How to qualify for government set-aside contracts
On a previous episode we discussed why you may want to consider government contracting work and how to get started. This week we’re diving in deeper to find out which government set-aside programs are available for contractors and how to qualify for them.
Topics we cover on this episode include:
- How to start and navigate the set-aside program qualification process
- Requirements to qualify as a small business
- The Small Disadvantaged Business designation
- The Woman-Owned Business designation
- The Veteran-Owned Small Business designation
- The 8(a) Program
- The HUBZone Program
Listen to our first government contracting episode: https://apple.co/3rEXh2D
Links and acronyms referenced in the show:
- NAICS (North American Classification System)
- SAM (System for Award Management)
- FAR (Federal Acquisition Regulations)
- 8(a) Program
- HUBZone (Historically Underutilized Business Zone)
- SBA Certification: Economically disadvantaged woman-owned
- SBA Service-Disabled Veteran program
Visit the episode page at https://contractorsuccessforum.com/setaside for more details and a transcript of the show.
Find all episodes and related links at ContractorSuccessForum.com.
Join the conversation on our LinkedIn page: https://www.linkedin.com/company/contractor-success-forum
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Rob Williams, Profit Strategist | IronGateESS.com
Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | McWins.com
[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today, we’re talking about qualifying for government set-aside contracts because we have our experts, Stephen Brown, with McDaniel-Whitley bonding and insurance company. And we also have our expert, Wade Carpenter, Carpenter, and Company, CPAs. And I am Rob Williams, IronGate Entrepreneurial Support Systems. So Stephen and Wade, what is it about these set-aside contracts and why is that so attractive for our guys?
[00:00:37] Wade Carpenter: Well from my standpoint, I do see people getting federal contracts and a lot of times, they don’t know a lot of these things. So I’m hoping Stephen’s gonna enlighten a lot of people on these things. And maybe they can go down a different path.
[00:00:49] Rob Williams: Lots of opportunity, I think, to be unique and stand aside and not be in the crowd, if you can qualify and get into part of that, right? Or Stephen, what are we even talking about here? What are these set-aside contracts?
[00:01:01] Stephen Brown: Well, we had a show on federal contracting, getting into federal contracting. Specifically, how do you do it? How do you get started? And the great thing about getting into federal contracting is the Small Business Administration has been charged with helping people learn how to do government contracting, how to get signed up. The technical assistance to doing business with the federal government. And also in that episode, we talked about how the rules involving government contracting are all set up in a FAR Act. Federal Acquisitions Regulations. It’s the rule book. And in the rule book, the FAR access that the small business administration is charged with seeing that certain percentages of government contracting go to certain set-aside businesses. And you may be one of those set-asides. And if you are, you need to take advantage of this because the federal government, through all these set-aside programs has benchmarked 33% of all their government contracts, 50 plus billion dollars with a B, 33% to go to small business and small business set-asides. So that’s what I thought I’d talk about a little bit today is tell you guys about what those set-asides are and what the qualifications are. And any questions, just let me know.
[00:02:28] Rob Williams: No, I think that’s great. I know Wade and I, in our programs, in our Profit First and our Pumpkin Planning, we always talk about how you can be unique and how you can set yourself aside to be different than everybody. So this gets you in a little bit smaller pool, so you’re not just in there with everybody else bidding it. If you can narrow the number of bidders and the job scope, that theoretically should hopefully improve your margins and your jobs. And if you can get some of these jobs that land inside your expertise, your area of expertise, boy that’s, that’s something else.
Stephen, I am kind of wondering one of my first thoughts is also, do people see what these qualifications are? Do they try to target their company to fall within those guidelines as well? Or is it just something that you see where you are and you just match it?
Qualifying for set-aside contracts
[00:03:16] Stephen Brown: Well, let me tell you about the different designations. Because sometimes, you can have a lot of different designations all on one. And then, you’re even more valuable to the federal government, and to another contractor that wants to use you as a sub and needs your certification in those small business standards. would that help?
[00:03:38] Rob Williams: You got it, man. That helps a lot. Let’s do it.
[00:03:41] Stephen Brown: All right. Let’s start quickly just explaining about the number one thing is we talked about getting set up on SAM. Rob, you are confused about, yeah.
I know. I–
[00:03:56] Rob Williams: those Costco? I–
Qualifying as a small business
[00:03:57] Stephen Brown: SAM.gov. That is how you put your information in there. And then the NAICS Code. So if you’re like a heavy, horizontal contractor doing you know, pipe work and so forth, the NAICS code is 237990. Okay. So that’s what you do. So don’t go in there and find 80 different NAICS codes. Put exactly what you do best because that’s going to track you. That’s how the government contractors track you. That’s how The other contractors that need you as a sub track you. Put in what you do. That’s my best advice.
Okay. So you’d get that done. And once you put your NAICS code in, like general contractor code, then, it tells you what your small business is and if you qualify. They take your sales over the prior three years. For example, $34 million. That means if you average $34 million in sales over the previous three years, you are not a small business, but if you didn’t, you are a small business. So that’s number one, you qualify as a small bit.
Small disadvantaged business
[00:05:08] Stephen Brown: Then the other subcategories are– cause 10% of the work is set-aside for small business and small disadvantaged business. So small disadvantaged business means that 51% of the company is owned or controlled by one or more disadvantaged person. And that that person must be socially and economically disadvantaged. Again, there’s a way that you click on a link to see if you are socially and economically disadvantaged. I know we all feel like we are that way all the time, but it’s a standard set of rules. So then you must also qualify for that size goal of being a small business. So that’s called SDB: Small Disadvantaged Business. So that’s number one. is.
[00:05:58] Rob Williams: Doesn’t just mean you’re broke, right? That’s just, that’s your, maybe your situation in life or some situation that–
[00:06:04] Stephen Brown: Yeah,
[00:06:04] Rob Williams: Doesn’t that you have no money.
[00:06:06] Stephen Brown: Makes it more likely for you to be disadvantaged.
[00:06:10] Rob Williams: Got it.
[00:06:10] Stephen Brown: So the government just won’t take your word for it that you’re broke and you’re socially and economically disadvantaged.
[00:06:17] Rob Williams: So you can be rich and then still be qualified for that though.
[00:06:21] Stephen Brown: Yeah. You know, I feel that way every other day. But nevertheless. So that’s the first thing. Are you a small business? And if so, are you a small disadvantaged business? Okay. The next category is, are you a Woman Owned Small Business? They call it WOSB. And a federal government, just like the military, has acronyms for everything. So, as you’re learning and studying this stuff, know the acronyms. SDB, Small Disadvantaged Business. Then Woman Owned Small Business. And then there’s a sub category of that called Economically Disadvantaged Woman Owned Small Business. WOSB contracts, 5% is the target for projects going to Woman Owned Small Business. And guys in government contract, you don’t use the word projects. It’s called task order award. That’s the name of a project. So let me point that out.
The next thing on about Women Owned Small Business that you need to know is that 51% of the business has to be owned or controlled by women. Women manage the day-to-day operations and they make long-term decisions. And the economically disadvantaged is you’ve got to be a WOS B, but you also you have to be owned by one or more women, each with a personal net worth of less than $750,000. And owned by one or more women with at least $350,000 or less in adjusted gross income, averaged over the previous three years. And you can have no personal assets valued over $6 million. That’s how they tell whether you’re Economically Disadvantaged, Woman Owned Small Business.
[00:08:08] Rob Williams: That’s disadvantaged. If you don’t have any assets over $6 million. That’s a pretty hard bar to cover there, isn’t it?
Tracking your qualification for set-aside contracts
[00:08:16] Stephen Brown: Well, it really is. And you say, well guys, how do I get qualified for this? And how do they track this? And it changes.
Well, you’ve got to get certified through the SBA, number one. And number two, because the SBA administers the program, you gotta be recertified every year. So, you’ve got to give them information to prove these things and they are tangible and measurable. So any questions guys?
[00:08:42] Wade Carpenter: I was going to comment on, because I’ve helped contractors both get the certifications as well as maintaining them and, they will do audits. So say a Woman Owned Small Business. They have to kind of come in and see that woman is actually actively making decisions, and it’s not just they put their spouse on there. They will dive into the day-to-day things that are going on on these things.
[00:09:06] Stephen Brown: They really will Wade. And, Also if your competitor contests a project by saying, Hey, that Woman Owned Small Businesses not really owned and operated by a woman. It’s owned and operated by someone else, a husband or another entity.
[00:09:24] Rob Williams: I’ve seen that before. I’ve definitely seen that.
[00:09:27] Stephen Brown: Well, not only will they throw you out and penalize you and hit you with all kinds of fines, but you will be banned from federal country. Banned. So, it can put you out of business and all your affiliated companies.
[00:09:39] Rob Williams: That’s a great point because I think a lot of people don’t realize that, especially as they’re getting into it, like, oh yeah, I’m just, I put my wife on there is 51%. She’d never been to the office before but she’s on there. She’s 51%.
[00:09:52] Stephen Brown: Well, I guarantee you that wife is making longterm decisions about her husband, but got to long term decisions about the business. And that’s usually a wife that is just actively involved in day-to-day operations. And I’ve seen some successful situations like that. The wife drives sales. The wife pushes for the projects. It just depends on the gifts that the wife has, but nevertheless, Woman owned Small Business is one category.
[00:10:21] Rob Williams: Stephen, I just came from the World of Asphalt and there was the Women of Asphalt. It wasn’t like a calendar. Not that they were very attractive women, but they were in the Women of Asphalt. And it was so interesting to see that. And I was wondering–
[00:10:38] Stephen Brown: They don’t put out a calendar?
[00:10:39] Rob Williams: They, they didn’t, They didn’t. Um, you know, they should. They were cute. They were cute, but that’s not important. What is important that they had that booth and I was there and I was like, I was thinking about them and I actually gave them some cards to our podcast here so we probably have some of them listening today.
[00:10:58] Stephen Brown: Well, hey.
[00:10:59] Wade Carpenter: Yeah. In which case you just turned all that group off. So.
[00:11:02] Stephen Brown: No. I certainly didn’t mean to sound sexist when I said a calendar, but it does sound like title of a calendar. These women are serious about owning and operating and running their business, and and women are not historically the prevalent contractors doing government work. So this is just a set-aside to help a woman owned business get started and get going.
[00:11:26] Rob Williams: We should probably have some of them on our show actually, too. So if you’re listening and you want to be on our show, Women of Asphalt or something else, give us a call, contact us. Maybe we can have you as a guest.
[00:11:36] Stephen Brown: And women don’t be mad at us. We’re men, were idiots. So, you know, we’ve got three men.
[00:11:41] Rob Williams: Well, if anybody’s very serious about anything, you’re not listening to our show anyway. Larry Moe and Curly here, we’re, we’re on the entertainment scale here.
[00:11:49] Stephen Brown: Well,
[00:11:49] Rob Williams: Not that we don’t have valuable information.
[00:11:51] Stephen Brown: Well, you’ve got a good point. Okay. So Women Owned Small Business is another category.
The next one. So again, Service Disabled Business, SDB. Woman Owned Small Business, WOSB. Economically Disadvantaged Woman Owned Small Business, EDWOSB. So I’m going to keep trying to imprint these acronyms in there.
[00:12:13] Rob Williams: And we’re gonna have these in our show notes, too.
Veteran-Owned Small Business
[00:12:16] Stephen Brown: Veteran Owned Small Business is next. So the subcategory of Veteran Owned Small Business, VOSP, is Service Disabled Veteran Owned Small Business. Service disabled. So if you’re a veteran-owned business, to qualify, you gotta be at least 51% owned or controlled by a service disabled veteran. This is administered through the VA, not the SBA, but what’s interesting in 2023 it’s going to move to that SBA. So, there’s just a point.
But Veteran-owned Small Businesses, 51% or more owned by a service disabled veteran, one or more service disabled veteran is in charge of day-to-day operations and long-term decisions. And you must have a service connected disability to be a service disabled veteran. So, 3% of that work is set-aside for Veteran Owned Business and Service Disabled Veteran Owned Small Business. So really just being veteran owned doesn’t really get you the set-aside as much as the service disabled veteran-owned small business.
[00:13:24] Wade Carpenter: I’ve had contractors that you wouldn’t think they were qualified, but they may have something like some hearing loss or something that really doesn’t affect them, and a lot of times they will qualify for things like that. So, you just, I mean, I’ve seen situations where you wouldn’t think, somebody would qualify, well, people that have gone through Iraq and Afghanistan, they may qualify and they may not know it. So I just want to throw that out there.
[00:13:51] Rob Williams: Yeah.
[00:13:52] Stephen Brown: Take advantage of it if you can.
[00:13:54] Rob Williams: yeah. You know, all these acronyms and stuff. There’s I was going through our webpage the other day, ContractorSuccessForum.Com. And the transcript of this, it’s probably not on your iPhone, but the transcript of this is on the website. So if you’re listening in your truck, which most of our listeners probably are, you can go and get that information right there. ContractorSuccessForum.Com, go to the episode and get all this stuff in writing. So I know everybody’s diligently taking notes and pulling over on the side of the road to write all this down. They don’t have to, they can go to ContractorSuccessForum.com. And go to this episode and get that or go to LinkedIn to the Contractor Success Forum and ask us these questions.
[00:14:36] Stephen Brown: Okay. All right. Okay. Next one. 8(a) program. 8 A. What does that mean? The Small Business Administration set it up and it’s listed as 8(a) program, in the FAR regulation. So 8(a) program is a special, this is a nine-year program. And basically they consider the first five years of that program as a learning program. And the next four years is going out and doing program. That doesn’t mean as you’re learning, you’re not doing projects, but they are setting aside in the 8(a) program like we did talk about earlier, Wade, $150,000 and less projects just to get you started. Just to get you going. These are set aside in the 8(a) program.
[00:15:26] Rob Williams: Everybody that’s thinking about, they’re racking their brains to try to think of what all eight A’s these are, this is not eight different A’s. This is section 8(a), right?
[00:15:36] Stephen Brown: Section 8(a), Rob. Excellent point.
[00:15:38] Rob Williams: 8(a). I know all of our listeners are wondering, because I started wondering, what are the eight different A’s? They’re not!
[00:15:43] Stephen Brown: Okay. Again, SDB, Small Disadvantaged Business, Woman Owned Small Business, WOSB, Veteran Owned Business, Service Disabled Veteran Owned Business, SDVOSB.
And then there’s the 8(a) contract, which 5% it’s the goal of government contracting to go to 8(a) contractors. That’s a lot. Now, as you become an 8(a) contractor and you qualify, you also get a lot of technical assistance and education programs. There’s 8(a) directors in every region and they are in charge of your training and to make sure you get these projects. So talk about learning how to do business the government way. Becoming an 8(a) contractors and valuable. And I’ve had so many contractors graduate from the 8(a) program, and it was a huge stepping stone in their growth. So the 8(a) program, in order to qualify, you have to be a Small Disadvantaged Business, 51% or more of your company owned or controlled by a small disadvantaged business. And then you’ve got to have one or more, small disadvantaged business owner do day-to-day operations and make long-term decisions. We talked about that. And you have to have a personal net worth of $750,000 or less, Adjusted Gross Income of $350,000 or less, assets of $6 million or less. Just like the Economically Disadvantaged Woman Owned Small Business. You also have to be able to demonstrate good character and demonstrate potential in business of at least two years. So you’ve been in business at least two years. You’ve shown that you know your business, you’re a good character. You pay your bills more or less on time and you finish projects. Then the 8(a) program is for you. And it’s hard work, but the payoff is huge. And you learn a lot. And it doesn’t cost anything. So please, if you fit in those categories, try to become 8(a) contractor and talk to your bonding agent also about how that 8(a) designation can help you partner up with other contractors because other contractors that are not small business, they are looking for these people to partner up with because literally, there’s a participation percentage set in the contract that you get to take off the final fixed price if you are designated one of these.
[00:18:09] Stephen Brown: And then the last one is HUBZone. Hub, like hubcap. HUBZone. And guys, that stands for Historically Under-utilized Business Zones, HUBZones.
[00:18:22] Rob Williams: I’ve actually done some of those projects before.
[00:18:25] Stephen Brown: Well, well, you are it’s, you are either located in a HUBZone, Rob, you know, your, your business is physically located in a HUBZone and 10% of all contracting business is being set aside for these HUBZone contractors. 10%. That’s huge.
[00:18:45] Rob Williams: Yep. I think you can get two different ways. Cause I think we had two– like one, we were in the poorest county in Mississippi, my one business was. But then also the project I believe qualified, I think that was still HUBZone, because the project was there. Doesn’t that work too? Or?
[00:19:00] Stephen Brown: Yeah. There is a map, that you can Google and look up HUBZone. You can see if where you live is in a HUBZone. And the HUBZones are set, usually for economically disadvantaged part of the state that the governor sets up as a HUBZone. So you’re going to see a lot of HUBZones in there, guys. And it changes every um, five–
[00:19:26] Rob Williams: Our uh, Mississippi property would go up and down. I think we were right on the barrier. It’s oh God, this year we were not in that percentage of the employment. We had to look in that we’d be like a few dollars above whatever that number was, or below it, as it were like, oh man.
[00:19:43] Stephen Brown: Yeah. I have a customer that’s right on the Tennessee Mississippi line and they’re physically in Mississippi, but if they were just literally a few hundred yards above the line they would be in the HUBZone for federal contracting. It’s a sad, but true.
But so what makes it HUBZone? I told you how to look up to see if you’re HUBZone. 51% of your business has to be owned and operated by a US citizen, of course. And then your primary office, your head location, has to be physically located in a HUBZone. And last but not least 35% of your employees have to live in the HUBZone. So those are the three criteria. So it’s just not a matter of bouncing around and moving your physical office into a hub zone. There’s that employee qualification too. So, guys HUBZone’s huge.
[00:20:35] Wade Carpenter: Yep. I know Stephen you were talking about before, people are looking for contractors right now to partner with. I’m just starting to see some of these, like from that infrastructure bill that passed here at the Atlanta airport, they’re giving out some of those contracts and they are begging people to work with them on these projects.
And I hate to say it but not all federal contracts are profitable. You still have to bid them, but this stuff is like, I hate to say stupid profits, but there are great profits to be made in the right type of industry. So I think this has been great.
[00:21:12] Stephen Brown: Good. I had a customer with a project out of state and low bidder was 5% less than them, but they were awarded it because they were HUBZone and they had a 10% price preference. It’s real, it’s huge for federal contracting. So I’d like to urge our listeners if you’re not doing federal contracting work to just look into it, just learn a little bit about it. And as you do it it’s incredible. It’s a step-by-step process of learning and the fundamentals are easy to get into federal contracting, but mastering it as an art form. Just like construction accounting and construction business coaching, huh?
[00:21:55] Wade Carpenter: Yup.
[00:21:57] Stephen Brown: Yeah. And bonding.
[00:21:58] Wade Carpenter: Yeah. So last point I was gonna make too was we were talking about a lot of these contracts require certified payroll. And we did an episode earlier, I don’t know, six months ago or so on certified payroll. I didn’t know if you wanted to comment on that part too?
[00:22:15] Stephen Brown: Yeah. As a small business, if you’re doing projects under $50 million, generally they don’t mandate that you have an approved certified job cost program in place, but you’re not going to go very far if you’re not. And if you do have that job cost accounting system in place, you are gonna be, especially in something like a Multiple Award Task Order Contract, a MAYTOC, then you’re going to be better received because they know that you’re professional enough to get them that information that they have to have.
[00:22:48] Rob Williams: That’s awesome. Great tips for our listeners and our contractors. More and more wonderful ways for our contractors to be successful on the Contractor Success Forum.
[00:23:02] Stephen Brown: That’s what we’re all about, guys.
[00:23:03] Rob Williams: That’s right. Building our profits and building our businesses and becoming more successful and profitable.
All right, guys. Well, thanks a lot again. Anything else we got to add on this great government contracting set-aside contract show?
[00:23:17] Stephen Brown: No.
[00:23:18] Rob Williams: Alright, thanks a lot guys. And this has been the Contractor Success Forum, and there are a lot of acronyms. So don’t forget on this one in particularly that we do have, if you’re on like iPhone or something like that, you can go to ContractorSuccessForum.Com and see the whole transcript on these episodes.
Go to LinkedIn and look up the Contractor Success Forum and ask us questions about that. So we’re excited about that. So thanks a lot for joining the Contractor Success Forum today, and we’ll see you on the next episode.