New 8(m) Certification for Women Owned Small Businesses?

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Kellie Austin New 8(m) Certification for Women Owned Small Businesses?

Women-owned small businesses ("WOSB's") are reported to be the fastest growing segment of this country's business community. Unfortunately, WOSB's have not seen a proportionate increase in the number of federal contracting dollars sent their way. In fact, the federal government has repeatedly failed to meet its own women-owned small business contracting goal (which was set at 5% under Section 7106 of the Federal Acquisition Streamlining Act). As a result, the U.S. Women's Chamber of Commerce (the "Chamber") is putting pressure on the U.S. Small Business Administration (the "SBA") to create a process for federal agencies to hit the statutory goal and offer sole-source opportunities for women-owned businesses.

On the home page of its web site, the Chamber says, "After 5 1/2 years, the SBA has finally issued the proposed regulations to implement the women's federal procurement program. This important program provides a targeted option to enable contracting officers to 'set-aside' certain procurements for women-owned businesses. These contracts are of a certain size and will only be for women-owned businesses in underrepresented industries in government contracting."

The Chamber also reports that "We are at a very, very important time - as the regulations that are used to implement the program will govern the ease of use by women and contracting officers, the timeline for reaching full market reach (how long it takes the SBA to establish 'women-owned status' for your firm), and the adherence to the law as written by Congress."

Women - Owned Small Business Contracting History
The Federal Procurement Data System reports that federal agencies have not met the 5% government-wide WOSB goal for prime contracts and subcontracts since fiscal year 1996. While the share of federal prime contracting dollars awarded to WOSB's has increased over the years to a high of 3.03% in Fiscal Year 2004, the total percent of WOSB prime contract awards still falls short of the 5% goal. The Government Accountability Office ("GAO") published a February 2001 report discussing the trends and obstacles in contracting with WOSB's. In that report, GAO noted that contracting officials complain that one of the primary obstacles in achieving the statutory WOSB goal was the "absence of a targeted government program for contracting with Women - Owned Small Businesses."

Addressing the Problem
Section 811(m) of the Small Business Act of 2000 (15 U.S.C. 637) focuses on women-owned business concerns and, more particularly, economically disadvantaged women-owned business concerns ("EDWOSB's"). This particular section also centers in on certain industries in which it has been determined that WOSB's have been underutilized by the federal government with respect to awarded contracting dollars. Section 811(m) (as recently amended) allows contracting officers to restrict competition to eligible WOSB's. More specifically, a contracting officer may restrict competition for the federal procurement of goods or services to small business concerns owned and controlled by women if the small business concern "is not less than 51 percent owned by 1 or more women who are economically disadvantaged."

For the purposes of this statute and in order to be considered "economically disadvantaged," the woman's net worth cannot exceed $750,000.00. In other words, a contracting officer has the latitude to consider only EDWOSB's for a procurement. However, there is a limit to this largess. Contracting officers can only restrict competition under this section of the legislation for contracts of $3 million or less (and $5 million for manufacturing). In the event that the contracting officer determines that the business in question is an industry in which WOSB's are substantially underrepresented, the contracting officer can waive the economically disadvantaged criteria and consider any WOSB. Furthermore, the SBA was charged with the task of determining those industries in which WOSB's are underrepresented.

The following is a list of the total federal contracting dollars awarded to WOSB's since 2000 (according to the Federal Procurement Data Center):

2000 = 2.3%
2001 = 2.49%
2002 = 2.90%
2003 = 2.98%
2004 = 3.03%
2005 = 3.00%
The SBA'S Role
The SBA's stated objective is to increase the amount of federal contract dollars awarded to WOSB's. SBA intends to assist federal agencies to meet the government's 5% contracting goal for WOSB's. Towards that goal, the SBA has proposed to amend its regulations to, among other things, (i) establish the standards to determine whether a company meets the definition of a WOSB or EDWOSB, (ii) establish the procedures for SBA certification of such businesses, and (iii) determine the penalties for a misrepresentation of a business as to its status.

The Effect on WOSB's
According to a 2002 Survey of Business Owners published by the U.S. Bureau of the Census, there were 6,489,493 women-owned businesses in the United States at the time the survey was completed. More than 900,000 of these businesses had one or more paid employees. Most women-owned businesses, however, do not participate in the federal contracting market.
In February 2005, approximately 75,000 WOSB's represented themselves as actual or potential federal contractors on the Central Contractor Registration ("CCR") database. Based on these figures, the SBA estimates that as many as 16,500 WOSB's may apply for certification as a SBA-certified WOSB. The SBA also expects that approximately 2,000 WOSB's will apply for such certification on an annual basis.
What Does SBA Need to Certify WOSB and EDWOSB Businesses?
Since the SBA is considering utilizing the current. 8(a) certification process (for small disadvantaged businesses) for this new program, an eligible 8(m) women-owned business should prepare in advance for the release of information concerning the certification process. The following is what someone may expect to be requested by the SBA for the 8(m) application process (provided it mirrors the 8(a) process):

A D&B Number
Registration with the CCR database
Registration with the SBA
The completion of SBA forms
Ownership records for the applicant business
Tax records for the applicant business
The completion of any supporting documents
The completion of any financial forms required by the SBA

The Certification Process Debate
It is estimated that the entire SBA 8(m) certification process, from beginning to end, will take approximately 30-90 days. The SBA recently asked for comments on its proposed rule regarding the (m) amendment and, in summary, the Chamber made a point of asking why a WOSB or EDWOSB could not "self certify" itself as such rather than go through the lengthy certification process. The Chamber's position was, in essence, that in allowing self certification, red tape would be eliminated and the government could start fulfilling its goals immediately.

The SBA's Response
The SBA says that if it certifies the EDWOSB's than the contracting officers don't have to do the certification on a case-by-case basis. Therefore, it allows a business to go through it once rather than for every contract, saving a great deal of money in the long run. The SBA also wants to make sure that no fraudulent activities happen as a result of WOSB certified sole-source contracts.
Women-Owned Businesses Which Are Already Certified
Those businesses which are already certified as economically disadvantaged or 8(a) certified will automatically be certified under the WOSB and the EDWOSB program created by the SBA.

Upcoming Issues
The SBA has hired a company to conduct a survey to determine those industries in which women-owned small businesses have been underutilized by federal procurement officials. Congress is also scheduled to review the issues at hand and will make a determination as to whether the SBA will allow self-certification.
The public may submit comments to the proposed rule up until close of business on May 3, 2010, to www.regulations.gov, where they will be posted after 4 p.m EST, or by mailing them to Dean Koppel, Assistant Director, Office of Policy and Research, Office of Government Contracting, U.S. Small Business Administration, 409 3rd St. SW, Washington, DC 20416. Please reference RIN 3245-AG06 when submitting comments.
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