Opportunities for Women-Owned Small Businesses on the Horizon?

George W. Ash and Erin L. Toomey

Recently, pressure from interest groups and litigation has caused the U.S. Small Business Administration (“SBA”) to assess whether women-owned small businesses (WOSBs) are under-represented in federal contracting. Although in 2004 approximately 3% of federal prime contracts were awarded to WOSBs, the U.S. Women’s Chamber of Commerce alleges that WOSBs lose billions of dollars each year as a result of the U.S. Government’s failure to satisfy the five-percent contracting goal established by the Federal Acquisition Streamlining Act of 1994 (FASA)¹ .

Background

FASA set a goal of awarding 5% of the total value of all federal government prime contracts and subcontracts for each fiscal year to WOSBs. FASA also directed that WOSBs, like other small businesses and small disadvantaged businesses, have the maximum practicable opportunity to become subcontractors for Federal contracts exceeding $100,000, and it mandated that WOSBs be included in subcontracting plans required under Section 8(d) of the Act.

Although FASA established this goal, it did not create a specific procurement mechanism for achieving the goal. The Equity in Contracting for Women Act of 2000, 15 U.S.C. § 637(m) (2000) (the “Women’s Act”), amended the Small Business Act and required the SBA to establish a preferential procurement program for “small business concerns owned and controlled by women.” The Women’s Act required the SBA to identify the industries that would benefit from the Women’s Act by conducting “a study to identify industries in which small business concerns owned and controlled by women are underrepresented with respect to Federal procurement contracting.”

By 2004, the SBA still had not initiated such a study. Accordingly, in 2004, the U.S. Women’s Chamber of Commerce initiated a lawsuit in the U.S. District Court for the District of Columbia against the SBA for its failure to conduct such a study and implement the program required by the Women’s Act. Although the Court did not issue an order requiring the SBA to implement the Women’s Act, the Court refused to dismiss the case and instead held that it would “retain jurisdiction . . . and monitor [SBA’s] adherence to [its] congressional mandates.²

Current Status

After the lawsuit, the SBA hired the RAND Corporation to conduct a study to assess the degree to which certain types of firms are represented in federal contracting, and whether this representation proportion to their presence in the commercial marketplace. The RAND study concluded that WOSBs were substantially under-represented in the industries of utilities, manufacturing, transportation, information services, finance, real estate, professional services, education, health accommodations and other (catchall) services. The study also concluded that WOSBs were underrepresented in retail and administrative services.

Next Steps

On June 15, 2006, the SBA issued a proposed rule to implement the Women’s Act.³ The proposed rule authorizes Contracting Officers to restrict competition for contracts not exceeding $3 million, or $5 million for manufacturing, to eligible WOSBs in eligible industries. “Eligible industries” are those industries that the SBA determines are substantially underrepresented by WOSBs. Further, the proposed rule requires WOSBs to be certified by “a Federal agency, a State government, or a national certifying entity” approved by the SBA. This is contradictory to the Women’s Act, which only requires self-certification.

On April 27, 2007, the SBA issued a statement proclaiming that the SBA intends to publish a final rule implementing the WOSB set-aside program by the third quarter of 2007. The implementation of a WOSB set-aside program is long overdue. As the figures show, without such a program, the Federal government has failed to award WOSBs their fair share of Federal government contracts.

¹ P.L. 103-355 (Oct. 13, 1994).
² U.S. Women’s Chamber of Commerce v. SBA, 2005 WL 3244182 (D.D.C. Nov. 30, 2005).
³ See 71 Fed. Reg. 34550-01.

George W. Ash and Erin L. Toomey are members of the law firm of Foley & Lardner LLP in Detroit, where they specialize in government procurement issues. They may be reached at (313) 234-7100.

Note: This update provides information of general interest presented in summary form, and does not constitute individual legal advice.