SBA Office Urges More Data on Women-Owned Firms

The Small Business Administration should consider revisiting its recent proposal that reclassifies how women-owned small businesses could better get a slice of the government-contracting pie.

So says the SBA's Office of Advocacy, an independent office housed within the agency, in a letter released Wednesday.

The SBA's proposal released at the end of last year met a hostile audience. It would limit the number of governmental contracts awarded to women entrepreneurs by requiring women-owned businesses to show they were underrepresented in thousands of industries and direct discrimination by a government agency to qualify for protected status.

The new rule would extend the special status to women-owned businesses in just four categories: kitchen cabinet manufacturing, engraving, certain motor vehicles and intelligence.

The Office of Advocacy's letter expresses concern that SBA's proposal to make a finding of discrimination prior to using a set-aside process of women-owned small business contracts "may actually shift the burden onto the WOSB community to compel agency action on research, analysis, and ultimately, a finding of discrimination."

The office recommends that the final rule should provide cost data on the effort required by these women-owned firms if they're expected to play a role in compelling agencies to determine evidence of discrimination.

The letter said the SBA "may wish to undertake a more comprehensive data gathering process. SBA would benefit from a process that can generate more data and information useful for the analysis required by agencies to find discrimination."

By Sharon McLoone |  February 21, 2008; 1:21 PM ET
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Sharon, thanks for your article! Yes, more research is needed.

AND...let's not just wait for the government to help. There's something else that you as a journalist can inspire readers to do right now.

FIRST: SBA's current course represents an insufficient remedy to an inadequately researched problem. The Proposed Rule needs significant change before any implementation, and the government needs to know whether the proposed action is sufficient to achieve the desired outcome.

2006 estimates showed that 7.7 million businesses 51% owned and controlled by women employ 7.1 million people and generate revenues of $1.1 trillion. The April 2007 report by the RAND Corporation showed those companies to be under-represented in 87 percent of the categories of goods and services that the federal government buys.

SBA's Women's Procurement Program was supposed to improve that record. I was thus disappointed in SBA's Proposed Rule, published on December 27th 2007, because:

1. The Proposed Rule acknowledges that to implement the set aside for WOSBs in only the four most severely under-represented NAICS codes might offer improved opportunities for 1,208 companies listed in the Central Contractor Registry. It further suggests that more firms might potentially benefit if SBA opens up more NAICS codes following its next study on the matter, which would not be required until after 2011.

2. To limit implementation of the Proposed Rule to only four NAICS Codes -- cabinetmaking, engraving, other motor vehicle dealers, and national security and international affairs -- would have virtually NO impact on improving the federal government's continuing and dismaying failure to meet the goal of awarding 5% of federal contract dollars to woman-owned small businesses.

3. To further require agencies considering setting aside contracts in any categories under this proposed rule to first perform an internal audit of past contracting actions to demonstrate corrective action for its own past discrimination before setting aside a contract virtually guarantees that the effect of the regulation will be negligible.

To produce such a Proposed Rule after seven years' work, two flawed studies and thousands of dollars' worth of time and money is unacceptable in its own right. To face such a likely outcome is exceptionally so.

As noted below, more research is needed. But the Administration need not delay all action while waiting for the results of another study; this Proposed Rule can be salvaged. To be even marginally acceptable in the short term, the Proposed Rule needs amendments to:

• Remove the contingent requirement for an internal agency audit of discriminatory practices and remedies prior to designating a competition as restricted for WOSBs

• Increase the number of NAICS codes to include both underrepresented as well as significantly underrepresented NAICS codes.

Concerning the need for further research: while the aforementioned RAND report showed woman-owned businesses to be under-represented in 87 percent of the categories of goods and services that the federal government buys, even this study did not explain why this is so. To be truly effective, any proposal for policies intended to change the outcome needs to address the underlying problem - and we still don't know what that is.

(One might infer, "lack of access to capital" from the proposal to require any Economically Disadvantaged Woman-Owned Small Businesses owner to prove that her "ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business.")

Government policymakers still need answers to the following questions:

Do woman-owned small businesses not participate in the procurement process in the same proportion as male-owned small businesses?

If they do participate equally, then why do they not win with proportionate equality?
In either case, is a set-aside program, or some other means, the most effective way to attract their interest and participation, and change the outcome of contract awards to

a) Reach the 5% goal, and, more importantly,

b) Reach proportional equality in dollar value of awards?

I urge enlightened pro-business advocates to press SBA to amend its proposed rule accordingly, and to commit funds for research to answer the questions I posed and recommend appropriate policy changes.

SECOND: Success breeds success. Let's also find and publish case after case of GREAT examples of women who are winning government contracts despite the lack of set aside, and encourage more to think about what it will take for THEM to succeed, too.

Let me know if you'd like leads on those stories!

Yours sincerely,

Judy Bradt

Judy Bradt, Principal, Summit Insight
Your Champion for Women Winning Government Business!
494 N Pickett St, Alexandria VA 22304 Tel: +1 703.627.1074

Posted by: Judy Bradt, Principal, Summit Insight | February 25, 2008 9:38 AM

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