Small Business and Micro-business Certification Programs

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The Small Business (SB) and Micro-business Certification Programs were established to increase business opportunities for the SB and MB communities with the State of California; thereby stimulating the state's overall economy.  The programs are designed to help SBs and MB’s participate in a more level playing field with certain advantages when competing against other non-SBs and non-MB’s for state contracts and purchases.  Certified firms can also take advantage of other SB and MB benefits.
Every year, each state agency must submit to the legislature an annual report that tracks contract award activity involving SBs and MB’s.  The report must demonstrate that the various participation goals have been met or exceeded.  If the minimum goals are not met, the agency must provide a sound justification and the remedial action they will take to attain or exceed the goal(s) the following year.
The Department of General Services (DGS), Procurement Division (PD), Office of Small Business and DVBE Certification (OSDC) is the state's certifying agency that administers the Small Business Certification Programs.  While small business certification is their primary role, they also assist SBs and MBs in a variety of ways including conducting outreach events, providing resource guidance, and supporting the businesses through advocacy.
Benefits and Eligibility Requirements

Upon meeting eligibility requirements, certified small businesses (SBs) and micro-businesses (MBs) are entitled to the following:
  • 5% bid preference on applicable state solicitations.
  • 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).  (See Prompt Payment Program.)
  • State agencies may use a streamlined process known as the "SB/DVBE Option" by contracting directly with a California-certified small business for goods, services, and information technology valued between $5,001 and $99,999 after obtaining price quotes from at least two California-certified small businesses.  For public works projects, the contract value can be up to $120,000.
  • The Department of General Services, Procurement Division 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.
  • As an incentive, non-small business prime contractors who use certified small business subcontractors are eligible for a bid preference of up to five percent (5%) of the highest responsible bid (or score).  
  • When applying bidder preferences in which non-small business bidders may be eligible, certified small business and micro-business bidders have precedence over non-small business bidders.  (Small business bids cannot be displaced by non-small business bids when applying any applicable lawful preferences.)
  • As a certified small business you are eligible for the state's Small Business Participation Program.  The program sets a goal for the use of small businesses in at least 25% of the state's overall annual contract dollars.
  • Certified small businesses increase their visibility and expand their business networking opportunities by being automatically listed in the online Certified Firm and Application Status Search.
Small Business Certification Eligibility Requirements
  • Must be independently owned and operated;
  • Cannot be dominant in its field of operation;
  • Must have its principal office located in California;
  • Must have its owners (or officers in the case of a corporation) domiciled in California; and
  • Together with its affiliates, be either:
    • A business with 100 or fewer employees, and an average annual gross receipts of $10 million or less over the previous three tax years, or
    • A manufacturer with 100 or fewer employees.

Manufacturer Definition

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 2000 to 3999, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
Micro-business Certification
Micro-business (MB) certification is a subset classification of small business (SB) certification.  Therefore, all MBs are also SBs.  There is no separate formal MB certification.  It is a designation they receive based on the size of their business, which is determined by gross annual receipts averaged over a three-year period and the average number of employees over four quarters.
A micro-business is:
  • A small business that, together with affiliates, has an average annual gross receipts of two million five hundred thousand dollars ($2,500,000) or less over the previous three years, or
  • Is a small business manufacturer with 25 or fewer employees.
Depending on business fluctuations throughout the MB's certification period, it is possible that the MB's designation could be turned "on" or "off".  If the MB is under both the dollar and employee count thresholds, they retain their MB designation.  If they exceed either the dollar or employee count threshold, they are no longer MB but retain their small business status.
In 2001, AB 1084 established the definition of a micro-business as a subset category of a small business.  It's the state's intent that micro-businesses are afforded the same entitlements and business participation benefits as a small business.
Certification Application
To access our online Small Business Certification Application (STD. 813), or to receive your hard-copy form by mail, e-mail or call (800) 559-5529 or (916) 375-4940.

California Government Code, Section 14835
California Code of Regulations, Title 2, Section 1896-1896.40


Small Business Certification Reciprocity Program

The Office of Small Business and DVBE Certification (OSDC) further promotes small business participation by administering the Certification Reciprocity Program.  The program's intent is to build partnerships with cities, counties and special districts throughout California in accepting the state's small business certification.  The reciprocity process allows the small business to go through only one certification procedure while having their certification valid with both the state and the participating agency.  The certified small business is able to optimize the benefits that both certification programs offer.

Reciprocity Agency Partnerships
Additional Resources

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