Government Hits Goal of Spending 5% of Contracting Dollars with Women-Owned Businesses — or Did It?

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The U.S. government said 5.05% of its fiscal year 2015 contracting dollars were awarded to women-owned small businesses, hitting a goal it set back in 1994. The Small Business Administration (SBA) reported the $17.8 billion awarded to women-owned businesses in 2015 is a “historic contracting achievement,” for the government and sets a new standard upon which to build.

The news from the SBA has received both applause and hesitation from women business groups. Janet Harris-Lange, president of the National Women Business Owners Corporation (NWBOC), which provides Women Business Enterprise (WBE) certifications to eligible companies, said the 5% goal is notable and hopes the percentage of contracts the federal government awards to WBEs continues to grow.

SBA created the Women-Owned Small Business Federal Contract program (WOSB) in 2011 to increase the availability to federal government contracts for small, women-owned businesses. It also allowed contracting officers to set aside certain federal contracts for women-owned businesses and economically disadvantaged women-owned small businesses.

Harris-Lange believes the WOSB program has been successful thus far and she has seen how companies the NWBOC is working with are increasingly winning federal government contracts. The program has also encouraged more women-owned businesses to explore working with the government that previously may not have thought it possible, she said.

Anne Sullivan, president of Women Impacting Public Policy, a nonpartisan public policy organization working on behalf of women-owned businesses, applauded the SBA’s news, saying it proved the WIPP’s efforts have paid off.

“We are just so thrilled that after 15 years of working on this and getting the program in good shape, the government finally met its goal,” Sullivan said.

Others Question Government Hitting Goal

The U.S. Women’s Chamber of Commerce, however, is skeptical about the SBA’s announcement. The WCC has voiced concerns in the past to the SBA and Congress on possible fraud or misuse of the WOSB program.

WCC Co-Founder and CEO Margot Dorfman believes the government likely spent only around 2.5% of its contracting dollars in fiscal year 2015 on contracts with women-owned small businesses, not the 5% the SBA has reported. Dorfman said about half of the companies the government claims are small, women-owned organizations are not properly certified as such and points to a number of government reports issued in recent years that found many firms the government contracted with under the SBA’s WOSB program did not have proper documentation.

For instance, a 2014 report from the U.S. Government Accountability Office found that 40% of women-owned business contracts were awarded to ineligible firms in fiscal years 2012 and 2013. Another May 2015 report from the SBA’s Inspector General said a dozen firms awarded $8 million worth of contracts under the WOSB program “did not provide sufficient documentation to prove that a woman or women controlled the day-to-day operations of the firm.”

Former Self-Certification Rule

To be eligible for federal government contracts under the WOSB program, businesses need to be certified as a women-owned small business and meet certain criteria, such as being at least 51% owned and controlled by one or more women. Businesses can be certified by a third party or be self-certified by the business owner. Congress, however, called on the SBA to end self-certification last year. The SBA is currently reviewing how to implement that change, but companies are still allowed to self-certify.

Dorfman said the fact the SBA allows businesses to “self-certify” as a women-owned small business is a problem, and the government does not properly monitor the certification process to ensure truly women-owned firms are being awarded contracts.

“I just think it’s time the SBA reports accurately what is really happening,” she said.

Sullivan, of WIPP, said the self-certification process has allowed more companies the opportunity to become a recognized women-owned small business and be eligible to compete for government contracts. Without the self-certification process, she added, it could have taken much longer for companies to receive certification. This gave the SBA a way to implement the WOSB program in a timely manner.

“That was the solution to be able to put the program in place when they did,” Sullivan said.

Miguel Ayala, SBA press secretary, said the federal agency is dedicated to creating a process where more women-owned businesses are eligible for government contracts. He also said the SBA does its due diligence to ensure the government is contracting with actual small businesses. Every government agency is responsible for reporting to the SBA what small businesses are in their supply chains. If a contract does not appear eligible, the SBA looks into it, Ayala said.

The SBA also stands behind the data it reported regarding hitting its 5% goal of contracting to WBEs, Ayala said.

“The SBA has worked very hard over the years to make sure these numbers are accurate,” he said.

Changes to SBA Program, and Areas for Improvement

A number of changes to the WOSB program have taken place in recent years. For example, when the National Defense Authorization Act of 2013 passed, caps on how much the federal government could spend awarding contracts to women-owned small businesses were removed, opening up opportunities for more federal procurement dollars to go to these businesses. Previously, the government could not spend more than $6.5 million on manufacturing contracts and $4 million on other contracts with women-owned businesses.

The government has also increased the percentage of contracting dollars it spends through the WOSB program over the years. In 2005, the government spent 3.2% of its contracting dollars on contracts with women-owned small businesses. By 2010, that increased to 4%, where it stayed through fiscal year 2012. In 2013, the amount rose to 4.3% and in 2014 hit 4.7%.

In September 2015, the SBA issued a final rule to allow federal agencies to award sole-source contracts to women-owned small businesses under the WOSB program — a move that has received positive feedback.

"As an SBA-approved third-party certifier, the Women's Business Enterprise National Council (WBENC) is pleased not only that the government achieved their target, but also acknowledges the value of sole source," Pamela Prince-Eason, WBENC president and CEO, told Spend Matters in a written statement.

The SBA has itself recognized its WOSB program can improve further. According to an SBA-commissioned study on the success of the contract program by the Office of the Chief Economist at the Department of Commerce, women-owned businesses were about 21% less likely to win contracts than similar companies not identified as WOBs. While women-owned businesses were typically small and younger than other businesses competing for contracts, the study said these factors accounted for “only part of the disparity in the likelihood of winning contracts.”

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