SBA’s Women-Owned Small Business Contracting Program

SBA’s Women-Owned Small Business Contracting Program

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 ful y defined at 13
substantially underrepresented. Industries were selected by
C.F.R. §127.203. Each individual whose ownership interest wil
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 fol owing 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 mil ion 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
WOSB Award Requirements and Limits
as industry updates or certification requirements, have an
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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