Many laws applying to federal procurement have some special provisions about small business and disadvantaged or minority small business contracting. No law, however, has had a more profound effect than Public Law 95-507. This law, passed in 1978, made major revisions to the Small Business Act ("the Act").
History of the Small Business Administration
The idea of a small business development program was born out of the Great Depression and several acts and programs were put forth. However, it was not until 1953, that the Small Business Administration (SBA) was created when the Small Business Act was passed. The purpose of the SBA was to assist and protect the interests of small business in the United States. The Government believed that the American economy was rooted in private enterprise which best thrived in free and open markets.
The notation of completely free markets changed when the Federal Reserve conducted a study that showed that small business had difficulty competing with larger concerns. The study showed that capital on credit was not generally available to the small business. Based on the information from this study, Congress passed the Small Business Investment Company Act of 1958. The 1958 act's goal was to help provide funds and capital investment to small businesses, so that they could better compete with larger companies.
Expansion of the Role of the Small Business Administration
In 1978, major changes to the Small Business Act were made with the passage of Public Law 95-507. The new law's stated goal was to provide opportunities for small business concerns of disadvantaged owners to participate in the performance of Government contracts. In particular the law sought to create the opportunity for full participation for socially and economically disadvantaged groups that have suffered the effects of discriminatory practices. These groups include, but are not limited to, Black Americans, Hispanic Americans, Native Americans, and other minorities or culturally disadvantage groups.
Key Points of the Original Law
In some of the key points of the law are:
- Participation by large businesses in some type of Small Business Program mandatory instead of voluntary
- Changed "best efforts" to "Maximum Practicable Opportunities"
- Required a small business inclusion plan for procurements
- Determined disadvantaged business concerns as being both socially and economically disadvantaged
- Established the Office of Small and Disadvantaged Business Utilization
The Years Brought Changes to the SBA
After 1978, the Small Business Act continued to evolve. The Public Law 99-661 made changes in 1987 to create a 5% minority contracting goal for the Department of Defense. In 1994, the Federal Acquisition Streamlining Act amended the Act to add a women-owned business goal of 5%. Then in 1997, Public Law 105-135 was passed to provide a preference for small businesses located in areas of high unemployment. In 1999, Public Law 106-50 was passed to establish goals for awards of Federal contracts to veteran-owned small businesses.
Today with all of the changes over the years Public Law 95-507 now requires:
- A strong and specific commitment to subcontracting with small, small disadvantaged, small women-owned businesses and small Veteran-owned businesses by large business prime contractors.
- Detailed subcontracting plans for larger contracts were required with plans to include small disadvantaged businesses. These plans may be accepted or rejected by the government contracting officer in a negotiated procurement and must be carried out forcefully in either a negotiated or sealed bid procurement by the successful large business.
- Monitoring of performance against the plan by SBA and by the procuring activity's contracting officer.
- Federal buying agencies to establish an Office of Small and Disadvantaged Business Utilization to assist small businesses by expanding their contracting opportunities and by helping solve problems.
- Annual goals for contracting and subcontracting with small, small disadvantaged (including 8(a)), women-owned businesses and veteran owned business to be set by Federal agencies.
Public Law 95-507 which amended Section 8(d) of the Small Business Act of 1958 created the Small Business Administration as it is known today. The law changed the way Federal contracts are planned and implemented with a focus on including small businesses that are economically and socially disadvantaged. Because of Public Law 95-507 these small business have the opportunity to compete with large contractors in securing government contracts.