07 Dec 2012
- Written by Carlee McCullough
Certification – the cornerstone of supplier diversity programs – is our month-long focus for "On Our Way To Wealthy."
A supplier diversity program is a business program, which encourages public entities and the private sector to use historically under-utilized firms.
Certification is necessary to ensure that minority- and women-owned firms are not victims of discrimination. The government has an affirmative duty to ensure non-discrimination. When diversity goals are established on projects, whether they are public or private sector, it is imperative that those goals be met with certified firms.
Without the certification process, programs would have more businesses serving as "fronts" than we could count. "Fronts" are considered firms that pretend to be owned by minorities or women. They are typically owned and backed by white males seeking to take advantage of programs established for those that have traditionally been disenfranchised.
A few of the benefits offered by firms that use certified firms may include bid price preferences, earmarked contracts, and in limited situations, sole-source contracts. Some examples of certified firms include engineers, lawyers, architects, construction, caterers, office suppliers and construction.
Various businesses may not be familiar with certification, the purpose or the process. Over the next few weeks, we will have review various regional and national certification programs. Let's begin with a review of the certification process in general.
What is certification?
Certification is the process by which a business has been closely examined and reviewed by an objective third-party organization to verify that the business is owned, operated and controlled by a minority or woman. Additional certification exists for small or disadvantaged firms. Although each certifying agency may have different standards, the standards are typically similar to those outlined in the Code of Federal Regulations (CFR).
How does the objective third-party organization verify ownership and control?
Through submitted documents, site visits and interviews, the agency can determine the ownership status of the entity. But in the event the firm is denied certification, there is typically an appeals process that is objective as well.
What are the different categories for certification?
Various agencies have different programs. Projects that have federal funds may require the use of federal designations such as disadvantaged business enterprise. Other local agencies may use the designations of small business enterprises, locally owned small businesses, minority-owned businesses and/or women owned businesses. Let's review each designation individually.
Those seeking to do business with the federal government may do so by seeking various designations designed to provide federal contracting opportunities. Small Business Administration certifications offer the 8A designation, which is offered for socially and economically disadvantaged firms; HUBZone certification for those businesses that locate and employ people in areas that are marked by lower wages and higher unemployment rates than the rest of the country; the Women Owned Small Business (WOSB) certification; and the Service Disabled Veteran Owned Small Business certification, which is earmarked for those veterans who suffer a disability while on active duty.
According to the United States Department of Transportation, Disadvantaged Business Enterprises are for-profit small business concerns, where socially and economically disadvantaged individuals own at least a 51 percent interest, and also control management and daily business operations.
African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent Asian Americans, and women are presumed to be socially and economically disadvantaged. Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis. An individual must have a personal net worth that does not exceed $1.32 million to be considered for DBE status. A few exclusions are allowed in calculating the net worth.
SBE or LOSB
(SBE) or Locally Owned Small Business (LOSB)
SBE (Small Business Enterprise) usually refers to firms that are not dominated in the field and that qualify as a small business under the criteria and size standards in 13 CFR Part 121. However, a few local programs using the Locally Owned Small Business (LOSB) tailor programs and definitions according to local standards.
A Minority-Owned Business Enterprise (MBE) is usually defined as a business in which more than 51 percent of the interest is owned by minority group members of the following heritage: African American, Asian-Indian American, Asian-Pacific American, Hispanic American, and Native American. The MBE must operate and control the entity as well.
Generally speaking, a Woman-Owned Business Enterprise (WBE) is typically a firm that is at least 51 percent owned, operated and controlled by a woman.
NEXT WEEK: Local agencies participating in certification.