To be a small business, vendors must adhere to industry size standards established by the U.S. Small Business Administration (SBA). When small firms register as a government contractor in the System for Award Management (SAM), they also self-certify their business as small.
The SBA, for most industries, defines a “small business” either in terms of the average number of employees over the past 12 months, or average annual receipts over time. In addition, as per 13 CFR § 121.105, SBA defines a U.S. small business as a concern that:
- Is organized for profit
- Has a place of business in the US
- Operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor
- Is independently owned and operated and is not dominant in its field on a national basis
The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences – especially size standards.
The SBA’s table of size standards corresponds to the North American Industry Classification System (NAICS). All federal agencies must use SBA size standards for small business contracting. Vendors should select NAICS codes that best match their business activities and then determine if their business meets the size standards for the selected NAICS codes. Vendors can use the SBA’s Size Standards Tool to determine if they qualify as a small business.
For federal government procurements, vendors must meet the small business size standard that corresponds to the NAICS code selected by the contracting officer for that contract. The selected contract NAICS code is not required to match up to a vendor’s principal activity NAICS code. The vendor qualifies as a small business as long as it meets the size standard for the procurement.
Small businesses may qualify for one or more Small Business Set-Asides. For more information, see SBA Contracting Assistance Programs.