Enjoy the post from I'Ashea Myles-Dihigo:
Money for Women and Minority Owned Contracting Businesses… An Introduction to Winning Government Contracts - Part 1: Certifying as a Small Business
I can’t help but think of the song by The O’Jays, “For the Love of Money” when writing this piece, so let that soundtrack play in your mind’s ear as you read this.
I get together with a group of my friends about every 6-8 weeks for “Wine and Woodworking,” the brain-child of my talented friend, Natalie. As a construction lawyer, I felt the need to be able to at least attempt to build something with my hands. I get to interact with a cross-section of women. We laugh, drink wine, use table saws and various other tools and build amazing furniture pieces. At one of these events, a friend of mine approached me about starting her own construction company. I was all about helping her out. The information I found in walking her through the process is useful for any general contractor or sub-contractor that is looking to start or grow her or his business.
The current administration spoke very boisterously on the campaign trail about its plans to “revitalize” the country’s infrastructure. There is also a large push in many areas of the country for housing and new construction as affordable housing shrinks across the nation. This series will be used to introduce minority and women owned contractors, and those aspiring contractors to the United States Small Business Administration (SBA). It will provide a broad overview of the programs it offers to small businesses and specifically the certifications and set-asides for women and minority owned businesses which are in place to position those companies to win some of those government contracts.
In 2016, the U.S. Bureau of Labor Statistics reported that women in construction related fields represented about 9% of the workforce. Latinos and/or Hispanic Americans 28.9%, African Americans made up 5.8% and Asian Americans 1.9%. These statistics are shocking, especially when new construction is booming in almost every quadrant of the country. As the statistics show, construction is an often missed and lucrative field for minority and women owned businesses. According to the SBA, the U.S. government awards about $500 billion in contracts annually, and at least 23% of those contracts are awarded to small businesses. There are additional federal mandates that some of those dollars and contracts must flow to businesses that are owned by women and minorities.
Size Matters: Certifying as a Small Business
The SBA has identified various programs to encourage women and minorities to enter into federal government contracting. For the record, the business registration process for minorities, women and service-disabled and/or veterans does not differ at all from the standard process that all businesses must follow. You will need to register your business with the state, choose a name for your business, obtain a federal tax identification number, and secure any pertinent certifications and/or permits for your business to legally operate under the rules and laws of your state.
You must also ensure that your business is a small business as defined by the SBA. For most industries, small business is defined by either the average number of employees over the past 12 months or average annual receipts over the past three years. U.S. Small Business Administration (October 2, 2017), available at http://www.sba.gov. This is the definition used for the construction industry. This information will be used in the System for Award Management (SAM) when you register as a government contractor in addition to your self-certification as a small business. Id. Additionally, the SBA defines a small business as one that:
- Is organized for profit;
- Has a place of business in the U.S.;
- Operates primarily within the U.S. 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;
- Is not dominant in its field on a national basis. Id.
All federal agencies must use the SBA defined size standards for contracts identified as small businesses. Once you have gone through the process to determine if you’re in fact a small business, you may register and certify your business as such. The small business standards are the ceiling on how large your business can be and still remain classified as a small business under the SBA guidelines.
NAICS for General Contractors
Once you’ve determined your business size, you have to determine the classification under which your service would fall. The North American Industry Classification System (NAICS) is a system used to classify businesses to collect, analyze and publish statistical data related to the U.S. economy. United States Census Bureau (October 2, 2017), available at https://www.census.gov. The NAICS industry codes define establishments based on the activities in which they are primarily engaged in and services and/or goods a business produces.
The 2017 NAICS code for new single-family construction is 236115. Id. This code is used for general contractor establishments that are responsible for the entire construction of new single-family housing that is separated from neighboring houses by a ground-to-roof wall and has no housing units constructed above or below the unit. This code would cover firms working in single-family design for firms handling the construction management for single family homes.
The 2017 NAICS code for commercial and industrial construction is 236220. Id. This code is for contractors focused on the construction of commercial and institutional buildings and related structures, such as parking garages, airports, office buildings and schools. This code would also cover design firms and commercial and institutional construction management firms. There are also specialty codes within the construction subsection for contractors that specialize in trades like flooring (238330), electrical (238210), structural and foundation (238190) and roofing (238170). Id. The NAICS defines the size of the business by monies earned in annually in millions of dollars. Id. For instance, if you are a framing contractor (23810), your size standards are calculated in either the number of employees or average annual receipts; therefore, if your business, inclusive of subsidiaries and affiliates, makes less than $15 million in receipts annually, then you are considered a small business. Many small start-up to mid-sized construction companies would qualify under this definition of small business. So, some of the governmental contracts for construction work on roads, infrastructure, natural disaster relief and many other areas could go to businesses of this size.
Next time, I will talk about the government set-asides that are specifically designed to be awarded to businesses that self-certify to be women and minority owned and how to qualify for those contracts.
For more information on the SBA visit www.sba.gov.