Articles

April 9th, 2024

Small, Minority- and Women-Owned Businesses May be Missing out on Maryland Contract Opportunities

Posted in: Business Law    Tagged: Dustin M. Dorsino

Maryland’s Minority Business Enterprise (MBE) and Small Business Enterprise (SBE) Programs aim to connect small, minority- and women-owned businesses to Maryland contracting and procurement opportunities. In addition to enhancing your business’ visibility, obtaining a MBE or SBE certification provides competitive advantages in the bidding process for contracts involving Maryland goods and services and Federal projects connected to the U.S. Department of Transportation (DOT). Many large companies request to work with MBE and SBE-certified companies that are actively submitting bids or proposals to Maryland state agencies because these larger companies often have to spend a specific portion of their budget on small or diverse business partners.

Eligibility

In order to qualify for MBE certification: (1) a business must be at least 51% owned by “socially and economically disadvantaged” individual(s); (2) the business’ daily operations must be managed by at least one of the “socially and economically disadvantaged” owners; and (3) the individual owners must have personal net worths below the $2,073,412 cap (for 2024). An individual will be presumed to be “socially and economically disadvantaged” if such individual is a woman, physically or mentally disabled, African American, American Indian/Native American, Asian, or Hispanic. Md. Code Ann. State Fin. & Proc. § 14-301(k) (West 2024). However, an applicant’s “socially and economically disadvantaged” status may be demonstrated on a case-by-case basis even if the owners are not members of one of the aforementioned groups.

In addition, owners’ capital contributions must be “real and substantial” (i.e., not pursuant to a promissory note or by mere employment). Further, “control” of the business must go beyond form; the “socially and economically disadvantaged” owner(s) must have real, substantial and continuing control of the business in that they have the power to direct the management and policies of the business.

In order to qualify for SBE certification: (1) a business must meet the small business size standards established by the U.S. Small Business Administration applicable to the type of work the business seeks to perform in DOT-assisted contracts; (2) the business’ three (3)-year average gross receipts must be no greater than $30.40 million; and (3) at least 51% of the business must be owned by a U.S. citizen or permanent resident whose personal net worth is no more than $1.32 million. 49 CFR §§ 26.65(b), 26.67(a)(2)(i).

Application

In order to apply for certification, all businesses must submit a SBE application or MBE application and the required supporting documentation to the Maryland Department of Transportation (MDOT). There is no cost to apply for either SBE or MBE certification. MBE- and SBE-certified businesses will also have to comply with ongoing reporting and eligibility requirements. Given the eligibility criteria for MBE and SBE certifications, it is imperative that those interested in obtaining these certifications structure their business appropriately to comply with the ownership and control requirements. Please contact Dustin M. Dorsino, or the Stein Sperling attorney with whom you are regularly in contact with, with any questions about the information provided above.

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