|
|
|
Small Business Set Asides
NAFTA Chapter 10 permits US government to reserve, or "set aside" contracts
for American small business. While that definition can limit Canadian participation,
teaming or subcontracting can sometimes open doors.
Definitions
Preference programs
Partnering with US small business
Establishing a US small business
Frequently-asked questions
Definitions
The U.S. Small Business Administration has established preference programs to encourage the participation of US small business in government contracting.
Canadian firms generally are not eligible for these programs, and should always check solicitation notices and documents to identify whether a contract is set-aside. A Canadian firm's operations in the United States might qualify as a small business if it meets requirements (see FAR Part 19). For US government contracting purposes, a small business is
- an entity organised for profit
- located in the US,
- that makes a significant contribution to the US economy
- qualifies under the size standards set forth in 13 Code of Federal Regulations (CFR) Part 121.201, based on revenue (for services) or number of employees (for products) and the NAICS Code of the item being procured.
Preference Programs
Please contact us if you face difficulties with these provisions
100% set-asides require contracting officers to set aside ALL opportunities greater than US$2,500 for small business if there is a reasonable expectation that (1) at least two responsible small businesses will make offers, and (2) the small businesses will bid fairly and competitively at reasonable prices. This is also known as the "rule of two" - FAR 19.502-2(a-b). Partial set-asides reserve a portion of a procurement for small businesses, if the contracting officer believes that the contract can be divided into two or more economic production units, one or more small business concerns are likely to have the capacity to satisfy the partial set-aside at a fair price and a total set-aside is not appropriate - FAR 19.502-3. Small Business Subcontracting Plans ensure that small businesses receive a share of subcontracting dollars when a procurement is awarded to a large business. All prime contractors and subcontractors holding a subcontract greater than US$500,000 (US$1 million for construction) must file a plan that outlines how they expect US small business to participate in that contract. Canadian companies performing all the work outside of the US are NOT required to file subcontracting plans. Canadian firms that do not meet the definition of US small business may be less attractive as partners to US companies that seek to achieve a subcontracting goal. A Small Disadvantaged Business (SDB) is at least 51 percent unconditionally owned by one or more individuals who are deemed to be socially and economically disadvantaged. If a publicly-owned business, at least 51 percent of its stock must be unconditionally owned by one or more socially and economically disadvantaged individuals who manage and control the firm on a daily business.
8(a) Program: provides advantages to SDB participating in a specific SBA program named after the section of the Small Business Act that created it. Small minority-owned businesses participate for a certain number of years after which they must graduate from the 8(a) program. Companies in the 8(a) program benefit from sole source and limited competition contracts let by government departments. The contracting officer, working in conjunction with the SBA, may reserve an acquisition for the SBA's 8(a) program participants. Agencies can also sole source contracts to 8(a) firms. Canadian companies cannot compete for contracts that are set aside for the 8(a) program, but may partner with 8(a) firms (check the ProNet 8(a) listings). Small Disadvantaged Business Price Adjustment and Evaluation Factor applies one of the three mechanisms to promote SDB participation in federal contracts:
- a price evaluation adjustment developed by the Department of Commerce of up to 10% in most SIC Major Groups and regions;
- a source selection evaluation factor or subfactor developed by each agency and primarily used to evaluate SDB participation in subcontracts; and
- monetary incentives to contractors who exceed targeted use of SDBs in subcontracting.
The Very Small Business set aside pilot program defines a very small business (VSB) as one with 15 or fewer employees and average annual receipts of less than US$1 million. Sets aside contracts between US$2,500 and US$50,000 for supplies or manufactured items for VSB if the buying activity is located within the geographical area served by a designated SBA district. Sets aside contracts between US$2,500 and US$50,000 for services and construction to be performed in the geographic area served by the SBA district office for VSB. The Historically Underutilized Business Zone (HUBZone) program requires set asides and creates preferences for small businesses located within economically depressed areas. Unlike other small business concerns, HUBZone companies must be 100% owned and controlled by Americans. For more information, visit the HUBZone web site.
Establishing a US small business
Under limited circumstances Canadian companies can be considered small businesses if you meet the various criteria under 13 CFR 121 (e.g.: having a substantive US presence (e.g.: manufacturing in the US using US materials, employing US labour, paying US taxes, etc) and FAR part 19.02. Consult the Small Business Administration if you are contemplating trying to meet the small business criteria.
These notes are intended for Canadian companies seeking to supply goods or services to US public sector buyers or prime contractors. While we have made our best efforts to ensure the accuracy of this information, it does not constitute legal advice.
|
