The US Government Does Not Have Minority Set-Asides

The federal government has no minority procurement set-asides. HUBZone is not a minority program, but a geographic program. 8(a) which is often thought to be a minority program, is a socio-economic program. Then other programs are marginal like veteran owned, well, that is more about service open to all who served. Women owned preference is the closest on paper to a minority preference program.

See, the issue stems from the political quagmire race can become. The federal government does not want to single out businesses just based on race, as that is discriminatory to those businesses that cannot participate in the minority programs. Reverse discrimination is the term. Odd, the federal government does not want minority set-asides but they have a whole agency called the Minority Business Development Agency. The difference is that the MBDA just doles out advice, the set-asides dole out cash. Which one would you rather have?

So, why is the 8(a) program considered to be a minority set-aside program? Because the primary qualifiers for the program is to be a socially AND economically disadvantage business. Let me start in reverse. Economically disadvantaged is a numbers qualifier and qualified means those whose net worth is les than $250,000. Easy enough to determine, and I would speculate that if could answer to your net worth right now you will probably not qualify. And if you don’t know your net worth, you probably will qualify. Socially disadvantaged is where it gets fuzzy. Socially disadvantaged is automatic if you are a member of a pre-determined ethnicity. Those pre-approved ethnicities are: Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. The MBDA also includes Hasidic Jews in its list, but 8(a) is a SBA program. Still, I would feel safe in saying they also would qualify automatically.

Here is the good news if you are not on the list- if you can show you are socially disadvantaged you can still qualify! I know of an 8(a) women-owned business who qualified by virtue of being a woman. It’s not an easy road, but it can be done. I imagine gays could qualify if they put up enough of a fight. The government wants businesses pursuing 8(a) to show 1). a “distinguishing feature” of your social disadvantage. This could be race, physical handicap, gender, and probably even dress (again think Hassidic Jew or maybe Mennonites or the Amish). 2). Every applicant has to provide a social disadvantage narrative, but not being in the approved list means that this narrative is all the more important. What the SBA wants on the narrative is direct anecdotal evidences where you and your business were discriminated against by virtue of your “social disadvantage.” If you are not on the “approved by race” list it is up to you to make the case, but it can be done.

You may also enjoy HUBZone - A Great Way To Get Started and 8(a)? Is it worth it?.