The federal  government has enacted numerous programs to advance the opportunities of small and disadvantaged businesses.  These policies are not necessarily the most progressive or the most well-enforced, but they are responsible for many advances, and minority-owned businesses should be aware of all the programs they are eligible for.  Better utilization of existing policies will expand the opportunities of minority firms and allow businesses and communities to evaluate and learn from them so as to generate more successful local programs. 

Minority Business Enterprise Development

Created in 1983 by Executive Order 12432, the minority business enterprise development program requires each department with substantial procurement or grantmaking authority to develop a Minority Business Enterprise (MBE) development plan. These plans are intended to encourage minority businesses to compete for federal contracts.  To carry out these plans, departments from the Environmental Protection Agency to the Department of the Interior each operate their own Office of Small Disadvantaged Business Utilization (OSDBU).  While some of these offices are essentially inactive, it is useful for advocates to investigate the OSDBU programs offered by agencies with major work contracts in their communities.

In addition, the Small Business Reauthorization Act of 1997 increased the goals for all government procurement from 20 percent from small businesses to 23 percent.

Small and Disadvantaged Business Certification

The Small Business Administration (SBA) operates programs to assist small disadvantaged businesses (SDB).  To qualify as an SDB, a business must:

1. Be at least 51 percent owned and controlled by one or more socially and economically disadvantaged individuals (African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, Native Americans, or other individuals who can show a "preponderance of evidence" that they are disadvantaged);
2. Be owned by an individual with a net worth less than $750,000; and
3. Meet industry-specific size standards.

Certified businesses are added to an on-line database - Pro-Net - where contracting officers can search for potential suppliers or subcontractors.

SBA offers SDBs price evaluation adjustments of up to 10 percent when bidding on federal contracts in industries where the U.S. Department of Commerce has determined that SDBs are underrepresented because of the effects of ongoing discrimination (including agriculture, fishing, construction, mining, transportation, manufacturing, retail trade, finance, insurance, and real estate service among others).  SBA also provides incentives for prime contractors who achieve SDB subcontracting targets. 

8(a) Business Development Program

The SBA's 8(a) program offers more intensive support to disadvantaged firms, helping them access management expertise, technical assistance, and capital.  The 8(a) program is more competitive than general SDB certification: in addition to meeting the SDB requirements, eligible businesses must have been in operation for at least two years and business owners' net worth cannot exceed $250,000.

The program's goal is to teach small companies "how to compete in the federal contracting arena and how to take advantage of greater subcontracting opportunities available from large firms as the result of public-private partnerships."

Small businesses in 8(a) can participate in the Mentor-Protégé program where they form a relationship with a successful business, which provides technical and managerial assistance. The relationship may result in joint-venture opportunities to raise capital.  In addition, 8(a) firms can receive sole-source contracts, up to a ceiling of $3 million for goods and services and $5 million for manufacturing. 

HUB Zones

The "Historically Under-Utilized Business Zones" empowerment contracting program was enacted as part of the 1997 Small Business Reauthorization Act and is run through the Small Business Administration. It encourages economic development in areas defined as "historically under-utilized business zones" and ensures federal contracting opportunities for qualified small businesses located in those areas.  To qualify, a small business must meet the same requirements as SDBs, be located in a HUBZone, and employ at least 35 percent HUBZone residents. 

In 1997, the government set a goal that HUBZone contracts would account for 2 percent of all government procurement in 2001; 2.5 percent in 2002; and 3 percent in 2003 and beyond.

Department of Transportation's Disadvantaged Business Enterprise (DOT DBE)

The Department of Transportation, which oversees a great deal of federal construction, has a significant impact on minority contractors.  Its DBE plan was revised in 1999 to "scrupulously adhere" to the Adarand v. Pena decision.  It still includes percentage goals-14.6  percent for disadvantaged small businesses in FY 2002, for example-but  the guidelines have been very carefully tailored:

• Quotas are prohibited;
• Recipients must set goals based on local evidence of the actual availability of qualified DBEs;
• Recipients must use race-neutral methods (like outreach and technical assistance) as much as possible to meet overall goals;
• Business owners with a personal net worth of more than $750,000 (excluding the value of the primary residence and the ownership interest in the business) may not participate in the program;
• Firms owned by socially and economically disadvantaged white males must be allowed to participate as DBEs;
• In order to minimize burden on non-DBEs, recipients must address "over-concentration" of DBEs in certain fields and ensure that bidders who make good faith efforts to obtain DBE participation will not lose contracts;
• Recipients have substantial flexibility to adapt the program to local conditions, including a program waiver provision that allows recipients to seek Department of Transportation approval for alternative ways of running the program;
• Contract goals can be waived if bidder demonstrates good faith efforts to meet the goal;
• Individual firms must graduate from the program if they exceed the small business size caps or if the firm's owner exceeds the personal net worth cap; and
• To ensure that the program stays consistent with demonstrated need, the entire DBE program will expire in 2004, unless it is reauthorized by Congress.

The Department of Transportation (DOT) has consistently met or surpassed its goals for minority participation.  The following table demonstrates DOT's achievements in FY 2002.

Department of Transportation* Major Procurement Preference Goals & Achievements FY 2002
Contract Distribution	Goal (percent)	Achievement (percent)	Achievement ($)
Contracts to Small Businesses	32.0	53.36	$1,282,908
Contracts to Small Disadvantaged Businesses	14.5	16.46	$395,872
Contracts To Small Disadvantaged Business Non-8(a)	3.0	5.38	$129,398
Contracts To Small Disadvantaged Business 8(a)	11.5	11.08	$266,474
Contracts to Women's Business Enterprise	5.0	3.83	$92,068
Contracts To Service-Disabled Veteran-Owned Small Businesses	3.0	0.16	$3,762
Contracts To Certified HUBZone Small Businesses	2.0	3.05	$73,243

*Preliminary Data. Dollars in thousands.
(Chart taken from http://osdbuweb.dot.gov/about/dotcont.html )

The Department of Transportation also runs a Bonding Assistance Program.  The program helps disadvantaged business enterprises obtain bid, payment, and performance bonds for transportation-related projects by guaranteeing 80 percent of losses on contracts up to $1,000,000.  The actual bond approval and issuance are performed by approved local surety companies that accept the guarantee from the Department of Transportation.

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