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Federal Government Directs 12% of Federal Contract Dollars to Small Disadvantaged Businesses

For Fiscal Year 2023, the Federal Government has issued guidance that 12% of all federal dollars spent on government contracts must be awarded to small disadvantaged businesses (SDBs).  This announcement is not a totally new strategy, but rather sets forth the new annual target for 2023, with the ultimate goal of reaching 15% by 2025 in accordance with President Biden's agenda

To qualify as an SDB, the qualifying company must meet the following criteria:

  • 51% owned and controlled by one or more disadvantaged persons. Control in this context means, strategic policy setting and day-to-day management. 
  • The disadvantaged person must be socially disadvantaged and economically disadvantaged. Certain groups automatically qualify as socially disadvantaged, such as Black Americans, Hispanic Americans, Native Americans and others.  However, an individual that is not a member of a group that is automatically presumed to be disadvantaged may present evidence to obtain the status.  
  • The firm must be small according to the Small Business Administration's (SBA) size standards

President Biden's agenda was put into place because Fiscal Year 2020 data showed that 75% of federal contract dollars were being awarded to large businesses, and of the 25% awarded to small businesses, less than 10% was awarded to SDBs.  See SBA Releases FY 2020 Disaggregated Contracting Data. The Director of OMB, Shalanda Young, has reported that, since this agenda was implemented, in FY 2021, the Federal government awarded $64 billion in contracts to SDBs and women-owned businesses. 

If you think your company should be, but is not currently registered with the SBA as one, you can take steps now to evaluate whether your company meets all of the requirements. Once you've determined that your company meets the qualifications to apply as an SDB, you can start the process to register on SAM.gov.  

The Office of Management and Budget guidance on Tuesday directed agencies and the Small Business Administration  to negotiate new contracting goals and to award at least 12% of all federal contract spending to SDBs in FY2023.

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sdb, government contracts

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