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Small Business: Definitions:

This section sets forth certain definitions to clarify the meaning of the terms found in this guide. Definitions are also found in the regulations, usually in more detail.

Affiliates - The calculation of a firm's size includes the employees or receipts of all affiliates. Affiliation with another business concern is based on the power to control, whether exercised or not. Such factors as common ownership, common management and identity of interest (often found in members of the same family), among others, are indicators of affiliation. Power to control exists when a party or parties have 50 percent or more ownership.

It may also exist with considerably less than 50 percent ownership by contractual arrangement or when one or more parties own a large share compared to other parties. The affiliated business concerns need not be in the same line of business.

Annual Receipts - Gross receipts are averaged over a firm's latest 3 completed fiscal years to determine its average annual receipts. "Receipts" means the firm's gross or total income, plus cost of goods sold, as defined by or reported on the firm's Federal Income Tax return. The term does not include, however, net capital gains or losses, nor taxes collected for and remitted to a taxing authority if included in gross or total income. The firm may not deduct income taxes, property taxes, cost of materials or funds paid to subcontractors.

Travel, real estate and advertising agents, providers of conference management services, freight forwarders and customs brokers may deduct amounts they collect on behalf of another. If a firm has not been in business for 3 years, the average weekly revenue for the number of weeks the firm has been in business is multiplied by 52 to determine its average annual receipts.

Business Concern - A business concern eligible for assistance as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or makes a significant contribution to the US economy through payment of taxes or use of American products, materials, or labor.

Employees - The number of employees of a firm is its average number of persons employed for each pay period over the firmýs latest 12 months. Any person on the payroll must be included as one employee regardless of hours worked or temporary status. The number of employees of a firm in business under 12 months is based on the average for each pay period it has been in business.

8(a) Business Development Program - An SBA program for small firms owned by socially and economically disadvantaged persons. Firms admitted to the program can receive Federal contracts designated for 8(a) Program participants, as well as management and technical assistance. (See SDB Program, below.)

HUBZone - The HUBZone Empowerment Contracting Program, which is included in the Small Business Reauthorization Act of 1997, stimulates economic development and creates jobs in urban and rural communities by providing contracting preferences to small businesses that are located in a HUBZone and that hire employees who live in a HUBZone. SBA is responsible for regulating and implementing the HUBZone Program. It certifies firms for eligibility to receive HUBZone contracts and maintains a listing of qualified HUBZone small businesses federal agencies can use to locate prospective vendors.

Industry - Concerns primarily engaged in the same kind of economic activity are classified in the same industry regardless of their types of ownership (such as sole proprietorship, partnership or corporation). The US Office of Management and Budget (OMB) classifies approximately 1,000 activities as industries under NAICS. For each industry, except those in the industry division of public administration, SBA has established a size standard. Industries are described in detail in North American Industry Classification System - United States, 1997. It can be found in many libraries or purchased from the National Technical Information Service, by calling (800) 553-6847 or (703) 605-6000.

Non-manufacturer - For purposes of Federal government contracts, a firm that supplies a product it did not manufacture is termed a nonmanufacturer. To qualify for Federal government contracting, a nonmanufacturer must have 500 or fewer employees, be primarily in the wholesale or retail trade, and supply the product of a US small manufacturer. This requirement is called the "nonmanufacturer rule". This rule does not apply to supply contracts of $25,000 or less that are processed under Simplified Acquisition Procedures. The requirement may also be waived through formal procedure by the Associate Administrator for Government Contracting if there is no small manufacturer in the Federal market for a class of products.

Not Dominant - A concern is not dominant in its field of operation when it does not exercise a controlling or major influence on an industry. As part of its review of a size standard, SBA investigates if a concern at or below a particular standard would be dominant in the industry, on a national basis. Thus, a concern at or below the size standard is presumed not to be dominant in its field of operation.

Set-Aside Contract - A "set-aside" is a Federal contract designated for small business bidding only.

Small Disadvantaged Program (SDB) Program - While the 8(a) Business Development Program (above) offers a broad scope of assistance to socially and economically disadvantaged firms, SDB certification strictly pertains to benefits in federal procurement. 8(a) firms automatically qualify for SDB certification.

SBA certifies SDBs to make them eligible for special bidding benefits Small Disadvantaged Program (SDB) Program - While the 8(a) Business Development Program (above) offers a broad scope of assistance to socially and economically disadvantaged firms, SDB certification strictly pertains to benefits in federal procurement. 8(a) firms automatically qualify for SDB certification. SBA certifies SDBs to make them eligible for special bidding benefits. Evaluation credits available to prime contractors boost subcontracting opportunities for SDBs.