An Overview of Small Business Contracting

An Overview of Small Business Contracting
November 17, 2021
Congress has broad authority to impose requirements upon the federal procurement
process, that is, the process whereby agencies obtain goods and services from the private Robert Jay Dilger
sector. One way in which Congress has exercised this authority is by adopting measures
Senior Specialist in
to promote contracting and subcontracting between “smal businesses” and federal
American National
agencies.
Government

These measures, among other things, are designed to ensure that a “fair proportion” of

federal contract and subcontract dollars is awarded to smal businesses; establish
government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars
awarded to smal businesses; establish an annual Smal Business Goaling Report to measure progress in meeting
these goals; general y require federal agencies, under specified circumstances, 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 smal businesses; authorize federal agencies, under
specified circumstances, to set aside contracts that have an anticipated value greater than the simplified
acquisition threshold exclusively for smal businesses; authorize federal agencies to make sole-source awards to
smal businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent
and compel ing circumstances); authorize federal agencies to set aside contracts for, or grant other contracting
preference to, specific types of smal businesses (e.g., 8(a) smal businesses, HUBZone smal businesses, women-
owned smal businesses (WOSBs), and service-disabled veteran-owned smal businesses (SDVOSBs)); and task
the Smal Business Administration (SBA) and other federal procurement officers with reviewing and restructuring
proposed procurements to maximize opportunities for smal business participation.
Smal business contracting programs general y 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, smal business advocates note that implementing regulations in the Federal
Acquisition Regulation (FAR) narrow the reach (and impact) of some smal business contracting preferences by
excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR
requirements pertaining to smal 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 smal 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 smal business contracting
opportunities by whether the federal government and individual federal agencies meet the predetermined
procurement goals in the annual Smal Business Goaling Report. In recent years, the federal government has
general y succeeded in meeting the government-wide goals of awarding 23% of the total value of al smal
business eligible prime contract awards to smal businesses, 5% to smal disadvantaged businesses (SDBs), and
3% to SDVOSBs. It has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone smal businesses.
The Smal Business Goaling Report is the most convenient measure available to compare federal smal 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 “smal 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 smal businesses, industry competitiveness, or the overal economy.
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Contents
Introduction ................................................................................................................... 1
Basic Contracting Requirements........................................................................................ 4
Federal Contractors.................................................................................................... 4
Federal Agencies ....................................................................................................... 6
The Pre-Award Process .................................................................................................... 7
Federal Agency Requirements ..................................................................................... 7
The Role of SBA Procurement Center Representatives .................................................... 9
The Role of the Office of Smal and Disadvantaged Business Utilization ......................... 10
The Roles of Other Procurement Officers and Offices ................................................... 11
Set-Asides and Sole-Source Awards ................................................................................. 14
SBA Contracting Programs ............................................................................................. 15
Prime Contracting Programs...................................................................................... 15
8(a) Program ..................................................................................................... 15
Historical y Underutilized Business Zone Program .................................................. 17
Service-Disabled Veteran-Owned Smal Business Procurement Program..................... 18
Women-Owned Smal Business Program ............................................................... 19
Subcontracting Programs .......................................................................................... 20
Other Federal Agency Contracting Programs ..................................................................... 20
Department of Transportation and Environmental Protection Agency Disadvantaged
Business Enterprise Programs ................................................................................. 20
Contracting Preferences for Indian Tribes and Native American-Owned and -
Controlled Businesses............................................................................................ 23
Subcontracting Programs for Smal Disadvantaged Businesses ....................................... 23
Other Smal Business Programs of Interest........................................................................ 24
The SBA 7(j) Management and Technical Assistance Program........................................ 24
SBA Surety Bond Guarantee Program......................................................................... 24

Smal Business Mentor-Protégé Programs ................................................................... 25
Smal Business Procurement Goals .................................................................................. 26
Certificate of Competency Program ................................................................................. 30
Post-Award Requirements .............................................................................................. 30

Smal Business Subcontracting Plan Reviews .............................................................. 30
Prompt Payments..................................................................................................... 31
Accelerated Payments .............................................................................................. 32
Concluding Observations ............................................................................................... 33

Tables
Table 1. Federal Procurement Goals and Percentage of FY2020 Federal Contract Dollars
Awarded to Smal Businesses, by Type .......................................................................... 29

Contacts
Author Information ....................................................................................................... 35

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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 smal 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 smal businesses might fail without government assistance, in
1953, Congress passed and President Dwight Eisenhower signed into law the Smal Business Act
(P.L. 83-163), which authorized the Smal Business Administration (SBA).2 The act specifies that
it is the declared policy of Congress to promote the interests of smal businesses to “preserve free
competitive enterprise.” Congress specified that one of the ways to preserve free competitive
enterprise was to insure that smal businesses received a “fair proportion” of federal contracts and
subcontracts:
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, to insure that a fair proportion of the total purchases
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
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 stre ngthen the
overall economy of the Nation.3
Congress indicated that its intent in supporting smal businesses was not to “favor smal 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 smal 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, Sm all Business Act of 1953, report to accompany H.R. 5141, 83 rd Cong., 1st sess., May 28,
1953, H.Rept. 83-494 (Washington: GPO, 1953).
2 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
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 federal agencies,
but with all federal agencies, as opposed to focusing on the Department of Defense. See U.S. Congress, Senate Select
Committee on Small Business, Sm all Business Adm inistration, committee print, 83rd Cong., 1st sess., August 10, 1953
(Washington: GPO, 1953), p. iv.
3 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.
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 smal business in various ways. For
example, the SBA administers several types of programs to support smal businesses, including
loan guaranty and venture capital programs to enhance smal business access to capital;
contracting programs to increase smal business opportunities in federal contracting; direct loan
programs for businesses, homeowners, and renters to assist their recovery from natural disasters;
and smal 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 especial y acute given
the Coronavirus Disease 2019 (COVID-19) pandemic’s widespread adverse economic impact on
the national economy general y and smal businesses in particular.
This report describes the various federal programs, requirements, procurement officers, and
procurement offices involved in promoting federal contracting and subcontracting with smal
businesses, smal disadvantaged businesses (SDBs), SDBs participating the SBA’s “8(a)
Program,” Historical y Underutilized Business Zone (HUBZone) smal businesses, women-
owned smal businesses (WOSBs), and service-disabled veteran-owned smal businesses
(SDVOSBs). The SBA administers many, but not al , of these programs.
It examines the following federal requirements and authorities in promoting contracting and
subcontracting with smal businesses:
1. The requirement that federal agencies general y 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 smal businesses unless the contracting officer is unable to obtain
offers from two or more smal businesses that are competitive with market prices
and the quality and delivery of the goods or services being purchased.6
2. The establishment of smal business procurement goals, both government-wide
and agency specific, to promote the awarding of contracts to smal businesses.
3. The requirement that federal agencies general y set aside contracts that have an
anticipated value exceeding the simplified acquisition threshold exclusively for
smal businesses when there is a reasonable expectation that offers wil be
obtained from at least two responsible smal businesses offering the products of
different smal businesses (Rule of Two) and the award wil 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 smal
businesses when the award could not otherwise be made (e.g., only a single
source is available, under urgent and compel ing circumstances).
5. The authority provided federal agencies to set aside contracts for, or grant other
contracting preference to, specific types of smal businesses (e.g., 8(a) smal
businesses, HUBZone smal businesses, WOSBs, and SDVOSBs) and to specific
types of businesses general y (e.g., the Buy Indian Act).
It discusses the SBA’s oversight and responsibilities concerning the smal business goaling
program, smal 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 Smal and Disadvantaged Business Utilization
(OSDBU), located in each federal agency, in promoting contracting with smal 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 smal business contracting opportunities.
This report concludes with a brief discussion of the strong bipartisan support for smal 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, smal business advocates note that implementing regulations in the Federal Acquisition
Regulation (FAR) narrow the reach (and impact) of some smal business contracting preferences
by excluding specific types of contracts, such as those listed in the Federal Supply Schedules,
from FAR requirements pertaining to smal business contracting.8 Advocates want the federal
government to enact policies that reduce or eliminate exclusions that narrow the reach of smal

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.
T he 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. T he 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. …T he 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 T ask 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.
T he U.S. Supreme Court ruled in 2016, in Kingdom ware 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 smal 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 Dun &
Bradstreet Data Universal Numbering System (DUNS) number (i.e., a unique nine-digit
identification number) for each of the business’s physical locations, and register with the federal
government’s System for Award Management (SAM).10 SAM is used by government agencies for
several purposes, including to find contractors.11
Businesses also must match their products and services to a North American Industry
Classification System (NAICS) code. Businesses general y have a primary NAICS code, and may
have multiple NAICS codes if they sel multiple products and services.12
Businesses that identify themselves as a smal business in SAM must (1) meet the Smal Business
Act’s definition of a smal business and (2) not exceed size standards established, and updated
periodical y, by the SBA.13
The Smal Business Act defines a smal 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;
 is independently owned and operated; and
 is not dominant in its field on a national basis.14

9 For example, see Henry Beale and Nicola Deas, “T he 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,
T homas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Sm all 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 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 Num bers and CAGE Codes
, by L. Elaine Halchin; and CRS Report RS22536,
Overview of the Federal Procurem ent Process and Resources, by L. Elaine Halchin.
11 SBA, “Register with SAM,” at https://www.sba.gov/federal-contracting/contracting-guide/basic-
requirements#section-header-8.
12 U.S. Bureau of the Census, “North American Industry Classification System,” at https://www.census.gov/eos/www/
naics/.
13 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.
14 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
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The business may be a sole proprietorship, partnership, corporation, or any other legal form.15
The Smal Business Act authorizes the SBA to establish size standards to ensure that only smal
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.16 The SBA’s industry-
specific size standards are used to determine eligibility for federal smal business contracting
purposes.
The SBA determines if a business is smal by comparing that business’s economic characteristics
(typical y number of employees or average annual receipts) to size standards listed in the SBA’s
Table of Smal 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 smal .
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.17 The SBA also considers the ability of smal businesses to compete for federal
contracting opportunities and, when necessary, several secondary factors “as they are relevant to
the industries and the interests of smal businesses, including technological change, competition
among industries, industry growth trends, and impacts of size standard revisions on smal
businesses.”18

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.
15 For additional information and analysis of the SBA’s size standards, see CRS Report R40860, Small Business Size
Standards: A Historical Analysis of Contem porary Issues
, by Robert Jay Dilger.
16 T he 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 m aximum 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).
T he 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.
17 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%2 011%2C%202019.pdf (hereinafter SBA, Office of
Government Contracting and Business Development, SBA Size Standards Methodology, April 2019).
18 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
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Historical y, the SBA has used the number of employees to determine if manufacturing and
mining companies are smal (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 mil ion for some industries to no more than $40 mil ion for others).19
Federal Agencies
To make it easier to determine if an offeror meets the SBA’s definition of a smal 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.”20 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.”21 If a solicitation cal s for
more than one item and al ows offers to be submitted on any or al of the items, “an offeror must
meet the size standard for each item it offers to furnish.”22 If a solicitation cal ing for more than
one item requires offers on al or none of the items, “an offeror may qualify as a smal business
by meeting the size standard for the item accounting for the greatest percentage of the total
contract price.”23
With several notable exceptions (e.g., HUBZone smal businesses, SBA 8(a) program
participants, and veteran-owned smal businesses [VOSBs] and SDVOSBs seeking contracts with
the Department of Veterans Affairs), businesses general y self-certify their status as smal when
they register their business in the SAM database.24
The contracting officer is required to accept an offeror’s representation in a specific bid or
proposal that it is a smal business unless “(1) another offeror or interested party chal enges the
concern’s smal business representation or (2) the contracting officer has a reason to question the
representation.”25
If an offeror’s smal business status is chal enged, the contracting officer is general y not al owed
to award the contract until the SBA has made a size determination or 15 business days after the

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.
19 SBA, Office of Government Contracting and Business Development, SBA Size Standards Methodology, April 2019,
p. 28.
20 FAR §19.102(c).
21 FAR §19.102(d).
22 FAR §19.102(e).
23 FAR §19.102(e).
24 P.L. 116-283, the William M. (Mac) T hornberry National Defense Authorization Act for Fiscal Year 2021, requires
the Department of Veterans Affairs (VA), by January 1, 2023, t o 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. T he 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.
25 FAR §19.301-1(b).
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SBA receives the protest, whichever occurs first.26 The SBA’s Office of Government Contracting
Area Office (Area Office) serving the area in which the headquarters of the offeror is located
initial y reviews the protest.27 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.”28 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 wil be disadvantageous to the government.”29
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 shal not exercise any
options or award further task or delivery orders.”30 Furthermore, a concern cannot become
eligible for a specific award after the SBA has determined that it is not a smal business, even if
the concern takes action to meet the definition of a smal business.31
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.32
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 shal facilitate the maximum

26 T he 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).
27 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. T he 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). “ T o 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).
28 FAR §19.302(f)(1).
29 FAR §19.302(g)(2).
30 FAR §19.302(h).
31 FAR §19.301-1(c).
32 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 Governm ent Contractor Accountability , by David H. Carpenter and
Kathleen Ann Ruane.
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participation of smal 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 smal 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 smal business conc ern
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 [general y $6.5
mil ion, or $10 mil ion if the contracting officer certifies that the higher amount
is necessary].”
3. “Ensure that delivery schedules are established on a realistic basis that wil
encourage smal business participation to the extent consistent with the actual
requirements of the Government.”
4. “Encourage prime contractors to subcontract with smal business concerns
[primarily through the agency’s role in negotiating an acceptable smal business
subcontracting plan with prime contractors on contracts anticipated to exceed
$750,000 or $1.5 mil ion for construction contracts].”33
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 smal business and the
proposed acquisition is of a quantity or estimated dollar value, the magnitude of
which makes it unlikely that smal businesses can compete for the prime contract;
(i ) 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 smal businesses can compete for the prime contract; or
(i i) The proposed acquisition is for a consolidated or bundled requirement.…
The contracting officer shal provide al 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]
7.107-4.34 The contracting officer shal also provide the same information to the

33 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.
34 FAR §7.017-4(2)(b) states “…when the proposed acquisition strategy involves substantial bundling, the agency shall
document in it s strategy—(1) T he 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 t o 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) T he
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agency Office of Smal and Disadvantaged Business Utilization [duties are
described later].”
6. “Provide a statement explaining why the (i) Proposed acquisition cannot be
divided into reasonably smal lots (not less than economic production runs) to
permit offers on quantities less than the total requirement; (i ) Delivery schedules
cannot be established on a realistic basis that wil encourage smal business
participation to the extent consistent with the actual requirements of the
government; (i i) Proposed acquisition cannot be structured so as to make it
likely that smal 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].”35
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 46 PCRs located in the SBA’s six Area Offices.36 PCRs are required to comply
with the contracting agency’s directives governing the conduct of contracting personnel and the
release of contract information.37
PCR duties include the following:
 Review proposed acquisitions to recommend “the setting aside of selected
acquisitions not unilateral y set aside by the contracting officer;” new qualified
smal business sources; and the feasibility of breaking out components of the
contract for competitive acquisitions.38
 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 smal
businesses can compete for the prime contract,” the PCR can recommend any
alternate contracting method that he or she “reasonably believes wil increase

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.”
35 FAR §19.202-1. See FAR §19.505 for a description of the appeals process.
36 SBA, “Procurement Center Representative Directory,” June 24, 2021, at https://www.sba.gov/federal-contracting/
counseling-help/procurement -center-representative-directory. T here were two vacancies.
37 FAR §19.402(a)(1).
38 FAR §19.402(c)(1).
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smal business prime contracting opportunities.” The recommendation must be
made to the contracting officer within 15 days after the package’s receipt.39
 Recommend smal businesses “for inclusion on a list of concerns to be solicited
in a specific acquisition.”40
 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 smal business being solicited.” This appeal may
be further appealed to the agency head.41
 Conduct periodic reviews of the agency’s contracting activity, including the
agency’s assessment of any required smal business subcontracting plan, “to
ascertain whether the agency is complying with the smal business policies in this
regulation.”42
 Sponsor and participate in conferences and training “designed to increase smal
business participation in the contracting activities of the office.”43
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.44 The OSDBU’s primary
responsibility is to ensure that smal businesses, SDBs, WOSBs, SDVOSBs, and HUBZone smal
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
solicitations where appropriate to increase the probability of participation by
smal businesses as prime contractors, or to facilitate smal business participation
as subcontractors and suppliers, if a solicitation for a bundled contract is to be
issued.”45

39 FAR §19.402(c)(2).
40 FAR §19.402(c)(3).
41 FAR §19.402(c)(4). See FAR §19.505 for a description of the appeals process.
42 FAR §19.402(c)(5).
43 FAR §19.402(c)(6).
44 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), Sm all Business Contracting: Actions
Needed to Dem onstrate and Better Review Com pliance with Select Requirem ents for Sm all Business Advocates
, GAO-
17-675, August 25, 2017, pp. 1-4, at https://www.gao.gov/assets/690/686766.pdf.
45 15 U.S.C. §644(k)(5).
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 Assist smal businesses “to obtain payments, required late payment interest
penalties, or information regarding payments due to the concern from an
executive agency or a contractor.”46
 Assign “a smal business technical adviser to each office to which the SBA has
assigned” a PCR. The smal business technical advisor “shal be a full-time
employee of the procuring activity, wel qualified, technical y trained and
familiar with the supplies or services purchased at the activity; and whose
principal duty shal be to assist” the PCR.47
 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 smal businesses appropriate opportunities to
participate as prime contractors and subcontractors].”48
 Provide training to smal businesses and contract specialists, provided that the
training does not interfere with the director carrying out his or her other
responsibilities.49
 Ensure that a smal 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].”50
 Review al subcontracting plans “to ensure that the plan provides maximum
practicable opportunity for smal business concerns to participate in the
performance of the contract to which the plan applies.”51
In accordance with P.L. 109-163, the National Defense Authorization Act of 2006, the DOD
renamed its OSDBU the Office of Smal 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.
The Roles of Other Procurement Officers and Offices
At the agency level, procurement department heads (sometimes titled senior procurement
executive
) are responsible for implementing smal business programs at their agencies, including
achieving program goals. In general, procurement department staff who work on smal business

46 15 U.S.C. §644(k)(6).
47 15 U.S.C. §644(k)(8).
48 15 U.S.C. §644(k)(12).
49 15 U.S.C. §644(k)(13).
50 15 U.S.C. §644(k)(17).
51 15 U.S.C. §644(k)(20).
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issues (often titled small business specialists) coordinate with OSDBU directors on their
agencies’ smal business programs.52
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.”53
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.54
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.”55 The breakout PCR is in addition to the PCR.
When a breakout PCR is assigned, the SBA must assign at least two co-located smal 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.56
The SBA has commercial market representatives who, among other duties, help prime contractors
find smal businesses that are capable of performing subcontracts; provide counseling on the
contractor’s responsibility to maximize subcontracting opportunities for smal businesses; and
conduct periodic reviews of contractors awarded contracts requiring an acceptable subcontracting
plan that provides smal businesses “the maximum practicable opportunity to participate in
contract performance consistent with its efficient performance” (general y any solicitation to
perform a contract that is expected to exceed $750,000 ($1.5 mil ion for construction) and that
has subcontracting possibilities).57
The SBA’s 140 business opportunity specialists provide, among other duties, guidance,
counseling, and referrals for assistance with technical, management, financial, or other matters

52 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select
Requirem ents for Sm all Business Advocates
, GAO-17-675, August 25, 2017, p. 7, at https://www.gao.gov/assets/690/
686766.pdf (hereinafter GAO, Sm all Business Contracting: Actions Needed to Dem onstrate and Better Review
Com pliance with Select Requirem ents for Sm all Business Advocates
).
53 GAO, Small Business Contracting: Actions Needed to Demonstrate and Better Review Compliance with Select
Requirem ents for Sm all Business Advocates
, pp. 7-8.
54 15 U.S.C. §644(l)(6); and FAR §19.403(a).
55 FAR §19.403(a).
56 FAR §19.403(a).
57 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, Im provem ents Needed to Help Ensure Reliability of SBA’s Perform ance Data on
Procurem ent Center Representatives
, GAO-11-549R, June 15, 2011, pp. 4-7, 30, at https://www.gao.gov/products/
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 .
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intended to improve the competitive viability of SBA 8(a) program participants.58 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 smal businesses in the award, modification, and
administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving
the 8(a) program.59
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 smal
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 smal business utilization in federal
contracting that may be implemented by federal agencies having procurement
powers.
5. Submit annual y, to the House Committee on Smal Business and Senate
Committee on Smal 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 smal business contracting.60
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. Most of the
assistance provided by the 97 PTACs and their more than 300 local offices is free.61 PTAC
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.”62

58 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.
59 15 U.S.C. §633(g)(1).
60 15 U.S.C. §644a(b).
61 DOD, Defense Logistics Agency, “Procurement Technical Assistance Centers: States and T erritories,” at
https://www.dla.mil/SmallBusiness/PT AP/AllLocations/; and SBA, “ Find Local Assistance: Procurement T echnical
Assistance Centers,” at https://www.sba.gov/local-assistance/find/?type=
Procurement%20Technical%20Assistance%20Center& pageNumber=2.
62 DOD, Defense Logistics Agency, “Procurement Technical Assistance Program,” at https://www.dla.mil/
SmallBusiness/PT AP/.
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Set-Asides and Sole-Source Awards
The Competition in Contracting Act of 1984 general y requires “full and open competition” for
government procurement contracts.63 However, various provisions of the Smal 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 smal businesses.
For example, as mentioned previously, federal agencies are general y 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 smal
businesses unless the contracting officer is unable to obtain offers from two or more smal
businesses that are competitive with market prices and the quality and delivery of the goods or
services being purchased.64
In addition, federal agencies
 are general y required to set aside contracts that have an anticipated value
exceeding the simplified acquisition threshold exclusively for smal businesses
when there is a reasonable expectation by the contracting officer that offers wil
be obtained by at least two responsible smal businesses offering the products of
different smal businesses (Rule of Two) and the award wil be made at a fair
market price;65
 may similarly set aside contracts exceeding the simplified acquisition threshold
for competition reserved for specific types of smal businesses (e.g., 8(a) smal
businesses, HUBZone smal businesses, WOSBs and SDVOSBs);66
 may enter into negotiations directly with particular types of smal businesses
(e.g., a sole-source award) when the award could not otherwise be made (e.g.,
only a single source is available or under urgent and compel ing
circumstances);67 and
 are required to grant HUBZone smal businesses a price evaluation preference of
not more than 10% in open and unrestricted competitions.68

63 41 U.S.C. §253(b)(1); 41 U.S.C. §259(b); and, the Deficit Reduction Act of 1984 (T itle VII, the Competition in
Contracting Act).
64 15 U.S.C. §644(j)(1). As mentioned previously, 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.
65 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.
66 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.
67 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.
68 15 U.S.C. §657a(b)(3).
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SBA Contracting Programs69
Several SBA programs assist smal 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 smal
business goaling program and the Surety Bond Guarantee program).
Prime Contracting Programs
Several contracting programs al ow smal 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 smal businesses an opportunity to win
government contracts without having to compete against larger and more experienced companies.
8(a) Program70
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 social y
and economical y disadvantaged, have good character, and demonstrate a potential for success.71
Although the 8(a) Program was original y established for the benefit of disadvantaged
individuals, in the 1980s, Congress expanded the program to include smal businesses owned by
four disadvantaged groups. Smal businesses owned by Alaska Native Corporations (ANCs),
Community Development Corporations (CDCs), Indian tribes, and Native Hawai an
Organizations (NHOs) are also eligible to participate in the 8(a) Program under somewhat
different requirements.
For individual y owned smal businesses, African Americans, Hispanics, Native Americans
(including American Indians, Eskimos, Aleuts, and Native Hawai ans), Asian-Pacific Americans,
and Subcontinent Asian Americans are presumed to be social y and economical y
disadvantaged.72 Other individuals can also qualify as social y and economical y disadvantaged
on a case-by-case basis.

69 T hese 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.
70 For additional information and analysis, see CRS Report R44844, SBA’s “8(a) Program”: Overview, History, and
Current Issues
, by Robert Jay Dilger.
71 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.
T he 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 th e 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.
72 Asian Pacific Americans are those whose country of origin is Burma, T hailand, Malaysia, Indonesia, Singapore,
Brunei, Japan, China (including Hong Kong), T aiwan, Laos, Cambodia, Vietnam, Korea, the Philippines, U.S. T rust
T erritory 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, T onga, Kiribati, T uvalu, or Nauru.
Subcontinent Asian Americans are those whose country of origin is India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the
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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. general y no more than $350,000 in average adjusted gross income over the
preceding three years; and
3. no more than $6 mil ion in assets (excluding funds invested in an official
retirement account).73
For group-owned smal businesses, by statute, ANCs are deemed to be economical y
disadvantaged, and CDCs are similarly treated as economical y disadvantaged. In contrast, Indian
tribes and NHOs must establish economic disadvantage.
Federal agencies are authorized to award contracts for goods or services, or to perform
construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate
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
sole-source basis, with the contract amount general y determining the acquisition method used.
For individual y owned smal businesses, when the contract’s anticipated total value, including
any options, is $4.5 mil ion or less ($7.5 mil ion or less for manufacturing contracts), the contract
is normal y awarded without competition (as a sole-source award).74 In contrast, when the
contract’s anticipated value exceeds these thresholds, the contract general y 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 wil submit offers and the award can be made at
fair market price.75
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 mil ion or less ($7.5 mil ion
or less for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also
receive sole-source awards in excess of $4.5 mil ion ($7.5 mil ion for manufacturing contracts)
even when contracting officers reasonably expect that at least two eligible and responsible 8(a)

Maldives Islands, or Nepal. 13 C.F.R. §124.103(b).
73 SBA, “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business Certification,” 85
Federal Register 27650-27665, May 11, 2020.
74 FAR §19.805-1. T he 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. T he 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).
75 15 U.S.C. §637(a)(1)(D)(ii); and SBA, “Conforming Statutory Amendments and T echnical Corrections to Small
Business Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018.
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firms wil submit offers and the award can be made at fair market price.76 NHO-owned firms may
receive sole-source awards from the Department of Defense under the same conditions.77
The SBA also provides technical assistance and training to 8(a) firms. Firms general y participate
in the 8(a) Program for no more than nine years. In an effort to assist smal businesses adversely
affected by the COVID-19 pandemic, P.L. 116-260, the Economic Aid to Hard-Hit Smal
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations
Act of 2021), provides businesses participating in the 8(a) program on or before September 9,
2020, the option to extend their participation in the program for one year.
In FY2020, the federal government awarded $34.0 bil ion to 8(a) firms:
 $20.4 bil ion was awarded with an 8(a) preference ($9.3 bil ion through an 8(a)
set-aside and $11.1 bil ion through an 8(a) sole-source award);
 $2.2 bil ion was awarded to an 8(a) firm in open competition with other firms;
and
 $11.4 bil ion was awarded with another smal business preference (e.g., set-
asides and sole-source awards for smal businesses general y and for HUBZone
firms, women-owned smal businesses, and service-disabled veteran-owned
smal businesses).78
Historically Underutilized Business Zone Program79
This program assists smal businesses located in Historical y 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
mil ion or less, or $7.5 mil ion or less for manufacturing contracts) and price evaluation

76 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).
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. T he $20 million threshold was increased through a regulatory update to $22 million, effective October 1,
2015, and t o $25 million, effective October 1, 2020, to account for inf lation. P.L. 116-92, the National Defense
Authorization Act for Fiscal Year 2020, increased this threshold to $10 0 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 T hresholds,” 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 T hresholds,” 85 Federal
Register
62485, October 2, 2020.
77 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
responsible small businesses existed on a temporary basis in 2004 -2006, and became permanent in 2006. See P.L. 109-
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)-
(B).
78 Data generated using U.S. General Services Administration (GSA), “Sam.Gov data bank,” August 2, 2021, at
https://sam.gov/reports/awards/adhoc.
79 For additional information and analysis, see CRS Report R41268, Small Business Administration HUBZone
Program
, by Robert Jay Dilger.
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preferences (of up to 10%) in full and open competitions.80 The HUBZone program targets
assistance to smal businesses located in areas with low income, high poverty, or high
unemployment.81 To be certified as a HUBZone smal business, at least 35% of the smal
business’s employees must general y reside in a HUBZone.
In FY2020, the federal government awarded $13.6 bil ion to HUBZone-certified smal
businesses:
 $2.1 bil ion was awarded with a HUBZone preference ($2.0 bil ion through a
HUBZone set-aside, $67.5 mil ion through a HUBZone sole-source award and
$48.5 mil ion through a HUBZone price-evaluation preference);
 $4.0 bil ion was awarded to HUBZone-certified smal businesses in open
competition with other firms; and
 $7.5 bil ion was awarded with another smal business preference (e.g., set-asides
and sole-source awards for smal businesses general y and for 8(a), women-
owned, and service-disabled veteran-owned smal businesses).82
Service-Disabled Veteran-Owned Small Business Procurement Program83
This program al ows agencies to set aside contracts for SDVOSBs.84 Also, federal agencies may
award sole-source contracts to SDVOSBs 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
mil ion or less ($7 mil ion or less for manufacturing contracts).85 For purposes of this program,
veterans and service-related disabilities are defined as they are under the statutes governing
veterans affairs.86
In FY2020, the federal government awarded $26.1 bil ion to SDVOSBs:
 $9.7 bil ion was awarded with a SDVOSB preference ($9.4 bil ion through a
SDVOSB set-aside and $281.9 mil ion through a SDVOSB sole-source award);

80 FAR §19.1306; 15 U.S.C. §657a(b)(2-3); and 41 U.S.C. §1980.
81 For specific criteria, see 15 U.S.C. §632(p)(4); and 13 C.F.R. §126.103.
82 Data generated using GSA, “Sam.Gov data bank,” July 31, 2021, at https://sam.gov/reports/awards/adhoc.
83 For further information and analysis of the SDVOSB Procurement program, see CRS Report R46906, Service-
Disabled Veteran-Owned Sm all Business Procurem ent Program
, by Robert Jay Dilger.
84 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.” T o 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 St atement of Service from the National Archives and Records
Administration, stating that the veteran has a service-connected disability.” T here 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/SDVO SB/.
85 FAR §19.1406; 15 U.S.C. §657f(a-b); and 41 U.S.C. §1980.
86 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.
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 $8.4 bil ion was awarded to a SDVOSB in open competition with other firms;
and
 $8.0 bil ion was awarded with another smal business preference (e.g., set-asides
and sole-source awards for smal businesses general y and for HUBZone firms,
8(a) firms, and WOSBs).87
Women-Owned Small Business Program88
Under this program, contracts may be set aside for economical y disadvantaged WOSBs in
industries in which women are underrepresented and substantial y underrepresented.89 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
mil ion or less ($7 mil ion or less for manufacturing contracts).90
To be eligible for the WOSB program, a business must be
 smal , as determined by the SBA;
 at least 51% owned and controlled by women who are U.S. citizens;
 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.91
To qualify as an economical y 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. general y no more than $350,000 in average adjusted gross income over the
preceding three years; and

87 Data generated using GSA, “Sam.Gov data bank,” July 31, 20 21, at https://sam.gov/reports/awards/adhoc.
88 For further information and analysis of the WOSB federal contacting program, see CRS Report R46322, SBA
Wom en-Owned Sm all Business Federal Contracting Program
, by Robert Jay Dilger.
89 T he 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) exclusively for WOSBs (including economically disadvantaged WOSBs) because those industries were
identified as ones in which WOSBs are substantially underrepresented. T he SBA has also ide ntified 80 six-digit
NAICS industry codes (out of 1,023) that may be set aside exclusively for economically disadvantaged WOSBs
because those industries were identified as ones in which WOSBs are 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.
90 FAR §19.1506; 15 U.S.C. §637(m); and 41 U.S.C. §1980.
91 15 U.S.C. §632(n); 15 U.S.C. §637(m)(2); and 13 C.F.R. §127.200.
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3. no more than $6 mil ion in assets (excluding funds invested in an official
retirement account).92
In FY2020, the federal government awarded $27.2 bil ion to WOSBs:
 $1.2 bil ion was awarded with a WOSB preference ($1.1 bil ion through a
WOSB set-aside award and $116.1 mil ion through a WOSB sole-source award);
 $9.3 bil ion was awarded to a WOSB in open competition with other firms; and
 $16.6 bil ion was awarded with another smal business preference (e.g., set-
asides and sole-source awards for smal businesses general y and for HUBZone
firms, 8(a) firms, and SDVOSBs).93
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 smal business subcontracting plan and to submit
advisory findings before the solicitation is issued.94 The PCR’s advisory comments regarding the
smal business subcontracting plan’s acceptability must be submitted, in writing, to the
appropriate contracting officer within five working days after the plan’s receipt.95
As mentioned previously, the SBA’s commercial market representatives help prime contractors
find smal businesses to perform subcontracts; counsel contractors on their responsibility to
maximize subcontracting opportunities for smal businesses; and conduct periodic reviews, often
in concert with a SBA PCR, of contractors awarded contracts that require an acceptable smal P.L.
117-58 business subcontracting plan.96
Other Federal Agency Contracting Programs
Federal agencies may also set aside contracts or make sole-source awards to smal 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
began in 1980 as a minority/women’s business enterprise program “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.”97 Congress has reauthorized the DOT

92 SBA, “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business Certification,” 85
Federal Register 27650-27665, May 11, 2020.
93 Data generated using GSA, “Sam.Gov data bank,” July 31, 2021, at https://sam.gov/reports/awards/adhoc.
94 FAR §19.705-3.
95 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.
96 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).
97 Department of T ransportation (DOT ), “Disadvantaged Business Enterprise (DBE) Program,” at
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DBE program several times since its inception; most recently 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
program under Titles I (federal-aid highways), II (innovative project finance), III (public
transportation) and VI (innovation) of the act and 23 U.S.C. §403 (highway safety research and
development), shal be expended with DBEs. DOT also has a separate DBE program for airport
concessions.98
A DBE is a for-profit smal business owned and controlled by social y and economical y
disadvantaged individuals.99 Eligibility for the DBE program differs somewhat from the 8(a)
program. For example, under the DBE program, women are presumed to be social y and
economical y disadvantaged individuals. Also, to be regarded as economical y disadvantaged, 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 mil ion. 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 mil ion for participation in Federal Highway Administration and
Federal Transit Administration-assisted work.100 P.L. 115-254, the FAA Reauthorization Act of
2018, removed the gross receipts cap for Federal Aviation Administration-assisted work. 101 Size
limits for the airport concessions DBE program are higher.102
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;

https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise.
98 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 th e 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.
99 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”).
100 DOT is required to adjust the DBE gross receipts cap annually to account for inflation.
101 DOT , “ Definition of a Disadvantaged Business Enterprise;” and Department of T ransportation, “Disadvantaged
Business Enterprise Program; Inflationary Adjustment,” 85 Federal Register 80646-80648, December 14, 2020.
102 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 $5 6.42 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 mor e than 350 employees,
and pay telephone companies can have no more than 1,500 employees. See 49 C.F.R. §23.33.
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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 al types of federal y 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.103
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 social y disadvantaged. Also eligible are historical y 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 economical y 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
underground storage tanks, to businesses or other organizations owned or controlled by social y
and economical y disadvantaged individuals, including historical y black colleges and universities
and women.
Individuals claiming economic disadvantage status must have an initial and continued personal
net worth of less than $750,000.104 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 wil 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

103 49 C.F.R. §26.1.
104 40 C.F.R. §33.202(c); and 40 C.F.R. §33.203(c).
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4. provide appropriate flexibility to recipients of EPA financial assistance in
establishing and providing contracting opportunities for DBEs.105
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 smal businesses, many Native American-owned and -controlled smal 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.106 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-
owned and -controlled businesses, and Native Hawai an smal businesses by providing a 5%
rebate on the amount subcontracted to these businesses.107
Subcontracting Programs for Small Disadvantaged Businesses
Other federal programs promote subcontracting with smal disadvantaged businesses (SDBs).
SDBs include 8(a) participants and other smal businesses that are at least 51% unconditional y
owned and controlled by social y or economical y disadvantaged individuals or groups.
Individuals owning and controlling non-8(a) SDBs must general y 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 wil be made to ensure that SDBs “have an equitable opportunity to compete for
subcontracts.”108 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.

105 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.
106 GAO, Buy Indian Act: Bureau of Indian Affairs and Indian Health Service Need Greater Insight into
Im plem entation 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.
107 U.S. Department of Defense, Office of Small Business Programs, “Indian Incentive Program (IIP),” at
https://business.defense.gov/Programs/Indian-Incentive-Program/.
108 15 U.S.C. §637(d)(6)(c).
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As of November 17, 2021, the SBA’s Dynamic Smal Business Search database included 6,615
SBA-certified 8(a) firms and 153,897 self-certified SDBs.109
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 smal
businesses that are owned and controlled by economical y and social y disadvantaged individuals
and smal business located in areas of high unemployment or low income, certified 8(a) and
HUBZone firms, and economical y disadvantaged women-owned smal businesses.”110 Training
includes “consulting in a wide range of business activities, including marketing, accounting,
opportunity development and capture, contract management, compliance, and financial
analysis.”111 Eligible firms work directly with their respective SBA district office to enroll in the
program.
In FY2020, the 7(j) Management and Technical Assistance program assisted 9,941 smal
businesses.112
SBA Surety Bond Guarantee Program113
The SBA’s Surety Bond Guarantee program aims to increase smal businesses’ access to federal,
state, and local government contracting, as wel as private-sector contracts, by guaranteeing bid,
performance, and payment bonds for smal businesses that cannot obtain surety bonds through
regular commercial channels.114 The program guarantees individual contracts of up to $6.5
mil ion and up to $10 mil ion 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.115 In FY2020, the SBA guaranteed 10,577 bid and final surety
bonds with a total contract value of nearly $7.2 bil ion.116

109 SBA, “Dynamic Small Business Search,” at http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
110 SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 72, at https://www.sba.gov/
document/report -congressional-budget-justification-annual-performance-report (hereinafter SBA, FY2022
Congressional Justification and FY2020 Annual Perform ance Report
).
111 SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 72.
112 SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 73.
113 For additional information and analysis, see CRS Report R42037, SBA Surety Bond Guarantee Program , by Robert
Jay Dilger.
114 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.
115 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) . For additional information and analysis, see CRS
Report R42037, SBA Surety Bond Guarantee Program , by Robert Jay Dilger.
116 SBA, FY2020 Program Performance: SBA Surety Bond Guarantee Program , at https://content.govdelivery.com/
accounts/USSBA/bulletins/2a5a0e6.
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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.117
Surety bonds are meant to encourage project owners to contract with smal 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.118
Surety bonds are important to smal 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.119
Small Business Mentor-Protégé Programs120
Smal business mentor-protégé programs typical y seek to pair new businesses with more
experienced businesses in mutual y 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 smal businesses
in various ways.
 The SBA’s All Small Mentor-Protégé Program is a government-wide program
designed to assist smal 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 smal 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.121

117 SBA, “Surety Bonds,” at https://www.sba.gov/funding-programs/surety-bonds.
118 SBA, “Surety Bonds.”
119 T he 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 T hresholds,” 75 Federal Register 53130, August 30, 2010.
120 For additional information and analysis of federal small business mentor-protégé programs, see CRS Report
R41722, Sm all Business Mentor-Protégé Program s, by Robert Jay Dilger.
121 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.
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 The Department of Defense (DOD) Mentor-Protégé Program, in contrast, is
agency-specific. It assists various types of smal 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.122
Other agencies also have agency-specific mentor-protégé programs to assist various types of
smal 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 general y 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.123
Small Business Procurement Goals
Since 1978, federal agency heads have been required to establish federal procurement goals, in
consultation with the SBA, “that realistical y reflect the potential of smal business concerns and
smal business concerns owned and controlled by social y and economical y 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.124
In 1988, Congress authorized the President annual y to establish government-wide minimum
participation goals for procurement contracts awarded to smal businesses and smal businesses
owned and controlled by social y and economical y disadvantaged individuals. Congress required
the government-wide minimum participation goal for smal businesses to be “not less than 20%
of the total value of al prime contract awards for each fiscal year” and “not less than 5% of the
total value of al prime contract and subcontract awards for each fiscal year” for smal businesses
owned and controlled by social y and economical y disadvantaged individuals.125

122 10 U.S.C. §2302note: Mentor-Protégé Pilot Program.
123 As of November 1, 2021, the SBA’s All Small Mentor-Protégé program had 1,512 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,
Office of Small Business Programs, “Active MPP [Mentor-Protégé Program] Agreements,” at
https://business.defense.gov/Programs/Mentor-Protege-Program/Protege-Eligibility-Requirements/.
124 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.
125 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 .
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Each federal agency was also directed to “have an annual goal that presents, for that agency, the
maximum practicable opportunity for smal business concerns and smal business concerns
owned and controlled by social y and economical y disadvantaged individuals to participate in the
performance of contracts let by such agency.”126 The SBA was also required to report to the
President annual y on the attainment of the goals and to include the information in an annual
report to Congress.127 The SBA negotiates the goals with each federal agency and establishes a
small business eligible baseline for evaluating the agency’s performance.128 The agency head is
required to “make consistent efforts to annual y expand participation by smal business concerns
from each industry category.”129 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.130
The smal business eligible baseline excludes certain contracts that the SBA has determined do
not realistical y reflect the potential for smal 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).131
These exclusions typical y account for 18% to 20% of al 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 Smal Business Procurement Scorecards. The SBA uses FPDS-NG
data, which are published in GSA’s annual Smal 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.132
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

126 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988.
127 15 U.S.C. §644(g)(1); and P.L. 100-656, the Business Opportunity Development Reform Act of 1988 .
128 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, Sm all Business: More
Transparency Needed in Prim e Contract Goal Program
, GAO-01-551, August 1, 2001, pp. 9-10, at
http://www.gao.gov/assets/240/231854.pdf.
129 15 U.S.C. §644(g)(2).
130 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”).
131 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.
132 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 6.
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Veteran-Owned Woman-Owned Smal Business would be counted toward the Smal Business
(SB) goal, the Service-Disabled Veteran-Owned Smal Business (SDVOSB) goal and the Women-
Owned Smal 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).”133
Over the years, federal government-wide procurement goals have been established for smal
businesses general y (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 Smal Business Reauthorization
Act of 1997); smal businesses owned and controlled by social y and economical y disadvantaged
individuals (P.L. 100-656); women (P.L. 103-355, the Federal Acquisition Streamlining Act of
1994); smal businesses located within a HUBZone (P.L. 105-135); and smal businesses owned
and controlled by a service-disabled veteran (P.L. 106-50, the Veterans Entrepreneurship and
Smal Business Development Act of 1999).
The current federal smal business procurement goals are
 at least 23.0% of the total value of al smal business eligible prime contract
awards to smal businesses for each fiscal year;
 5.0% of the total value of al smal business eligible prime contract awards and
subcontract awards to smal disadvantaged businesses (including participants in
the SBA’s 8(a) Program) for each fiscal year;134
 5.0% of the total value of al smal business eligible prime contract awards and
subcontract awards to women-owned smal businesses;
 3.0% of the total value of al smal business eligible prime contract awards and
subcontract awards to HUBZone smal businesses;135 and
 3.0% of the total value of al smal business eligible prime contract awards and
subcontract awards to service-disabled veteran-owned smal businesses.136
There are no punitive consequences for not meeting these goals. However, the SBA’s Smal
Business Procurement Scorecards and GSA’s Smal Business Goaling Report are distributed
widely, receive media attention, and heighten public awareness of the issue of smal business
contracting. For example, agency performance as reported in the SBA’s Smal Business
Procurement Scorecards is often cited by Members during their questioning of federal agency
witnesses during congressional hearings.
As shown in Table 1, the FY2020 Small Business Procurement Scorecard indicates that federal
agencies met the federal procurement goal for smal businesses general y, smal disadvantaged
businesses, and service-disabled veteran-owned smal businesses in FY2020 (see the second and
third columns).

133 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 5. “T he 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. T hat
also means Federal procurements awarded to SDVOSB will also have been awarded to Veteran -Owned Small Business
(VOSB).”
134 For additional information and analysis of the SBA’s 8(a) Program, see CRS Report R44844, SBA’s “8(a)
Program”: Overview, History, and Current Issues
, by Robert Jay Dilger.
135 For additional information and analysis of the HUBZone program, see CRS Report R41268, Small Business
Adm inistration HUBZone Program
, by Robert Jay Dilger.
136 15 U.S.C. §644(g)(1)-(2).
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For comparative purposes, Table 1 provides the percentage of smal business eligible contracts
awarded to smal businesses in FY2020 without the required double counting of awards in a
disaster area and to Puerto Rico and other covered territories (see the fourth column), as wel as
the percentage of al federal contracts (without exclusions and without double counting) awarded
to smal businesses (see the fifth column).
Table 1. Federal Procurement Goals and Percentage of FY2020 Federal Contract
Dollars Awarded to Small Businesses, by Type
Percentage of
Percentage of
Percentage of
Federal
Federal
Federal
Contracts (all
Contracts (small
Contracts (small
reported
business eligible,
business eligible,
contracts,
including double
excluding double
excluding double
Business Type
Federal Goal
counting)
counting)
counting)
Smal Businesses
23.0%
26.02%
25.42%
21.89%
Smal Disadvantaged
5.0%
10.54%
10.39%
9.08%
Businesses
Women-Owned Smal
5.0%
4.85%
4.71%
4.10%
Businesses
HUBZone Smal
3.0%
2.44%
2.39%
2.04%
Businesses
Service-Disabled
3.0%
4.28%
4.23%
3.92%
Veteran-Owned Smal
Businesses
Sources: U.S. Smal Business Administration (SBA), “Statutory Guidelines,” at https://www.sba.gov/content/
statutory-guidelines-0 (federal goals); SBA, “Government-Wide Performance, FY2020 Smal Business
Procurement Scorecard,” at https://www.sba.gov/document/support-smal -business-procurement-scorecard-
overview; and data generated using General Service Administration, “Sam.Gov data bank,” July 31, 2021, at
https://sam.gov/reports/awards/adhoc (al reported contract dol ars).
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 smal business or other
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 FY2020 Smal Business Procurement Scorecard was made available on July 30, 2021, and reflects contracting
data as of February 22, 2021. Smal business eligible contracts totaled $559.981 bil ion in FY2020, and $145.8
bil ion was awarded to smal businesses ($142.4 without double counting), $59.0 bil ion to smal disadvantaged
businesses ($58.2 bil ion without double counting), $27.1 bil ion to women-owned smal businesses ($26.4 bil ion
without double counting), $13.6 bil ion to SBA-certified HUBZone smal businesses ($13.4 bil ion without double
counting), and $23.9 bil ion to service-disabled veteran-owned smal businesses ($23.7 bil ion without double
counting). The Department of Energy first-tier subcontract awards in FY2020 were as fol ows: $3.36 bil ion to
smal businesses, $0.81 bil ion to smal disadvantaged businesses, $0.76 bil ion to smal women-owned businesses,
$0.24 bil ion to SBA-certified HUBZone smal businesses, and $0.23 bil ion to service-disabled veteran-owned
smal businesses.
The percentages provided in the column for al reported contracts in FY2020 were calculated using contracting
data as reported on July 31, 2021 (without double counting): $665.7 bil ion in total contracts, and $145.8 bil ion
was awarded to smal businesses; $60.5 bil ion to smal disadvantaged businesses; $27.3 bil ion to women-owned
smal businesses; $13.6 bil ion to SBA-certified HUBZone smal businesses; and $26.1 bil ion to service-disabled
veteran-owned smal businesses.
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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 smal business offeror lacks certain elements of responsibility (e.g., is unable
to fulfil 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 smal
business.137 The COC certifies in writing that the smal business meets al 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 al elements of
responsibility of any smal 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.”138
Post-Award Requirements
As mentioned previously, the SBA’s commercial market representatives conduct periodic
compliance reviews of contractors awarded contracts that require an acceptable smal business
subcontracting plan.139 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.140
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.141 Contractors are selected randomly for audit.142 The SBA may enter into agreements
with other federal agencies to conduct these assessments.143
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.144 If any deficiencies
are found, the contractor is required to submit, within 30 days of the compliance review rating

137 15 U.S.C. §637(b)(7); and FAR §19.601(a-e).
138 FAR §19.601(b).
139 15 U.S.C. §633(h).
140 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, effective July 17, 2018, p. 1 1, at
https://www.sba.gov/sites/default/files/2018-07/2018-07-17%20Final%20Subcontracting%20Program%20SOP_1.pdf .
141 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 1 1.
142 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 1 2.
143 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 14.
144 13 C.F.R. §125.3(e)(3).
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letter date, a corrective action plan (CAP).145 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.146
If the contractor refuses to provide or address al 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 al otted 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.147
Prompt Payments
Once a contract is awarded, federal agencies are general y 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.148
Similar requirements exist for prime contractors in paying subcontractors on construction
contracts. These requirements are especial y important for smal businesses in the construction
industry. Specifical y, 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.149 The contract
must also obligate the prime contractor to include similar payment and interest penalty terms in
its subcontracts, as wel 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 al 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

145 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 12 .
146 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 1 3.
147 SBA, “Subcontracting Assistance Program Post Award,” SOP 60 03 7, p. 1 3. 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 Governm ent Contractor
Accountability
, by David H. Carpenter and Kathleen Ann Ruane.
148 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). T he interest rate to be used is that determined by the Secretary of
the T reasury twice a year under the Contract Disputes Act. 31 U.S.C. §3902(a).
149 31 U.S.C. §3905(b); and P.L. 100-496, the Prompt Payment Act Amendments of 1988.
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reduction in payment or failure to pay a subcontractor within 90 days.150 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 shal 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, or any successor.151 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.”152
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 smal business; or
 the payment is related to an emergency, disaster, or military deployment.153
In addition, the Secretary of Defense is required, to the fullest extent permitted by law, to
establish an accelerated payment date for its smal 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.154
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 smal 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.”155

150 15 U.S.C. §637(d)(13)(A-B); and U.S. Department of the T reasury, 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.
151 15 U.S.C. §637(d)(13)(C-E).
152 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.
153 31 U.S.C. §3903(a)(8); Office of Management and Budget, “Prompt Payment,” 6 4 Federal Register 52582-52583,
September 29, 1999; and 5 C.F.R. §1315.5.
154 10 U.S.C. §2307(2)(A); and P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year
2019.
155 10 U.S.C. §2307(2)(B); and P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year
2019.
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Concluding Observations
The smal business contracting programs described in this report general y 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, smal
business advocates have sought policies that reduce or eliminate exclusions that narrow the reach
of smal business contracting preferences and want the SBA to use the total value of al prime
contract awards in the Smal Business Goaling Report.156 Also, critics have questioned some of
these programs’ effectiveness, in terms of both promoting smal business opportunities to win
federal contracts and a more diversified, robust economy.157
Many observers judge the relative success or failure of federal efforts to enhance smal business
contracting opportunities by whether the federal government and individual federal agencies meet
the procurement goals in the annual Smal Business Goaling Report. In recent years, the federal
government has general y met the government-wide goals of awarding 23% of the total value of
al smal business eligible prime contract awards to smal businesses general y, 5% to SDBs, and
3% to SDVOSBs. However, it has had difficulty meeting the goals of 5% to WOSBs and 3% to
HUBZone smal businesses.158
The Smal Business Goaling Report is the most convenient measure available to compare federal
smal business contracting performance over time, but it has limitations. For example, the report
does not include al federal contracts, because some are not deemed to be smal business eligible
and others are not recorded in the FPDS-NG. In addition, the report does not evaluate the effect
these contracts have on smal businesses, industry competitiveness, or the overal 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].159

156 See American Small Business League v. Maria Contreras-Sweet in her capacity as Administrator of the United
States Sm all Business Adm inistration
, May 3, 2016, at http://www.asbl.com/documents/
Filed_Complaint_For_Injunctive_Relief.pdf.
T he federal government awarded more than $50 8.8 billion in federal contracts in FY2017. About $442.5 billion of that
amount was deemed small business eligible. GSA, Federal Procurem ent 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.
157 For example, see Henry Beale and Nicola Deas, “T he 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, T homas R. Edison Jr., Nancy Young Moore, and Edward G. Keating, Sm all 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.
158 SBA, “ T he 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.
159 Clifford A. Grammich, T homas 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
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Comprehensive studies examining the effect of smal business contracting preferences on smal
business startups, growth, wealth generation, and industry competitiveness may prove useful for
congressional oversight. In the meantime, although the Smal 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 smal businesses.160


https://www.rand.org/content/dam/rand/pubs/monographs/2011/RAND_MG443.pdf.
160 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

Senior Specialist in American National Government



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Congressional Research Service
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