Advantages of Small Business Contracting
For healthcare providers interested in federal contracts, there are several key advantages related to small business contracting that should be of particular interest to most physician groups.
One of the major objectives of federal procurement policy is to provide small businesses with fair and reasonable opportunities to participate in federal contracts. This objective covers all types of federal contracts and extends to healthcare organizations. There are a number of incentives built into procurement laws and regulations that actually favor small businesses under certain conditions.
A key point is that there is no single definition of a small business that applies equally to all contracts. In fact, the definition of a small business is established for each solicitation. In general, every Request for Proposal or Request for Quote will specify a North American Industry Classification System (NAICS) code that reflects a certain industry, and a corresponding size threshold for that industry determined generally by annual sales revenues or number of employees.
Industry classifications and size thresholds are prepared by the Census Department and updated periodically. For example, according to the most recent NAICS data, physician groups are classified under NAICS code 621111. A physician or group practice qualifies as a small business if their average annual revenues for the last three years are less than $10 million. Similarly, most acute care general hospitals are classified as NAICS code 621118, and are considered small business if their average annual revenues are less than $35.5 million.
There are two primary ways that small businesses can participate in federal contracts:
In addition to the general category of small businesses, there are a number of subcategories that are afforded a statutory contracting preference under federal law. This preference enables the government to set aside a certain percentage of contract awards to organizations that meet these criteria. The major categories of organization include:
- Women Owned Business
- Small Disadvantaged Business
- Historically Underutilized Business Zone (HUBZone) Business
- Veteran Owned Small Business
- Service-Disabled Veteran-Owned Small Business
- 8(a) Business (socioeconomically disadvantaged)
- Native American
- Alaskan Native Corporation
When contracts are set aside for a particular category, the competition pool is restricted to organizations that meet this criterion.
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