Small Business:

Status of Small Disadvantaged Business Certifications

GAO-01-273: Published: Jan 19, 2001. Publicly Released: Feb 20, 2001.

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The federal government has an annual, governmentwide procurement goal of at least five percent for small disadvantaged businesses (SDB). SDBs are eligible for various price and evaluation benefits when being considered for federal contract awards. SDB firms must have their SDB status certified by the Small Business Administration (SBA). Because of concerns over reports that fewer businesses were receiving SDB certification than expected, GAO examined the SBA certification processes to (1) determine the number of businesses that SBA had certified as socially and economically disadvantaged since the implementation of the Small Disadvantaged Business Certification program and (2) obtain views on reasons for the current difference in the number of SDB certifications from the number that had previously self-certified as SDBs. SBA records show that 9,034 small business firms were certified as SDBs as of August 24, 2000. According to SDB officials, 6,405 of these were automatically certified because of their 8(a) certification. The number of SDBs that have been certified by SBA is significantly lower than the 30,000 projected by SBA based on the number of firms that had self-certified as SDBs. Possible reasons for this discrepancy include (1) company reluctance to participate because of their uncertainty as to when or how the program would be implemented, (2) the perception by businesses that the application process is burdensome, and (3) the belief by some companies that the benefits do not justify the effort.

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