The 8(a) Business Development Program, often shortened to just 8(a), is the Small Business Administration’s certification program that verifies socially and economically disadvantaged people or entities and subsequently provides benefits to those businesses that qualify, such as increased access to government set-aside contracts, as well as education and training. The current federal contracting goal is to award at least 5% of all federal contracting dollars to small disadvantaged businesses each year.
A certification agency is a third-party organization specializing in certifying business diversity status. The certification process usually includes a review of the owner’s diversity category, ownership, and financial documents, an onsite visit or interview, as well as an application fee.
The most common diversity certification types and agencies include:
Data enrichment, sometimes called a data cleanse or data scrub, is the process cleaning an organization’s master vendor file by comparing that file to an up-to-date third party master database in order to correct the organization’s bad or duplicate vendor data, as well as understand diverse supplier spend.
A typical data enrichment may help with vendor address standardization, contact information updates, diversity category & certification status, Tax ID, diverse supplier count and spend, and more.
A disability-owned business enterprise, often referred to as a DOBE, is a business that is at least 51% owned, operated, and controlled by one or more individuals with a disability.
A diverse business, often called a diverse supplier, is an organization that is at least 51% owned and controlled by a person(s) of a diverse category, including:
Diverse certification is when a diverse-owned organization employs a third-party certification agency to validate its diversity category and ownership status.
Being certified as a diverse business is a best practice in supplier diversity and is often required when participating in a corporate supplier diversity program.
The most common types of diverse certifications include:
Diverse supplier spend, often shortened to diverse spend, refers to the procurement dollars spent solely with small and diverse businesses, often expressed in a dollar amount or percentage of total procurement spend.
The effect of a purchasing event on the economy in a specified area or region, ranging from a single neighborhood to the entire world. Typically, economic impact would be discovered through an economic impact analysis and metrics include changes in business revenue, personal wages, and jobs created.
An economic impact analysis is the examination of the economic impact an organization, program, or project has on the economy of a specified region. It usually measures the cumulative changes in employment, earnings, and output in a given economy
Economically disadvantaged individuals are defined as those that have an abnormally difficult time gaining access to financial (credit and capital) opportunities, and as a result have had increased difficulty competing in the free market, in contrast to people with similar business who are not identified as socially disadvantaged.
There are no specific guidelines on the exact qualifications to be certified as an economically disadvantaged individual. Generally, however, the SBA requires the individual to be socially disadvantaged, as well as have a net worth of under $250,000.
The federal acquisition regulation (often referred to as FAR) is the primary set of rules that the executive agencies of the U.S. federal government must follow when acquiring goods or services by way of contract.
The FAR helps small and diverse businesses in many ways, one of which is through the observation of set-aside contracts.
Government contracting goals are federally mandated goals requiring federal agencies to spend a specific percentage of contract dollars with small and diverse businesses. These goals are negotiated by the Small Business Administration and each individual agency, which in aggregate form the government-wide goal.
The current government-wide spend goal for small businesses is 23% of all contract dollars with subset goals in the following:
The federal spend goals vs. actual federal spend can be found on U.S. government’s small business data website.
The historically underutilized business zones program, often shortened to HUBZone, is an SBA program that certifies and assists businesses located (as the name suggests) in historically underutilized zones.
The SBA’s certification program verifies small businesses located in a HUBZone and subsequently provides benefits to those businesses that qualify, such as increased access to government set-aside contracts, as well as education and training. The current federal government goal is to award at least 3% of all federal contracting dollars to HUBZone businesses each year.
A LGBTQ-owned business enterprise, often referred to as an LGBTQE, is a business that is at least 51% owned, operated, and controlled by a LGBTQ individual(s).
A master vendor file, sometimes called a supplier portfolio, is a complete catalog of an organization’s suppliers and vendors across every department. Master vendor files include data such as vendor contact information, diversity status, Tax ID, corporate hierarchy, spend amount, and more.
Master vendor files are often kept up-to-date by way of data enrichment – a third-party service that helps clean and correct the data of each vendor record.
An MBE is a business that is at least 51% owned, operated, and controlled by one or more minorities. Minority groups include African Americans, Hispanic Americans, Native Americans, Alaska Native Corporations, Indian Tribes, Native Hawaiian Organizations, Asian Pacific Americans, or Subcontinent Asian Americans. Individuals must be U.S. citizens and have at least 25% heritage in one of the minority groups.
Below are examples of racial and ethnically diverse identities in the United States. This guide is not meant to be comprehensive, and personal diverse identification may not be reflected.
Black and/or African-American: Descended from sub-Saharan racial groups.
Hispanic or Latino: Descended from Cuba, Mexico, Puerto Rico, Central and South America (including Brazil), and Spanish or Portuguese-speaking Caribbean nations.
Indigenous or Native American: Descended from Indigenous tribes and nations of the Americas. Includes Inuits, Native Alaskans, First Nations, and citizens of sovereign tribal nations.
Middle Eastern and North African (MENA): Descended from Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Syria, Tunisia, Turkey, United Arab Emirates, and Yemen.
East Asian: Descended from China, Japan, Mongolia, North Korea, South Korea, or Taiwan.
Pacific Islander: Descended from Indigenous tribes and nations from the three major subregions of Oceania; Melanesia, Mocronesia, and Polynesia. Includes Native Hawaiians.
South Asian: Descended from Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
A service-disabled veteran-owned small business, often referred to as a SDVOSB, is a business that is at least 51% owned, operated, and controlled by one or more service-disabled veterans, and that is also considered small according to the Small Business Administration’s constantly updated Small Business Size Standards.
A service-disabled veteran is a person with a service-connected disability as determined by the Department of Veteran Affairs or Department of Defense.
A small business is a company that is categorized as small, based on revenue and/or employees, as determined by the Small Business Administration’s classification layed out in it’s Small Business Size Standards.
The Small Business Administration, often referred to as the SBA, is an arm of the U.S. government that provides support and guidance to small businesses through education, financing, contracts, and other forms of small business assistance. The businesses in question must be located in the United States or a recognized territory.
The SBA is also responsible for maintaining the Small Business Size Standards, a document that defines the criteria to be considered a small business.
Learn more about the SBA by viewing the short video below.
A small business concern is another term for a small business’s bid on a government contract. Certain government contracts may give preference to small business concerns in an effort to promote small business growth in the United States. These types of contracts are referred to as small business set-asides.
A small business set-aside, often referred to as a set-aside contract, is a federal contract within an anticipated dollar value that is automatically reserved, or set-aside, for bids from small businesses.
These types of contracts were formed to help level the playing field and provide additionally contracting opportunities for small businesses. Within set-aside contracts, there are two different types: competitive and sole-source.
Competitive set-aside contracts are government contracts in which at least two small business concerns are able to perform the work or provide the products being purchased. In such instances, the contract is set aside exclusively for small businesses.
Sole-source set-aside contracts are contracts that can be awarded to a business without a competitive bidding process. While most contracts are competitive, this usually occurs when only a single business can fulfill the requirements of a contract.
The small business size standards are the Small Business Administration’s definition of small businesses based on either the number of employees over the past 12 months or the average annual receipts over the past three years, or both. The criteria vary depending on industry.
A small disadvantaged business is a small business that is at least 51% owned, operated, and controlled by one or more individuals who are both socially and economically disadvantaged.
The Small Business Administration (SBA), through its 8(a) Business Development Program, establishes the guidelines and oversees the certification of small disadvantaged businesses.
Socially disadvantaged individuals are defined as those that have been, historically, the target of negative prejudice based on their race or ethnicity within the larger American culture.
According to the SBA a socially disadvantaged person is someone “…who has been subjected to racial or ethnic prejudice or cultural bias within American society, because of their identification as a member of a group without regard to their individual qualities.” The following groups are considered to be socially disadvantaged by the SBA:
Supplier development is the process of working with suppliers to improve performance and expand their business capabilities to the benefit of the buying organization.
Supplier development is employed by many top-tier corporate supplier diversity programs because of the benefits:
Supplier diversity is the business practice of consistently including small and diverse-owned businesses in an organization’s procurement activities to improve bottom-line results, such as decreased supply costs via supplier competition, and product innovation through the entrance of new products, services, and ideas.
The supplier management process is the process of strategically managing an organization’s supplier portfolio to maximize the value of each supplier. The process is handled either through manual software such as Microsoft Excel or through third party supplier management software such as a supplier registration portal.
Managing a supplier portfolio with an established process can assist in keeping clear lines of communication, maintaining up-to-date supplier data, facilitating the entrance of new or potential suppliers, expediting and consolidating RFPs and RFQs, sharing supplier information with other stakeholders, and more.
A supplier registration portal is a web-based platform that allows an organization to manage its supplier database via supplier screening, supplier registration, supplier communication, and more.
These platforms are primarily built by third-party supplier diversity solution companies and are a facet of almost every top-tier corporate supplier diversity program.
A third party master database is a database compiled from several public and private sources—often hundreds—in order to create a complete database with all of the vendor data available. Ideally, to ensure that the sources delivering the data are up-to-date, the third party runs each source through a quality assurance algorithm to to ensure every diverse supplier record is accurate.
The amount of spend, or procurement dollars, that an organization spends directly with its tier 1 suppliers. In regards to supplier diversity, Tier 1 diverse spend represents only those dollars directly spent with diverse suppliers.
A company that supplies directly to the organization in question. Think of a Tier 1 supplier as the second-to-last link in the supply chain, with the buying organization being the final link.
The amount of spend, or procurement dollars, that an organization’s suppliers spend with their tier 1 suppliers. In regards to supplier diversity, Tier 2 diverse spend represents only those dollars spent with diverse suppliers.
There are three companies: ABC Corp., Processor Supplier Co., and Computer Parts LLC. ABC Corp. assembles and sells computers to the general public. Processor Supplier Co. assembles the processors needed to complete a computer. Computer Parts LLC, a woman-owned firm, creates the pieces necessary to assemble a processor.
In order to assemble their computers for the month, ABC Corp. needs to buy $1 million in completed processors from Processor Supply Co., who in turn needs to buy $100k in processor parts from the woman-owned company, Computer Parts LLC.
ABC Corp. wants to determine what their tier 2 spend is with diverse suppliers.
In the above example:
Keep in mind that the organization in question is ABC Corp. — they are trying to determine their tier 2 spend. This means that however much Processor Supply Co. spends with Computer Parts LLC, ABC Corp. can count as tier 2 spend. Concluding the example, ABC Corp. has a tier 2 diverse spend of $100k.
A company that supplies to an organization’s suppliers. Think of a Tier 2 supplier as the “supplier’s supplier”, or the third-to-last link in the supply chain.
A veteran-disability owned business enterprise, often referred to as a VDOBE, is a business that is at least 51% owned, operated, and controlled by one or more veterans with a disability not incurred during their time of service.
A Veteran-Owned Small Business, often referred to as a VOSB, is a business that is at least 51% owned, operated, and controlled by one or more U.S. military veterans, and that is also considered small according to the Small Business Administration’s constantly updated Small Business Size Standards.
As a side note, this type of business is sometimes called a Veteran-Owned Business Enterprise, or a VBE.
A business that is at least 51% owned, operated, and controlled by one or more women.