What is a Certificate of Competency?

Daphne Mallory

A Certificate of Competency is issued by the small business administration (SBA) to prove that a small business is capable of contractual performance. The certificate in necessary in cases where the small business is the low bidder on a government contract and the contracting officer who is charged with awarding a bid does not believe that the small business can carry out the duties required under the bid. SBA experts review the business in detail to assess its performance capabilities and issue a Certificate of Competency that requires that the contract be awarded to the business. Without it, businesses that are new to bidding on government contracts may have difficulty being awarded contracts by contracting officers who are unsure about their ability to perform. The United States Congress gave the SBA the authority to make those determinations for government contracts and to review and issue certificates.

A certificate of competency allows a small business to enter into a contractual agreement with the government.
A certificate of competency allows a small business to enter into a contractual agreement with the government.

It’s up to the small business that was denied a bid to apply for a Certificate of Competency with the SBA. Congress enumerated some of the criteria that the SBA should review in order to determine whether to issue a certificate. These include the business’s tenacity, credit, and integrity. A contracting officer can reject a bid on any of these criteria, but the bid has to be forwarded to the SBA for review. The SBA is not confined to this list only, and it often reviews other criteria to determine the business’s abilities and level of responsibility.

The SBA sends an Application for a Certificate of Competency in accordance with the Small Business Act to those businesses that want to overturn the contracting officer’s denial. The application is often used to collect financial and other data about the small business owner. It includes a financial statement form that businesses must complete that lists their assets and liabilities; accounts payables and accounts receivables; and a comparative statement of sales, profits, and losses. Businesses must also provide information about their facilities and equipment to help the SBA review the business’s capacity to perform the contract. The application concludes with an agreement that the applicant must sign, wherein the business owners agree not to hire any SBA representative within two years of the certificate’s issuance and to give the SBA access to financial and other records during the performance of the contract.

After the SBA receives the Application for a Certificate of Competency, it begins its reviews of the company and notifies the contracting officer who denied the bid in the first place. The SBA often sends out a team of field representatives to evaluate the business's capabilities. The team reports its findings to a review committee that will approve or deny the certificate.

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