 31 U.S.C. §3905(b); and P.L. 100-496, the Prompt Payment Act Amendments of 1988. Specifically, every construction contract awarded by a federal agency must contain clauses obligating the prime contractor to (1) pay the subcontractor for “satisfactory performance” under the subcontract within seven days of receiving payment from the agency, and (2) pay interest on any amounts that are not paid within the proper time frame. The contract must also obligate the prime contractor to include similar payment and interest penalty terms in its subcontracts, as well as require its subcontractors to impose these terms on their subcontractors, to ensure that the payment and interest penalty requirements flow down to all tiers of construction subcontractors. 131 15 U.S.C. §637(d)(13)(C-E). 132 Department of Defense, General Services Administration, and National Aeronautics and Space Administration, “Federal Acquisition Regulation; FAR Case 2008-027, Federal Awardee Performance and Integrity Information System,” 75 Federal Register 14059, March 23, 2010. 133 31 U.S.C. §3903(a)(8); Office of Management and Budget, “Prompt Payment,” 64 Federal Register 52582-52583, September 29, 1999; and 5 C.F.R. §1315.5. 134 This policy was enacted by section 873 of the National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92). Congressional Research Service 25 An Overview of Small Business Contracting date for prime contractors that subcontract with small businesses (though they may not be small businesses themselves), with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract and if the contractor agrees without any further consideration from, or fees charged to, the subcontractor.135 Conclusion There are various government-wide and agency-specific requirements, programs, and personnel involved in promoting federal contracting and subcontracting with small businesses. Small businesses and “socioeconomic” small businesses (i.e., SDBs, SDBs participating the SBA’s 8(a) Business Development Program, HUBZone businesses, WOSBs, and SDVOSBs) may receive contracting preferences through contracting programs. SBA has significant involvement in these programs along with agency OSDBU staff and the procurement personnel within agencies. Certain agencies implement their own programs in addition to participating in government-wide programs, such as the VA, DOT, and DOI. Subcontracting policies, technical assistance resources, and mentor-protégé programs also support small business contractors in federal procurement. The small business contracting programs described in this report generally have strong bipartisan support. Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether the federal government and individual federal agencies meet the small business procurement goals. The SBA’s Procurement Scorecards and Small Business Goaling Reports are convenient tools for comparing federal small business contracting performance over time, but have limitations. Moreover, the regularly provided reports on small business procurement do not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy. As one group of researchers has argued the entire goal-setting process … is geared to measuring the dollars and contracts awarded to small business, and pays little attention to the effect that access to government contracts has on small business starts, growth, and wealth generation. Results of the program are also hard to isolate, difficult to measure, and generally not judged against the next best or other alternative policies [emphasis in original].136 While Congress has expressed various arguments for promoting federal procurement from small businesses at different points in time, views vary on the policies and programs that may be used to accomplish small business participation in federal procurement. Studies examining the effect of small business contracting preferences on small business startups, growth, wealth generation, and industry competitiveness may prove useful for contracting program oversight. Congress may also be interested in program impacts on promoting a more diversified, robust pool of federal contractors and on the economy at large. 135 Section 873 of the National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92). Prior to the act, P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year 2019, required these accelerated payment policies for Defense Department small business contractors and subcontractors. 136 Clifford A. Grammich, Thomas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Small Business and Defense Acquisitions: A Review of Policies and Current Practices (Santa Monica, CA: RAND, 2011), p. 15, at https://www.rand.org/content/dam/rand/pubs/monographs/2011/RAND_MG443.pdf. Congressional Research Service 26 An Overview of Small Business Contracting Appendix A. SBA’s Surety Bond Guarantee Program The SBA’s Surety Bond Guarantee program137 aims to increase small businesses’ access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels.138 A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor’s responsibilities and ensures that the project is completed. The surety bond reduces the government’s risk associated with contracting.139 Surety bonds are meant to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract’s terms and conditions.140 Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety in an amount that the contracting officer considers adequate to protect the government’s interests.141 The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA’s guarantee ranges from a maximum of 80% to 90% of the surety’s loss if a default occurs.142 Small businesses pay SBA a fee of 0.6% of the contract price for performance and payment bond guarantees but SBA will return the fee if the bond is cancelled or not issued; SBA does not charge a fee for bid bond guarantees.143 137 For additional information and analysis, see CRS Report R42037, SBA Surety Bond Guarantee Program. 138 Ancillary bonds may also be eligible. They ensure completion of requirements outside of performance or payment, such as maintenance. SBA, “Surety Bonds,” at https://www.sba.gov/funding-programs/surety-bonds. 139 SBA, “Surety Bonds,” at https://www.sba.gov/funding-programs/surety-bonds. 140 SBA, “Surety Bonds.” 141 The threshold amount was originally set at $2,000 in 1935 under P.L. 74-321, An Act Requiring Contracts for the Construction, Alteration, and Repair of Any Public Building or Public Work of the United States to be Accompanied by a Performance Bond Protecting the United States and an Additional Bond for the Protection of Persons Furnishing Material or Labor for the Construction, Alteration, or Repair of Said Public Buildings or Public Work [the Miller Act of 1935], 49 Stat. 793 (August 24, 1935) (codified at 40 U.S.C. §3131(a)(b)). Also, see Department of Defense, General Services Administration, and National Aeronautics and Space Administration, “Federal Acquisition Regulation; Inflation Adjustment of Acquisition-Related Thresholds,” 75 Federal Register 53130, August 30, 2010. 142 P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, includes a provision that increased the Preferred Surety Bond Guarantee Program’s guarantee rate from not to exceed 70% to not to exceed 90% of losses starting one year from enactment (effective November 25, 2016). 143 SBA, “Surety Bonds,” at https://www.sba.gov/funding-programs/surety-bonds#id-bond-guarantee-fee. Congressional Research Service 27 An Overview of Small Business Contracting Appendix B. Small Business Size Protests If an offeror’s small business status is challenged,144 the contracting officer is generally not allowed to award the contract until the SBA has made a size determination or 15 business days after the SBA receives the protest, whichever occurs first.145 The SBA’s Office of Government Contracting Area Office (Area Office) serving the area in which the headquarters of the offeror is located initially reviews the protest.146 The Area Office is required, by regulation, to determine the offeror’s size status within 15 business days after receipt of the protest, or “within any extension of time granted by the contracting officer.”147 If the SBA does not make a determination within the required time, the contracting officer “may award the contract after determining in writing that there is an immediate need to award the contract and that waiting until SBA makes its determination will be disadvantageous to the government.”148 Any interested party may file an appeal of the Area Office’s decision with the SBA’s Office of Hearings and Appeals (OHA). If the OHA accepts the appeal for consideration and finds the protested concern to be ineligible for award, the contracting officer must “terminate the contract unless termination is not in the best interests of the government, in keeping with the circumstances described in the [aforementioned] written determination. However, the contracting officer may not exercise any options or award further task or delivery orders.”149 Furthermore, a firm cannot become eligible for a specific award after the SBA has determined that it is not a small business, even if it takes action to meet the definition of a small business.150 The SBA or the federal agency may suspend or debar a firm from future government contracts for misrepresenting its size status. In addition, individuals that knowingly misrepresent a business’s size to secure a federal contract can be subject to civil and criminal penalties.151 144 Who may initiate a challenge and file a protest depends on the type of firm being challenged. SBA regulations at 13 C.F.R. §121.1001 describe who may initiate a size protest for SBA’s Small Business Set-Aside Program; competitive 8(a) contracts; SBA’s Subcontracting Program; SBA’s Small Business Innovation Research (SBIR) program and Small Business Technology Transfer (STTR) program; the Department of Defense’s Small Disadvantaged Business (SDB) Program, and any other similar program of another federal agency; SBA’s HUBZone program; SBA’s SDVOSB program; SBA’s WOSB program; and for “any unrestricted Government procurement in which a business concern has represented itself as a small business concern.” 145 The contracting officer may award the contract if he or she “determines in writing that an award must be made to protect the public interest.” 48 C.F.R. §19.302(g)(1). 146 48 C.F.R. §19.302(c)(1). “An offeror, the SBA, or another interested party may protest the small business representation of an offeror in a specific offer. However, for competitive 8(a) contracts, the filing of a protest is limited to an offeror, the contracting officer, or the SBA.” 48 C.F.R. §19.302(a)(2). “The protest, or confirmation if the protest was initiated orally, shall be in writing and shall contain the basis for the protest with specific, detailed evidence to support the allegation that the offeror is not small. The SBA will dismiss any protest that does not contain specific grounds for the protest.” 48 C.F.R. §19.302(c)(2). “The protest shall include a referral letter written by the contracting officer with information pertaining to the solicitation.” 48 C.F.R. §19.302(c)(3). “In order to affect a specific solicitation, a protest must be timely.” 48 C.F.R. §19.302(d). “To be timely, a protest … must be received … by the close of business of the fifth business day after bid opening (in sealed bid acquisitions) or receipt of the special notification from the contracting officer that identifies the apparently successful offeror (in negotiated acquisitions).” 48 C.F.R. §19.302(d)(1). “…a protest filed by the contracting officer or the SBA is generally always considered timely whether filed before or after award.” 48 C.F.R. §19.302(d)(2). 147 48 C.F.R. §19.302(f)(1). 148 48 C.F.R. §19.302(g)(2). 149 48 C.F.R. §19.302(h). 150 48 C.F.R. §19.301-1(c). 151 13 C.F.R. §121.108; 18 U.S.C. §287; 18 U.S.C. §1001. See CRS Report R45322, Selected Legal Tools for Maintaining Government Contractor Accountability, by David H. Carpenter and Kathleen Ann Ruane. Congressional Research Service 28 An Overview of Small Business Contracting Appendix C. Procurement Center Representatives Agencies with procurement authority may have SBA staff known as Procurement Center Representatives (PCRs) assigned to them. The SBA may assign one or more PCRs to any contracting activity or contract administration office to implement the SBA’s policies and programs. PCRs are located in the SBA’s six Area Offices, and cover different agencies and regions of the country. PCRs perform such tasks as reviewing proposed agency acquisitions to recommend contract set-asides for small businesses.152 PCRs also: • Review proposed acquisitions to recommend “the setting aside of selected acquisitions not unilaterally set aside by the contracting officer;” new qualified small business sources; and the feasibility of breaking out components of the contract for competitive acquisitions.153 • Review proposed acquisition packages. If the PCR (or, if a PCR is not assigned, the SBA Area Office serving the area in which the procuring activity is located) “believes that the acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract,” the PCR can recommend any alternate contracting method that he or she “reasonably believes will increase small business prime contracting opportunities.”154 • Recommend small businesses “for inclusion on a list of concerns to be solicited in a specific acquisition.”155 • Appeal to the chief of the contracting office “any contracting officer’s determination not to solicit a concern recommended by the SBA for a particular acquisition, when not doing so results in no small business being solicited;” this appeal may be further appealed to the agency head.156 • Conduct periodic reviews of the agency’s contracting activity, including the agency’s assessment of any required small business subcontracting plan, “to ascertain whether the agency is complying with the small business policies in this regulation.”157 • Sponsor and participate in conferences and trainings “designed to increase small business participation in the contracting activities of the office.”158 152 48 C.F.R. §19.402; 13 C.F.R §125.2. 153 48 C.F.R. §19.402(c)(1). 154 48 C.F.R. §19.402(c)(2). 155 48 C.F.R. §19.402(c)(3). 156 48 C.F.R. §19.402(c)(4). See 48 C.F.R. §19.505 for a description of the appeals process. 157 48 C.F.R. §19.402(c)(5). 158 48 C.F.R. §19.402(c)(6). Congressional Research Service 29 An Overview of Small Business Contracting Author Information R. Corinne Blackford Analyst in Small Business and Economic Development Policy Acknowledgments This report was prepared with the help of research conducted by Robert Jay Dilger, former Senior Specialist in American National Government. The small business eligible baseline excludes certain contracts that the SBA has determined do
not realistically reflect the potential for small business participation in federal procurement (such
as those awarded to mandatory and directed sources), contracts funded predominately from
agency-generated sources (i.e., nonappropriated funds), contracts not covered by the FAR,
acquisitions on behalf of foreign governments, and contracts not reported in the General Services
Administration’s (GSA’s) Federal Procurement Data System—Next Generation, or FPDS-NG
(such as government procurement card purchases and contracts valued less than $10,000).138
These exclusions typically account for 18% to 20% of all federal prime contracts each year.
The SBA then evaluates the agencies’ performance against their negotiated goals and presents the
results in the SBA’s annual Small Business Procurement Scorecards. The SBA uses FPDS-NG
data, which are published in GSA’s annual Small Business Goaling Report. Each agency that fails
to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA
on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective
action.139
Agencies can take credit in every category that is applicable to the recipient of the contract. For
example, “when counting goaling achievements, a contract awarded to a Service-Disabled
Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business
(SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-
Owned Small Business (WOSB) goal. However, these category counts are not summed to triple
the total count. The Sum of Parts Does Not Equal the Whole (italics in original).”140
Over the years, federal government-wide procurement goals have been established for small
businesses generally (P.L. 100-656, the Business Opportunity Development Reform Act of 1988,
and P.L. 105-135, the HUBZone Act of 1997—Title VI of the Small Business Reauthorization
Act of 1997); small businesses owned and controlled by socially and economically disadvantaged
individuals (P.L. 100-656); women (P.L. 103-355, the Federal Acquisition Streamlining Act of
1994); small businesses located within a HUBZone (P.L. 105-135); and small businesses owned
and controlled by a service-disabled veteran (P.L. 106-50, the Veterans Entrepreneurship and
Small Business Development Act of 1999).
The current federal small business procurement goals are
 at least 23.0% of the total value of all small business eligible prime contract
awards to small businesses for each fiscal year;
 5.0% of the total value of all small business eligible prime contract awards and
subcontract awards to small disadvantaged businesses (including participants in
the SBA’s 8(a) program) for each fiscal year;

138 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 3; and GSA, Federal Procurement Data System—Next Generation, “What’s In FPDS-NG,” at
https://www.fpds.gov/wiki/index.php/FPDS-NG_FAQ.
139 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 6.
140 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 5. “The exception to this non-additive rule is for total Small Disadvantaged Business (SDB)
which is the sum of 8(a) and non-8(a) SDBs. Each special type of small business is first of all a small business. That
also means Federal procurements awarded to SDVOSB will also have been awarded to Veteran-Owned Small Business
(VOSB).”
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 5.0% of the total value of all small business eligible prime contract awards and
subcontract awards to women-owned small businesses;
 3.0% of the total value of all small business eligible prime contract awards and
subcontract awards to HUBZone small businesses; and
 3.0% of the total value of all small business eligible prime contract awards and
subcontract awards to service-disabled veteran-owned small businesses.141
There are no punitive consequences for not meeting these goals. However, the SBA’s Small
Business Procurement Scorecards and GSA’s Small Business Goaling Report are distributed
widely, receive media attention, and heighten public awareness of the issue of small business
contracting. For example, agency performance as reported in the SBA’s Small Business
Procurement Scorecards is often cited by Members during their questioning of federal agency
witnesses during congressional hearings.
As shown in Table 1, the FY2021 Small Business Procurement Scorecard indicates that federal
agencies met the federal procurement goal for small businesses generally, small disadvantaged
businesses, and service-disabled veteran-owned small businesses in FY2021 (see the second and
third columns).
For comparative purposes, Table 1 also provides the percentage of all federal contracts (without
exclusions and without double counting) awarded to small businesses (see the fourth column).
Table 1. Federal Procurement Goals and Percentage of FY2021 Federal Contract
Dollars Awarded to Small Businesses, by Type
Percentage of
Small Business
Percentage of All
Eligible Federal
Reported Federal
Contracts
Contracts
(including double
(excluding
Business Type
Federal Goal
counting)
double counting)
Small Businesses
23.0%
27.23%
23.50%
Small Disadvantaged
5.0%
11.01%
9.63%
Businesses
Women-Owned Small
5.0%
4.63%
3.83%
Businesses
HUBZone Small
3.0%
2.53%
2.20%
Businesses
Service-Disabled
3.0%
4.41%
3.89%
Veteran-Owned Small
Businesses
Sources: U.S. Small Business Administration (SBA), “Statutory Guidelines,” at https://www.sba.gov/content/
statutory-guidelines-0 (federal goals); SBA, “Biden-Harris Administration Awards Record-Breaking $154.2 Billion
in Contracting to Small Businesses,” at https://www.sba.gov/article/2022/jul/26/biden-harris-administration-
awards-record-breaking-1542-billion-contracting-small-businesses (percentages including double counting); and
data generated using General Service Administration, “Sam.Gov data bank,” July 26, 2022, at https://sam.gov/
reports/awards/adhoc (percentages for all reported contract dollars excluding double counting).
Notes: In accordance with federal law, the SBA provided double credit, for scorecard purposes only, for prime
contracts awarded in disaster areas that are awarded as a local set aside and a small business or other

141 15 U.S.C. §644(g)(1)-(2).
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socioeconomic set aside when the vendor state is the same as the place of performance (see 15 U.S.C. §644(f))
and for prime contracts awarded to businesses in Puerto Rico and covered territories (see 15 U.S.C. §644(x)(1)).
The SBA also included Department of Energy first-tier subcontract awards as required by P.L. 113-76, the
Consolidated Appropriations Act, 2014 (§318).
The SBA reported that, including double counting and Department of Energy first-tier subcontracts, in FY2021
$154.2 billion was awarded to small businesses, $62.4 billion to small disadvantaged businesses, $26.2 billion to
women-owned small businesses, $14.3 billion to HUBZone small businesses, and $25.0 billion to service-disabled
veteran-owned small businesses.
The percentages provided in the column for all reported contracts in FY2021 were calculated using contracting
data as reported on July 26, 2022 (without double counting and Department of Energy first-tier subcontracts):
$636.1 billion in total contracts; $149.5 billion to small businesses; $61.3 billion to small disadvantaged
businesses; $24.4 billion to women-owned small businesses; $14.0 billion to SBA-certified HUBZone small
businesses; and $24.7 billion to service-disabled veteran-owned small businesses.
Figure 1 shows the percentage of small business-eligible federal contracts awarded to small
businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small businesses from FY2005 through
FY2021. As detailed in the figure’s notes, the small business-eligible baseline excludes certain
contracts that the SBA has determined do not realistically reflect the potential for small business
participation in federal procurement. About 15% to 18% of all federal contracts are excluded in
any given fiscal year.
The federal government has had difficulty meeting the WOSB and HUBZone small business
procurement goals. The 5% procurement goal for WOSBs was achieved in only 2 of the 17 fiscal
years (FY2015 and FY2019) reported in the figure. The 3% procurement goal for HUBZone
small businesses was not achieved in any of the 17 fiscal years. In contrast, the 23% procurement
goal for all types of small businesses was achieved in 10 of the 17 fiscal years reported in the
figure (FY2005 and FY2013-FY2021), including the past 9 fiscal years. The 5% procurement
goal for SDBs was achieved in each of the 17 fiscal years. The 3% procurement goal for
SDVOSBs was achieved in 10 of the 17 fiscal years (FY2012-FY2021), including the last 10
fiscal years.
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Figure 1. Small Business Contracting, Performance, by Type of Small Business,
FY2005-FY2021
(percentage of small business eligible federal contracts)

Sources: U.S. General Services Administration (GSA), “Sam.Gov Data Bank, Static: Small Business Goaling
Report [FY2005-FY2020], at https://sam.gov/reports/awards/static; and U.S. Small Business Administration,
“Biden-Harris Administration Awards Record-Breaking $154.2 Billion in Contracting to Small Businesses,” at
https://www.sba.gov/article/2022/jul/26/biden-harris-administration-awards-record-breaking-1542-billion-
contracting-small-businesses.
Notes: The small business eligible baseline excludes certain contracts that the Small Business Administration has
determined do not realistically reflect the potential for small business participation in federal procurement (such
as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated
sources (i.e., nonappropriated funds), contracts not covered by the Federal Acquisition Regulations System,
acquisitions on behalf of foreign governments, and contracts not reported in the GSA’s Federal Procurement
Data System—Next Generation (such as government procurement card purchases and contracts valued less
than $10,000). About 15% to 18% of all federal contracts are excluded in any given fiscal year.
Certificate of Competency Program
Before awarding a federal contract, the contracting officer must affirmatively determine that the
business is responsible to perform the contract. If the contracting officer determines that an
apparent successful small business offeror lacks certain elements of responsibility (e.g., is unable
to fulfill the requirements of a specific government procurement because it lacks capability,
competency, capacity, credit, integrity, perseverance, tenacity, or limitations on subcontracting),
the officer is required to refer the matter in writing to the SBA for review and a possible
Certificate of Competency (COC), even if the next acceptable offer is also from a small
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business.142 The COC certifies in writing that the small business meets all required elements of
responsibility for the purpose of receiving and performing a specific government contract. The
“COC program empowers the SBA to certify to contracting officers as to all elements of
responsibility of any small business concern to receive and perform a specific government
contract. The COC program does not extend to questions concerning regulatory requirements
imposed and enforced by other federal agencies.”143
Post-Award Requirements
As mentioned, the SBA’s commercial market representatives conduct periodic compliance
reviews of contractors awarded contracts that require an acceptable small business subcontracting
plan.144 In addition, once the contract is completed, federal agencies are required to pay the
contractor on a timely basis and pay interest penalties for late payments. Under specified
circumstances, federal agencies may also pay contractors before the contract’s payment’s due
date.
Small Business Subcontracting Plan Reviews
The periodic compliance review can take place on-site, at the contracting agency, or virtual.145
Materials that may be reviewed include the contractor’s contract files, correspondence that is
directly or indirectly related to the contract, IT systems, subcontracting methods, and
procedures.146 Contractors are selected randomly for audit.147 The SBA may enter into agreements
with other federal agencies to conduct these assessments.148
The compliance report includes compliant and noncompliant items found during the assessment
of the contractor’s subcontracting activities and a rating indicating the contractor’s level of
compliance or noncompliance, ranging from unsatisfactory to outstanding.149 If any deficiencies
are found, the contractor is required to submit, within 30 days of the compliance review rating
letter date, a corrective action plan (CAP).150 The CAP is submitted to the SBA Area Office via
email, or any method designated by the SBA. The commercial market representative conducts a
follow-up compliance report within six months to a year of the date the SBA acknowledges
receipt of the contractor’s CAP to ensure that corrective actions have been taken to eliminate the
deficiencies. The SBA keeps the federal agency that awarded the contract informed of the
contractor’s adherence to correcting the deficiencies.151

142 15 U.S.C. §637(b)(7); and FAR §19.601(a-e).
143 FAR §19.601(b).
144 15 U.S.C. §633(h).
145 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, effective July 17, 2018, p. 11, at
https://www.sba.gov/sites/default/files/2018-07/2018-07-17%20Final%20Subcontracting%20Program%20SOP_1.pdf.
146 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 11.
147 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 12.
148 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 14.
149 13 C.F.R. §125.3(e)(3).
150 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 12.
151 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 13.
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If the contractor refuses to provide or address all deficiencies in the CAP, a delinquent CAP letter
is sent advising the contractor that it has 15 days from the letter’s date to comply with federal
regulations. If an acceptable CAP is not received in the allotted time frame the case is escalated to
the SBA’s subcontracting program manager who informs the SBA’s Office of Government
Contracting director and works with the SBA’s Office of General Counsel and the federal agency
that awarded the contract for resolution or to begin accessing liquidated damages.152
Prompt Payments
Once a contract is awarded, federal agencies are generally required to pay interest to prime
contractors on any invoice payments the agency fails to make by the date(s) specified in the
contract, or within 30 days of receipt of a proper invoice for the amount due if no date is specified
in the contract.153
Similar requirements exist for prime contractors in paying subcontractors on construction
contracts. These requirements are especially important for small businesses in the construction
industry. Specifically, every construction contract awarded by a federal agency must contain
clauses obligating the prime contractor to (1) pay the subcontractor for “satisfactory
performance” under the subcontract within seven days of receiving payment from the agency and
(2) pay interest on any amounts that are not paid within the proper time frame.154 The contract
must also obligate the prime contractor to include similar payment and interest penalty terms in
its subcontracts, as well as require its subcontractors to impose these terms on their
subcontractors. This latter provision ensures that the payment and interest penalty requirements
flow down to all tiers of construction subcontractors.
In addition, required subcontracting plans must incorporate terms obligating the prime contractor
to notify the agency awarding the contract in writing if a subcontractor is paid a reduced price for
goods supplied or services completed under the contract, or if payment is made to the
subcontractor more than 90 days past due. The prime contractor must include the reason for the
reduction in payment or failure to pay a subcontractor within 90 days.155 If the contracting officer
for a covered contract (a contract that requires an acceptable subcontracting plan) determines that
a prime contractor has a history of unjustified, untimely payments to contractors, the contracting
officer shall record the contractor’s identity, describe the circumstances under which the
contractor may be determined to have a history of unjustified, untimely payments to
subcontractors, and include the contractor’s identity in, and make publicly available through, the

152 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 13. Liquidated damages are predetermined
sums a contractor must pay the procuring agency for specified contract breaches or performance failures. For additional
information and analysis, see CRS Report R45322, Selected Legal Tools for Maintaining Government Contractor
Accountability, by David H. Carpenter and Kathleen Ann Ruane.
153 31 U.S.C. §3903(a); and P.L. 97-177, the Prompt Payment Act. Among other things, a proper invoice contains (1)
the name of the contractor, the invoice date, and the contract number; (2) a description of the goods rendered and the
shipping and payment terms; (3) other substantiating documentation or information required under the contract; and (4)
the name, title, telephone number, and complete mailing address of the person to whom payment should be sent. 31
U.S.C. §3901(a); and 48 C.F.R. §32.905(b)(1)(i)-(x). The interest rate to be used is that determined by the Secretary of
the Treasury twice a year under the Contract Disputes Act. 31 U.S.C. §3902(a).
154 31 U.S.C. §3905(b); and P.L. 100-496, the Prompt Payment Act Amendments of 1988.
155 15 U.S.C. §637(d)(13)(A-B); and U.S. Department of the Treasury, Bureau of the Fiscal Service, “Prompt
Payment,” at https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/promptPayment_home.htm. Under a
construction contract, an agency may withhold payment to a prime vendor if it learns that the prime vendor has failed
to pay subcontractors in accordance with the terms of the contract.
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Federal Awardee Performance and Integrity Information System, or any successor.156 This
information is used by federal agencies to “evaluate the business ethics and quality of prospective
contractors competing for Federal contracts and to protect taxpayers from doing business with
contractors that are not responsible sources.”157
Accelerated Payments
Federal agencies are permitted to make an accelerated payment up to seven days before the
required payment date in a federal contract, or earlier if the agency deems it necessary on a case-
by-case basis if, after receiving a proper invoice, it is in the best interest of the government, and
any of the following is true:
 the invoice in under $2,500;
 the payment is to a small business; or
 the payment is related to an emergency, disaster, or military deployment.158
In addition, the Secretary of Defense is required, to the fullest extent permitted by law, to
establish an accelerated payment date for its small business prime contractors, with a goal of 15
days after receipt of a proper invoice for the amount due if a specific payment date is not
established by contract.159
The Secretary of Defense is also required to establish, to the fullest extent permitted by law, an
accelerated payment date for its prime contractors that subcontract with small businesses, with a
goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is
not established by contract and the prime contractor agrees to make payments to the subcontractor
“in accordance with the accelerated payment date, to the maximum extent practicable, without
any further consideration from or fees charged to the subcontractor.”160
Concluding Observations
The small business contracting programs described in this report generally have strong bipartisan
support. However, that does not mean that these programs face no opposition or that issues have
not been raised concerning the impact or operations of specific programs. For example, small
business advocates have sought policies that reduce or eliminate exclusions that narrow the reach
of small business contracting preferences and want the SBA to use the total value of all prime
contract awards in the Small Business Goaling Report.161 Also, critics have questioned some of

156 15 U.S.C. §637(d)(13)(C-E).
157 Department of Defense, General Services Administration, and National Aeronautics and Space Administration,
“Federal Acquisition Regulation; FAR Case 2008-027, Federal Awardee Performance and Integrity Information
System,” 75 Federal Register 14059, March 23, 2010.
158 31 U.S.C. §3903(a)(8); Office of Management and Budget, “Prompt Payment,” 64 Federal Register 52582-52583,
September 29, 1999; and 5 C.F.R. §1315.5.
159 10 U.S.C. §2307(2)(A); and P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year
2019.
160 10 U.S.C. §2307(2)(B); and P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year
2019.
161 See American Small Business League v. Maria Contreras-Sweet in her capacity as Administrator of the United
States Small Business Administration, May 3, 2016, at http://www.asbl.com/documents/
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these programs’ effectiveness, in terms of both promoting small business opportunities to win
federal contracts and a more diversified, robust economy.162
Many observers judge the relative success or failure of federal efforts to enhance small business
contracting opportunities by whether the federal government and individual federal agencies meet
the procurement goals in the annual Small Business Goaling Report. In recent years, the federal
government has generally met the government-wide goals of awarding 23% of the total value of
all small business eligible prime contract awards to small businesses generally, 5% to SDBs, and
3% to SDVOSBs. However, it has had difficulty meeting the goals of 5% to WOSBs and 3% to
HUBZone small businesses.163
The Small Business Goaling Report is the most convenient measure available to compare federal
small business contracting performance over time, but it has limitations. For example, the report
does not include all federal contracts, because some are not deemed to be small business eligible
and others are not recorded in the FPDS-NG. In addition, the report does not evaluate the effect
these contracts have on small businesses, industry competitiveness, or the overall economy. As
one group of researchers has argued
the entire goal-setting process … is geared to measuring the dollars and contracts awarded
to small business, and pays little attention to the effect that access to government contracts
has on small business starts, growth, and wealth generation. Results of the program are also
hard to isolate, difficult to measure, and generally not judged against the next best or other
alternative policies [emphasis in original].164
Comprehensive studies examining the effect of small business contracting preferences on small
business startups, growth, wealth generation, and industry competitiveness may prove useful for
congressional oversight. In the meantime, although the Small Business Goaling Report has its
limitations, it can help policymakers identify programs most in need of examination. For
example, the SBA has announced that it is focusing additional efforts on promoting the HUBZone
program to federal contracting officials, primarily due to the continuing difficulties federal
agencies have had in meeting the 3% goal for HUBZone small businesses.165


Filed_Complaint_For_Injunctive_Relief.pdf.
The federal government awarded more than $508.8 billion in federal contracts in FY2017. About $442.5 billion of that
amount was deemed small business eligible. GSA, Federal Procurement Data System—Next Generation, at
https://www.fpds.gov/fpdsng/ (contract dollar amount); and GSA, Federal Procurement Data System—Next
Generation, “Small Business Goaling Report: Fiscal Year 2017,” at https://www.fpds.gov/downloads/top_requests/
FPDSNG_SB_Goaling_FY_2017.pdf.
162 For example, see Henry Beale and Nicola Deas, “The HUBZone Report,” prepared for the SBA, Office of
Advocacy, May 2008, pp. i, ii, 124-131, at https://www.sba.gov/sites/default/files/rs325tot.pdf; and Clifford A.
Grammich, Thomas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Small Business and Defense
Acquisitions: A Review of Policies and Current Practices (Santa Monica, CA: RAND, 2011), pp. xii, 15, 16, at
https://www.rand.org/content/dam/rand/pubs/monographs/2011/RAND_MG443.pdf.
163 SBA, “The Federal Government Achieves Small Business Contracting Goal for the Sixth Consecutive Year with
Record-Breaking $120 Billion to Small Businesses,” at https://www.sba.gov/about-sba/sba-newsroom/press-releases-
media-advisories/federal-government-achieves-small-business-contracting-goal-sixth-consecutive-year-record-
breaking.
164 Clifford A. Grammich, Thomas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Small Business and
Defense Acquisitions: A Review of Policies and Current Practices (Santa Monica, CA: RAND, 2011), p. 15, at
https://www.rand.org/content/dam/rand/pubs/monographs/2011/RAND_MG443.pdf.
165 SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, pp. 75-77, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_FY_19_508-Final-FINAL.PDF.
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Author Information

Robert Jay Dilger
R. Corinne Blackford
Senior Specialist in American National Government Analyst in Small Business and Economic

Development Policy



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