Last summer, the Biden administration's announced significant opportunities for small disadvantaged businesses, and in December, the president added more actions. Paul Ford, Founder and President of DS9 Capital, recommends that SDB owners and startup founders assess their options with an eye to the future.
LOUISVILLE, Ky., Feb. 7, 2022 /PRNewswire-PRWeb/ -- In June of last year, President Biden announced a plan to increase government contracts to small and disadvantaged businesses (SDBs) by 50% over five years, reaching a total of $100 billion by 2026. If attained, this goal will represent the largest increase in SDB contracting since data was first collected more than 30 years ago.(1) However, in December, the president announced more actions to help SDBs by asking agencies "to increase their goals, so that governmentwide spending results in 11% of contracting dollars being awarded to small, disadvantaged businesses, up from the current statutory goal of 5%," according to a statement released by the White House on December 2, 2021.(2)
Paul Ford, Founder and President of DS9 Capital, notes that similar announcements in the past have produced less than optimum results for the intended beneficiaries. This time, however, he says, there are major differences. "One," he says, "is awareness. People are more vocal about perceived disparities. The other is that through technology, today's SDBs have better access to both funding and information."
A small disadvantaged business is defined as a startup company that is at least 51% owned by one or more individuals who are both socially and economically disadvantaged. Groups meeting this definition include, but are not limited to: African Americans, Asia Pacific Americans, Hispanics, Native Americans, and Subcontinental Asian Americans. Businesses must be certified by the Small Business Administration to qualify for SDB status.(3) There are, notes Ford, two other varieties of a startup company that benefit from certain federal subcontracting goals: women-owned businesses (WBE), which are certified as such by the Women's Business Enterprise National Council,(4) and minority business enterprises (MBE), which are certified by the Minority Supplier Development Council.(5)
President Biden's Steps to Attain More Contracts for SDBs, WBEs and MBEs
1. The federal government will revise the goals for SDBs, WBEs, MBEs and Historically Underutilized Business Zones (HUBZones).
2. The federal government will release disaggregated data on spending according to race and ethnicity.
3. The Office of Management and Budget (OMB) will issue updated guidance on category management in order to, according to the White House statement, "conduct more equitable buying practices.
4. Agencies will track new entrants in the federal marketplace to diversify the small business arena and for enhanced transparency. (2)
The last federal initiative for SDBs, says Ford, took place during the Obama administration, when the Air Force attempted to reserve a certain amount of contracting for veteran-owned SDBs. This resulted, he says, in a good deal of "pass-through" contracting in which a large and established defense contractor would essentially hire a few veterans to form a window through which they could put in their bids. The key difference in the new Biden program, he says, is that it is both permanent and verifiable: technology makes it much easier to weed out the phonies.
Nevertheless, Ford adds, there are risks in setting up a startup for SDB certification. One is that it may result in sending an unintentional message—that growth is dependent not on the performance of the company, but on money from the government. On the other hand, he says, it is very important to give people a chance to get into the game who were previously shut out.
What it comes down to, says Ford, is that the goal of a business—any business—is to grow. Which means, he says, it is not to be a sheltered government contractor 30 years from now. He says it might, however, be a good place to start—particularly if you are that rarity of rarities—an SDB focused on tech.
"To grow," says Ford, "a business must be able to attract investment. Getting an SDB certification is not easy, and people know that. Once you have achieved certification, it sends a signal that your books are in order, your house is in order, and you are ready, willing, and able to do business. That's a good thing for people—especially customers and potential investors—to know."
About DS9 Capital:
DS9 Capital is a founder-friendly portfolio management holding company focused on building enduring and stable cash-flowing businesses in the insurance, fintech,and healthcare technology space. DS9 is generally focused on frontier technology and service offerings in the insurance, fintech, and healthcare space largely leveraging cloud-based infrastructure, and more specifically on applying our domain expertise to nano-cap sized businesses to expand the value chain for all stakeholders. This value creation typically includes: investment, leveraging our vast resources and networks to create a strategic pipeline for organic growth, and realigning the businesses to optimize commercial and IP assets. Our tactical goal with each of our companies is to leverage our expertise into higher margin and missed revenue opportunities.
1. "Biden Announces 50 Percent Increase in Small Disadvantaged Business Contracting Goals: Key Details for Government Contractors." JD Supra, jdsupra.com/legalnews/biden-announces-50-percent-increase-in-1989148/.
2. Bublé, Courtney; "Biden Administration Announces More Actions to Help Small Businesses Win Contracts"; 2 Dec. 2021; Government Executive; govexec.com/management/2021/12/biden-administration-announces-more-actions-help-small-businesses-win-contracts/187241/
3. "Small Disadvantaged Business." AcqNotes, 18 July 2021, acqnotes.com/acqnote/tasks/small-disadvantaged-business.
4. "Women-Owned Businesses," sba.gov/business-guide/grow-your-business/women-owned-businesses.
5. "MBE Certification." National Minority Supplier Development Council, nmsdc.org/mbes/mbe-certification/.
Karla Jo Helms, JOTO PR Disruptors(TM), 727-777-4619, firstname.lastname@example.org
SOURCE DS9 Capital