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January 29th, 2007
Government Certification = Business
The federal government and many city and state governments have programs designed to increase the flow of contracts to minority-owned and women-owned businesses. Government Certification=BusinessA recent example of a firm winning status as a women-owned business is Public Communications Inc. of Chicago. It won the designation of "Women's Business Enterprise" from the Women's Business Development Center, Chicago, and is seeking similar recognition from city, county, state and federal offices.
Federal law establishes national goals for federal procurement of goods and services: 20% of contracts to small businesses, 5% to small disadvantaged businesses (SDBs), and 5% to women-owned businesses. SDBs are businesses owned by persons from certain minority racial and ethnic groups.
The Federal Small Business Administration runs a program to encourage such minority participation. The program is called the 8(a) Business Development Program. This program benefits minority-owned (but not women owned) SDBs.
In order to participate in the 8(a) Program, a business must be certified by the SBA that the business is controlled and operated by "minority owners."
In addition to the SBA Certification, certain other federal agencies require their own certification. Certain governmental organizations permit a business to effectively "self-certify" that the business is either women or minority owned.
Many individual federal agencies (including the Department of Defense and Department of Transportation) have their own programs to encourage hiring of minority- and women-owned businesses. Federal agencies often use PR Firms in connection with launching new programs and initiatives.
As a result, most federal agency contracts contain a subcontractor compensation clause which gives the general contractor financial incentives to hire subcontractors that are SDBs or women-owned.
Certain of these agreements encourage prime contractors to give business to minority- or women-owned businesses, sometimes even outside of the particular government project.
New York City has a program to open certain contracts and sub-contracts for good and services, including professional services, to minority and women owned businesses enterprises (M/WBs).
New York City's contracting goal is to award approximately 30% of each city agency's budget to minority- or women-owned businesses.
A business owner must be careful to provide accurate information when certifying or self-certifying minority- or women-owners status. Increasingly, lawsuits are being filed by unsuccessful bidders claiming that the winning bidder is not actually women- or minority-owned.
Additionally, governmental agencies have been cancelling contracts (and winning money damages) in cases where the winning bidder is not, in fact, women- or minority-owned.
Author: Gavin McElroy
This article was first published in the January 29th, 2007 edition of the legal column in www.odwyerpr.com.
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