women-owned small business
Discussing ideas

Recent Changes to Women-Owned Small Business Program Push Contract Awards Over 5 Percent Goal

By Todd R. Overman and Sylvia Yi

In April 2016, five years after the Women Owned Small Business (“WOSB”) Program was finally implemented by the Small Business Administration (“SBA”), the SBA announced the federal government had met its goal of awarding 5 percent of federal government contracts to WOSBs. The federal government has statutorily set small business and socioeconomic prime contracting goals – 23 percent to small businesses, 5 percent to small disadvantaged businesses, 5 percent to women owned small businesses, 3 percent to service disabled veteran owned small businesses and 3 percent to HUBZone small businesses. Fiscal Year (“FY”) 2015 marks the first time the federal government has met (and exceeded) its WOSB goal, coming in at 5.05 percent. A number of regulatory improvements to the WOSB Program, with the most significant changes concentrated within the past couple of years, are the likely reason for this achievement and have paved the way for greater federal contracting opportunities for WOSBs to pursue.

Establishing the 5 Percent Goal

The Federal Acquisition Streamlining Act (“FASA”) of 1994 established the 5 percent federal contracting goal for WOSBs. It is not surprising that this WOSB goal was not met until nearly 22 years later after it took six years for Congress in 2000 to establish a women’s procurement program to aid the government in meeting this 5 percent goal. From there, it took another 11 years for SBA to establish its WOSB Program. To add to the regulatory waiting game, SBA regulations and the Federal Acquisition Regulation (“FAR”) are not amended simultaneously.

WOSB Contract Set-Asides

When the WOSB Program officially launched in early 2011, unlike other socioeconomic procurement programs, SBA limited the set-aside procurement authority to 83 North American Industry Classification System (NAICS) code industries. Of the 83 NAICS code industries, only 38 were industries in which WOSBs were determined to be “substantially underrepresented” and, therefore, open to all WOSBs to compete for set-asides. SBA determined WOSBs were “underrepresented” in the remaining 45 industries, which allowed set-asides for Economically Disadvantaged Women Owned Small Businesses (“EDWOSBs”), but not WOSBs. The set-aside authority was initially limited to $5 million for manufacturing contracts or $3 million for other contracts. These limits were raised to $6.5 million for manufacturing and $4 million for other contracts in 2012 to adjust for inflation. These set-aside threshold limits were eliminated in 2013, mirroring the other socioeconomic programs.

A GAO study published in October 2014, found the WOSB set-aside authority had relatively little impact on achieving the 5 percent WOSB goal and that set-asides accounted for less than 1 percent of the total federal awards to WOSBs. Not surprisingly, the GAO study noted there was an increase in WOSB set-aside awards after the set-aside threshold limits were eliminated. Even with that change, a contracting officer in GAO’s study noted the 83 NAICS codes under which WOSB set-asides were permitted did not serve the agency’s procurement needs and, thus, found it difficult to use the WOSB Program. GAO received numerous suggested improvements to the WOSB Program from contracting officers and industry including: (1) expanding the NAICS codes; (2) allowing sole source awards; and (3) removing the NAICS code restrictions on set-asides.

Expanding and Targeting Award Opportunities for WOSBs

Following GAO’s lead, Congress amended the Small Business Act in 2014 to require SBA to submit a report on a new NAICS code study by January 2016, with new studies conducted every five years. As a result, SBA contacted the Department of Commerce (“DOC”) to conduct the study, which was released in December 2015. DOC’s study found that women owned businesses were 21 percent less likely to win awards than otherwise similar firms not identified as women owned businesses. The study also identified 109 industries in which WOSBs were at statistically significant lower odds of winning a federal contract.

Soon thereafter, in December 2015, the FAR was amended to authorize contracting officers to issue sole source awards to WOSBs. Sole source authority was given with limits at $6.5 million for manufacturing and $4 million for other contracts, but limited sole source awards to those NAICS codes for WOSBs determined to be “substantially underrepresented.” Most recently, and perhaps most significantly, SBA expanded the NAICS codes for WOSBs in March 2016. After analyzing the DOC study, SBA determined that 113 total industries were eligible for the WOSB Program, of which 92 were industries in which WOSBs were “substantially underrepresented.” This means 92 NAICS industry codes are available for WOSB set-asides and sole source awards, a significant increase from the 38 NAICS industries previously designated in this category.

Work in Progress

Since GAO’s 2014 study, two out of the three suggested changes to encourage better utilization of the WOSB Program have been implemented. While the WOSB Program is not quite on the same playing field as other SBA socioeconomic programs, a series of improvements during the past few years have had a positive impact, contributing significantly to the achievement of the 5 percent goal. With the WOSB Program’s changing regulatory framework, WOSBs now have greater federal contracting opportunities to look forward to and compete for.

Todd R. Overman is the chair of the government contracts practice at Bass, Berry & Sims PLC, and is based in the firm’s Washington, D.C. office. He can be contacted at 202-827-2975 or toverman@bassberry.com.  Sylvia Yi is an attorney in the firm’s government contracts and international trade practice groups, and can be contacted at 202-827-2993 or syi@bassberry.com.