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Office of Small & Disadvantaged Business Utilization


Applicant Must Meet Small Business Definition Brief

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Issue:  SBA issued a negative size determination against my firm, what happens?  OR What must my firm show in order to meet the definition of small for inclusion this program?

The Regulation

  • 38 CFR § 74.2(e) U.S. Small Business Administration (SBA) Protest Decisions.  Any firm registered in the VetBiz VIP database that is found to be ineligible due to an SBA protest decision or other negative finding will be immediately removed from the VetBiz VIP database.  Until such time as the Center for Verification and Evaluation (CVE) receives official notification that the firm has proven that it has successfully overcome the grounds for the determination or that the SBA decision is overturned on appeal, the firm will not be eligible to participate in the 38 U.S.C. § 8127 program.
  • CVE applies the small business concern definition established by 48 CFR § 2.101.
  • According to 48 CFR § 2.101 a Small business concern means a concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on Government contracts, and qualified as a small business under the criteria and size standards in 13 CFR part 121 (see 19.102).  Such a concern is “not dominant in its field of operation” when it does not exercise a controlling or major influence on a national basis in a kind of business activity in which a number of business concerns are primarily engaged.  In determining whether dominance exists, consideration must be given to all appropriate factors, including volume of business, number of employees, financial resources, competitive status or position, ownership or control of materials, processes, patents, license agreements, facilities, sales territory, and nature of business activity.  (See 15 U.S.C. § 632.)
  • According to 13 CFR Part 121(a), SBA’s size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for “small business” concerns.  Size standards have been established for types of economic activity, or industry, general under the North American Industry Classification System NAICS).
  • According to 38 CFR § 74.13(d), if CVE determines that a concern may not qualify as small, they may directly deny an applicant for VetBiz VIP Verification or may request a formal size determination from the U.S. Small Business Administration (SBA).  A concern whose application is denied because it is other than a small business concern by CVE may request a formal size determination from the SBA Associate Administrator, Officer of Government Contracting (ATTN:  Director, Office of Size Standards), 409 3rd Street, SW., Washington, DC 20416.  A favorable determination by SBA will enable the firm immediately submit a new VetBiz VIP Verification.

What This Means for an Applicant

  • An applicant must meet the size standards established by the North American Industry Classification System (NAICS).
  • If your firm receives a determination of other than small from SBA, it cannot be included in the VIP listing under that size standard or size standards at the same or lower dollar value of other NAICS codes.
  • If your firm has never received a size determination from SBA then it is up to the applicant to self-represent the appropriate NAICS codes.
  • An applicant should only list the codes for which the firm is small on the VIP application.
  • During the verification process, CVE will review the applicant’s taxes and other business and organizational documents to confirm that the applicant meets the classification of a small business.
  • An applicant’s average three year annual gross receipts should be equal to or less than the SBA size standard established under the NAICS it is has chosen.
  • If an applicant is denied because it does not qualify as a small business, it will have to provide evidence showing that is in fact a small business as defined by the SBA.

*For Informational Purposes Only*

This information has been provided by CVE for general informational purposes and should not be construed as providing legal advice.  You should contact your attorney to obtain advice with respect to any particular issue or problem.  In addition, CVE makes no representation as to the accuracy or whether the above information is currently up-to-date.  All applicants must read the applicable regulations and determine how best to meet these requirements.  The Verification Assistance Briefs do not constitute legal notice or replace the regulations.

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