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Small Business Eligibility Requirements

In order for a small business to be eligible for certification, the small business must meet the following requirements:
  • Be independently owned and operated;
  • Not dominant in field of operation;   
  • Principal office located in California;  
  • Owners (officers, if a corporation) domiciled in California; and,  
  • Including affiliates, be either,
    • A business with 100 or fewer employees; an average annual gross receipts of $14 million or less, over the last three tax years;
    • A manufacturer* with 100 or fewer employees; or,
    • A microbusiness. A small business will automatically be designated as a microbusiness, if gross annual receipts are less than $3,500,000; or the small business is a manufacturer with 25 or fewer employees.

* For Small Business Certification purposes, a manufacturer is a business that is both of the following:

  1. Primarily engaged in the chemical or mechanical transformation of raw materials or processed substances into new products.   
  2. Classified between Codes 31 to 339999, inclusive, of the North American Industrial Classification System (NAICS) Manual, published by the United States Census Bureau, 2007 edition.


Small Business Certification Benefits

Upon meeting the Small Business Certification eligibility requirements, certified small business (SBs) and microbusinesses (MBs) are entitled to the following benefits:

  • A five percent (5%) bid preference on applicable State solicitations; 
  • As a certified small business/microbusiness, you are eligible for the State's Small Business Participation Program.  This program sets a goal for the use of small businesses in at least 25% of the State's overall annual contract dollars;  
  • Under the Prompt Payment Act, the State must pay a certified SB / MB higher interest penalties for late payment of an undisputed invoice.  Prompt payment penalties for construction firms are addressed separately under Public Contract Code, Section 10261.5);  
  • State agencies may use a streamlined process, known as the SB/DVBE Option, by contracting directly with a California certified small business/microbusiness for goods, services, information technology and Public Works projects.  The solicitation must be valued at more than $5,000 and the State agency must obtain price quotes from at least two California certified small business/microbusiness;
Effective January 1, 2010, the maximum thresholds are:
      Goods, Services, or Information Technology - $249,999.99
Public Works - $250,000

     

    Effective January 12, 2012, the maximum thresholds are:
      Goods, Services, or Information Technology - $249,999.99
        Public Works - $281,000 (Effective 1/30/14: BL 14-01)
          •  The DGS-PD charges State and local agencies an administrative fee, when contracting with a California Multiple Award Schedules (CMAS) vendor.  As an incentive, the fee is waived, if the CMAS vendor is a certified small business/microbusiness;
          • As an incentive, a non-small business prime contractor, who uses certified small business/microbusiness subcontractors for at least 25% of its net bid price, is eligible for a bid preference of five percent (5%) of the lowest responsible bid, when competing against another non-small business;  and,When applying bidder preferences, in which non-small business bidders may be eligible, certified small business/microbusiness bidders have precedence over non-small business bidders. 

            NOTE: Small business/microbusiness bids cannot be displaced by non-small business/microbusiness bids, when applying any applicable lawful preferences.


          If you have any questions regarding the Small Business Certification eligibility requirements and benefits, please contact OSDS Help at (916) 375-4940 or by email.