OLR Research Report

October 28, 2008




By: John Rappa, Principal Analyst

You asked how many states set aside government contracts for microbusinesses.

Computer searches found no states requiring government agencies to bid or set aside some of their contracts exclusively to microbusinesses, which generally employ five or fewer people, according to the Association for Enterprise Opportunity. But these businesses may qualify for set-asides and other procurement benefits generally available for small businesses, whose top limits range from 50 to 500 employees.

This is the case in California, which is the only state that explicitly mentions microbusinesses in its Small Business Participation Program. That program requires state agencies to award at least 25% of construction contracts to state-certified small businesses. An agency meets this goal by letting contracts to small businesses or microbusinesses. In other words, the program does not set separate goals for these businesses. Attachment 1 summarizes California's program.

Microbusinesses may qualify under Connecticut's Small and Minority Business Set-Aside program (now, the Supplier Diversity Program), which requires state agencies to set aside at least 25% of the total value of the contracts they let for construction, goods, and services each year for bidding exclusively by state-certified small businesses. The agencies must further set aside 25% of the set-aside value for exclusive bidding by small minority-owned businesses. Unlike California, the program does not provide bid preferences.

A microbusiness may bid on a Connecticut small or minority business set-aside contract if it grossed no more than $10 million in its most recent fiscal year and meets the law's location and ownership requirements. Attachment 2 is a 2007 OLR report explaining how small businesses may bid on state contracts.

In 2007, the legislature considered but did not enact a bill creating a separate 15% set-aide for “small business vendors” that meet the same location and ownership criteria as small businesses but grossed no more than $5 million per year (HB 5975, LCO 4345).

Connecticut explicitly targets microbusinesses for other types of assistance. PA 06-166 authorized the state-charted, nonprofit Connecticut Community Economic Development Fund to help microbusinesses prepare business plans, complete loan applications, and obtain financing from public and private sources. A business qualifies for this assistance if it employs fewer than 10 people and grosses less than $500,000 per year.

PA 06-83 authorized matching funds for microbusinesses receiving federal research and development dollars. A business qualifies for these funds if it, and any of its affiliates, is independently owned and operated, and (1) employs fewer that 50 full-time employees or (2) has gross annual sales under $5 million. The business may apply for the funds to Connecticut Innovations, Inc., the state's quasi-public venture capital agency.

Attachment 1: California Small Business Participation Program

Program Element

Small Business


Business Type

Manufacturer: No more than 100 employees

Manufacturer: No more than 25 employees


Independently owned and operated

Not dominant in its field

Principal office in California

Officers domicile in California

Together with affiliates has no more than 100 employees

Three-year average annual gross receipts no more than $10 million


Independently owned and operated

Not dominant in its field

Principal office in California

Officers domicile in California

Together with affiliates has no more than 100 employees

Together with affiliates, three-year average annual gross receipts no more than $2.5 million

Applicable contracts


Information technology




Small Business Preference

5% of the lowest qualified bidder or the highest scored bidder, depending on the solicitation

Value of preferences granted under bids awarded to the lowest qualified bidder cannot exceed $50,000 and, when combined with other preferences, cannot exceed $100,000

Applies to large businesses subcontracting with small businesses or microbusinesses only when preference does not deny bid to small business


Other Preference Benefits

Reduced experience and inventory criteria

Technical assistance in preparing required forms


Set-Aside Requirement

25% small business participation goal on all bond funded infrastructure projects

Microbusinesses qualify as small businesses for set-aside goal

Other benefits

Agencies may award goods, services and information technology contracts between $5,000 and $100,000 to certified small businesses based on competitive quotes

Agencies may award construction contracts within specified ranges to small businesses based on bid submittals from at least two certified small businesses