Chapter 3: Small Business Program Eligibility
This part sets forth basic policy and general information about how to identify and verify a small business concern. This part expands on key aspects of the Federal Acquisition Regulations (FAR) and the U.S. Health and Human Services Acquisition Regulations (HHSAR).
Eligibility for set-aside contracts and other assistance programs available to small businesses is limited to small business concerns as defined by the SBA standards. In federal procurement, a small business is a concern, including its affiliates, organized for profit, independently owned and operated, not dominant in the field of operation in which it is bidding on Government contracts. Small business concerns must qualify according to the industry criteria in the SBA size standard regulations, 13 Code of Federal Regulation (CFR) Part 121. The SBA Administrator establishes standards for classifying small businesses and has the sole authority to determine a firm's size status.
Each HHS solicitation shall contain the appropriate North American Industry Classification System (NAICS) code and corresponding small business size standard for that requirement, whether or not the solicitation is set aside for small business (refer to the FAR Subpart 19.3).
- Determining the NAICS Code
The NAICS was developed jointly by the United States, Canada and Mexico to provide new comparability in statistics about business activity throughout North America. For size standard purposes, requirements are classified in the industry whose definition best describes the principal nature of the product or service being acquired.
The online NAICS manual includes definitions for each industry and tables showing a comprehensive index--features also available at http://www.census.gov/epcd/www/naics.html.
A product or service should be classified in only one industry. When acquiring a product or service that could be classified in two or more industries with different NAICS codes and size standards. The CO may also apply the NAICS which is dominant in describing the principal purpose of the work involved. This may or may not be the NAICS code for the industry accounting for the greatest percentage of the contract price.
If a solicitation requires more than one item and allows offers to be submitted on any or all of the items, the offeror must meet the size standard for each item it offers to furnish. If a solicitation has more than one item and it requires offers on all or none of the items, an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price.
The CO should consider previous government requirements' (purchase orders, contracts, etc.) classifications of the same or similar products or services to determine the appropriate NAICS. The CO is encouraged to consult the SBS prior to finalizing a determination of requirements with multiple NAICS.
- Determining the Small Business Size Standard
Size standards are established according to a firm's average number of employees during the preceding 12 months or its average annual receipts for the past three (3) fiscal years (FAR Subpart 19.101). A NAICS code will have a size standard expressed in either number of employees or dollars of receipts, but not both. To make a determination of its size, a company must include the employees or receipts of its affiliates.
Once the NAICS code has been established, the corresponding small business size standard can be found by consulting the SBA size standard regulations published in 13 CFR Subpart 121.201 and at http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards
In August 2009, SBA increased all revenue based small business size standards. These size standards were adjusted 8.7% for inflation and are incorporated into Central Contractor Registration (CCR) and the Dynamic Small Business Search (DSBS). The CO should confirm a business' size according to the NAICS listed in their CCR profile, which is edited by SBA. For more information, please see the SBA website on the increased size standards.