Minority-Certification Deadline Now Oct. 1

Minority-owned businesses that subcontract with the federal government have received another reprieve from complying with a program that will require them to prove their disadvantaged status to the Small Business Administration.

Tens of thousands of minority-owned businesses that subcontract on federal jobs now have until Oct. 1 to obtain certification from the SBA. After that date, prime contractors who deal directly with federal agencies will be able to count only certified firms toward federal minority subcontracting goals.

The extension marks the second time implementation of the program has been postponed. The regulations were originally scheduled to go into effect Jan. 1 but were pushed to June 30 at the eleventh hour, in part because of complaints from minority entrepreneurs and prime contractors that the program was under-publicized and its rules confusing.

SBA officials estimate they will eventually certify 36,000 businesses, but other federal agencies place the number of eligible companies much higher--above 100,000. It is not known how many are in Southern California, but the region is home to the country’s largest concentration of disadvantaged small businesses--particularly Latino- and Asian-owned.

So far, about 6,700 companies across the country have been certified--1,100 of those since the deadline was first extended in January, said SBA spokesman D.J. Caulfield.

“The pattern seemed to be that just before these deadlines, we get a large wave of applications,” he said. “The thought is that to increase the pool, we would provide the extension.”

In the past, businesses contracting or subcontracting with federal agencies could self-certify as minority-owned by checking a box on a form. But regulations designed to eliminate fraud and reshape affirmative action have changed that. Under the new regulations, the SBA becomes the gatekeeper, requiring proof that companies are owned and controlled by someone who meets the government’s definition of economic and social disadvantage.

Disadvantaged firms can apply directly to the SBA, but the agency is not staffed to handle a large influx of applications and is encouraging the businesses to file their paperwork through private third-party certifiers around the country. Those firms--under contract to the SBA--then pass the paperwork on to the federal agency for final approval.

Some minority entrepreneurs have complained that the fees charged by the private certifiers vary wildly, from several hundred dollars to as much as $1,800. The SBA’s Caulfield said disadvantaged business owners should shop around for the best deal and that they need not use certifiers in their geographic area. Forms and a listing of private certifiers are available on the Internet at https://www.sba.gov/sdb.

The certification requirement is part of a broader change in federal affirmative action policy. The new regulations have largely done away with set-asides for minority-owned businesses, but they have created other incentives. For example, disadvantaged small businesses that contract directly with the government became eligible Oct. 1 for price preferences, but only if they are certified and are in industries in which disadvantaged firms are underrepresented.

For subcontractors in those industries, there are no preferences per se, but those who are certified will be more attractive to prime contractors, who must meet minority contracting goals passed on to them by federal agencies.

Prime contractors such as TRW, Sverdrup and the Jet Propulsion Laboratory have been sending notices to their minority subcontractors and having meetings to inform them of the pending changes.

“We think the word is getting further out there, but still, it can’t be more than about 10% of our subcontractors that are getting certified,” said Margo Kuhn, JPL’s vendor liaison.

“There’s still some confusion out there. It would have been nice if they had moved [the start date] even further.”