Congressional Research Service IF12476.1 (SBA’s Women-Owned Small Business Contracting Program)

Summary

This Congressional Research Service report of August 18, 2023 describes the SBA’s Women-Owned Small Business (WOSB) Federal Contracting Program, which gives WOSBs, including economically disadvantaged ones, greater access to federal contracts. Federal agencies have a statutory goal of awarding 5% of federal contracting dollars to WOSBs, a goal met twice since it was authorized in 1994. Congress authorized set-asides in the Small Business Reauthorization Act of 2000 and sole-source contracts in the FY2015 defense authorization act. The SBA identifies eligible industries by how underrepresented WOSBs are among federal contractors, and published a final rule on October 7, 2010 listing program-eligible NAICS codes.

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“Congressional Research Service IF12476.1 (SBA’s Women-Owned Small Business Contracting Program).” Original at www.congress.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/congressional-research-service-if12476-1-sba-s-women-owned-small-busin-003c699bec/, SHA-256 3715b50b72f193226bc8fb7383ea4e1e22f9327f8b369c376c0949acc21189f1.

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August 18, 2023
SBA’s Women-Owned Small Business Contracting Program
Program Background Industry-Specific Eligibility Requirements
The Small Business Administration’s (SBA’s) Women- At the direction of Congress, the SBA identifies WOSB
Owned Small Business (WOSB) Federal Contracting program-eligible industries by determining how
Program is designed to provide greater access to federal underrepresented WOSBs are among federal contractors in
contracts for WOSBs, including a subset that are considered each industry. The SBA determines industry
economically disadvantaged (EDWOSBs). Federal agencies underrepresentation to different degrees:
have a statutory goal of awarding 5% of federal contracting “underrepresented” or “substantially underrepresented,”
dollars to WOSBs, which is codified at 15 U.S.C. and (re)examines industries every five years. The list of
§644(g)(1)(A). The percentage of contracts awarded to identified industries determines which WOSBs may receive
WOSBs has increased since the creation of the WOSB set-aside and sole-source contracts from federal agencies.
contracting program, but the government has typically Both “underrepresented” and “substantially
fallen short of reaching the 5% WOSB procurement goal. underrepresented” refer to a disparity between federal
The goal has been met twice since it was authorized in utilization of WOSBs in contracting and their availability
1994. for contracts. The SBA assesses the disparity using North
American Industry Classification System (NAICS) industry
Congress proposed a contract set-aside for WOSBs codes to define different industries.
(including EDWOSBs) in the Equity in Contracting for
Women Act of 2000 (H.R. 4897). This language was History of Selecting Eligible Industries
incorporated into the Small Business Reauthorization Act The SBA has faced challenges in identifying a methodology
of 2000, which was included in P.L. 106-554, the to determine the industries in which WOSBs are
Consolidated Appropriations Act, 2001. Congress underrepresented in federal contracting. SBA completed a
authorized sole-source contracts for WOSBs (including draft of a legislatively mandated study of underrepresented
EDWOSBs) in the Carl Levin and Howard P. “Buck” industries in 2001, and decided to contract with the
McKeon National Defense Authorization Act for Fiscal National Academy of Science (NAS) to review the study.
Year 2015 (FY2015 NDAA; P.L. 113-291). Set-asides limit NAS completed its analysis and issued a report in 2005,
contract competition to WOSBs and sole-source awards are concluding that the study was “problematic,” and
made to a WOSB without competition. WOSBs are eligible recommending a new study. The SBA commissioned a new
for set-asides and sole-source opportunities in certain study by the Kaufman-RAND Institute for Entrepreneurship
industries where they are “substantially underrepresented,” Public Policy, which was published in 2007. Following this
while EDWOSBs are eligible for such opportunities in all study, the SBA elected to define underrepresentation using
industries in which WOSBs are either “underrepresented” disparity ratios, where a ratio equal to 1.0 suggested that
or “substantially” so. Certain requirements for and WOSBs were fully represented in a given industry, while a
limitations on both of these preferences are defined in ratio less than that suggested some level of
statute. underrepresentation in federal contracting.

Definition of Economically Disadvantaged The SBA published a final rule on October 7, 2010, that
Women-Owned Small Business identified program-eligible NAICS codes, designating
In order to qualify as an EDWOSB, one or more economically industries with disparity ratios between 0.5 and 0.8 as
disadvantaged women must unconditionally and directly own underrepresented, and industries with ratios less than 0.5 as
at least 51% of the firm. These criteria are fully defined at 13 substantially underrepresented. Industries were selected by
C.F.R. §127.203. Each individual whose ownership interest will analyzing the dollars earned by WOSB contractors and the
be used to qualify for EDWOSB designation must submit number of WOSB contractors.
documentation demonstrating that their financial condition
meets the following economic thresholds: As shown below, the disparity ratios used in the SBA’s
analysis were (1) the WOSB share of federal prime contract
• Personal Net Worth must be less than $850,000,
dollars divided by the WOSB share of total business
excluding her ownership interest in the concern and her receipts within a given NAICS code, and (2) the share of
equity interest in her primary personal residence. contracts awarded to WOSBs in a particular NAICS code
• Income must be $400,000 or less in adjusted gross divided by the total number of WOSBs within that NAICS
income averaged over the three years preceding the code:
certification.
• Total Assets must be $6.5 million or less for the fair
market value of all personal assets, including primary
residence and the value of the business concern.

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SBA’s Women-Owned Small Business Contracting Program

million ($7 million for manufacturing contracts). The
Federal Acquisition Regulatory Council has the
responsibility of adjusting this maximum contract value on
and October 1 of each year that is evenly divisible by five. The
next adjustment will take place on October 1, 2025.

Certification Requirements
Among other provisions, the FY2015 NDAA removed the
Recent Updates to Eligible Industries ability of WOSBs to self-certify their eligibility for the
The SBA most recently updated its list of eligible industries program, and required the SBA to implement its own
on March 18, 2022. The updated industry list implements certification process. To be eligible for contracting
provisions of the FY2015 NDAA, in which Congress preferences, WOSBs and EDWOSBs must apply for
required the SBA to conduct a new study of WOSB certification using SBA’s online platform at
representation across industries by 2016, update it every WOSB.Certify.sba.gov. According to the SBA, it makes a
five years, and submit a report of the results of each new firm certification decision within 90 calendar days after
study to Congress. receipt of a complete package, “whenever practicable” (13
C.F.R. §127.304(a)).
The SBA contracted with an independent research firm to
make the most recent industry updates. The study examined As of May 30, 2023, certified WOSB and EDWOSB firms
the representation of WOSBs in government procurement are required to undergo an examination every three years to
during the previous three fiscal years (FY2016-FY2019). maintain their certification (13 C.F.R. §127.400(a)).
According to its announcement in the Federal Register, the Previously, WOSB program participants annually attested
SBA used the same “disparity ratio thresholds ... for finding to their eligibility to continue participating in the program.
WOSBs to be substantially underrepresented and The rule change removed this requirement.
underrepresented” that were developed by the Kaufman-
RAND study. Prior to this change, WOSBs could self-certify or obtain
certification from certain third parties. With the change,
Through the update, the SBA increased the number of WOSBs may continue to use third-party certifiers (subject
eligible industries by 71%. EDWOSBs became eligible for to SBA regulations). There are four organizations approved
contracting preferences in 74% of NAICs industries and by SBA to provide third-party certification:
WOSBs in 63% of them. Because the eligible industries list
expanded, the potential number of small women-owned 1. El Paso Hispanic Chamber of Commerce;
businesses eligible for the program grew as a result of the 2. National Women Business Owners
update. Corporation;
3. U.S. Women’s Chamber of Commerce; and
Program Scrutiny and Judicial Review 4. Women’s Business Enterprise National
The creation of the WOSB program’s set-aside and sole- Council.
source preferences followed a Supreme Court case that Firms certified through these organizations must still
highlighted the legal vulnerability of contracting provide documentation to the SBA through the agency’s
preferences. The ruling in Adarand Constructors, Inc. v. new certification platform before they can receive
Pena (1995) found that all racial classifications, whether contracting preferences.
imposed by federal, state, or local authorities, are subject to
“strict scrutiny.” The WOSB program’s industry-specific Congressional Issues
eligibility and precise methodology for determining eligible Congress may be interested in the performance of federal
industries reflects a program design that maintains a narrow agencies in making WOSB awards because the government
scope. The House report accompanying the Equity in has not met the statutory 5% WOSB contracting goal most
Contracting for Women Act of 2000, H.Rept. 106-879, fiscal years. Congress also may be interested in how federal
mentions the need for “the program established in this Act agencies have used the WOSB program compared to other
to conform with Adarand Constructors v. Pena.” contracting programs, and whether program changes, such
as industry updates or certification requirements, have an
WOSB Award Requirements and Limits impact on program use.
Aside from industry-based eligibility limits, federal
agencies may only restrict competition for contracts to Congress has undertaken program oversight to ensure that
WOSBs through a set-aside if there is a reasonable WOSB awards are made only to certified eligible firms.
expectation that at least two WOSBs will submit offers that Concerns about program fraud risks led to the end of
meet reasonable price requirements. WOSB self-certification in 2020. Congress may be
interested in how the certification requirements created by
Agencies may award sole-source contracts to WOSBs and the FY2015 NDAA have affected both program
EDWOSBs in eligible industries if (1) the contracting accessibility and program fraud.
officer does not have a reasonable expectation that offers
would be received by two or more eligible WOSBs and R. Corinne Blackford, Analyst in Small Business and
EDWOSBs; (2) the award can be made at a fair and Economic Development Policy
reasonable price; and (3) the anticipated total value of the
contract, including any options, does not exceed $4.5 IF12476

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SBA’s Women-Owned Small Business Contracting Program

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