Biden-Harris Administration Announces Increase In Federal Contracting Goals For Small Disadvantaged Businesses

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On June 1, 2021, the Biden-Harris Administration announced that it intends to use the federal government’s purchasing power to grow federal contracting with small disadvantaged businesses by 50 percent, translating to an additional $100 billion over five years. This is one of many new steps intended to help narrow the racial wealth gap and reinvest in communities. In explaining this new policy goal, the Administration recognized that:

“Federal procurement is one of our most powerful tools to advance equity and build wealth in underserved communities. And yet, just roughly 10 percent of federal agencies’ total eligible contracting dollars typically go to small disadvantaged businesses (SDB), a category under federal law for which Black-owned, Latino-owned, and other minority-owned businesses are presumed to qualify. Increasing federal spending with these businesses will help more Americans realize their entrepreneurial dreams and help narrow racial wealth gaps.”

To achieve this goal, the Biden administration will direct agencies to assess every available tool to lower barriers to entry and increase opportunities for small businesses and traditionally underserved entrepreneurs to compete for federal contracts. Attainment of the new goal will represent the biggest increase in SDB contracting since data was first collected more than 30 years ago.

The Administration’s goal means that small businesses will likely see expanded opportunities to contract directly with the Federal government. It may also translate into expanded subcontracting opportunities for small businesses, as large companies that serve as prime or subcontractors to the Federal government will see an increase in small business subcontracting goals. For this reason, large businesses should be aware of this policy change and prepare to increase their SDB spend.

As a reminder, the Small Business Administration promulgates the regulations that govern which businesses qualify as SDB. An SDB must be at least 51 percent owned and controlled by a socially and economically disadvantaged individual or individuals. African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are presumed to qualify. Other individuals can qualify if they show by a “preponderance of the evidence” that they are disadvantaged. All individuals must have a net worth of less than $750,000, excluding the equity of the business and primary residence. Successful applicants must also meet applicable size standards for small businesses in their industry.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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