Questions, answers on SBA's proposed rule for women-owned small businesses

The Small Business Administration proposed a contracting rule on March 2 that would give certain women-owned small businesses (WOSBs) a special set-aside status. Along with it, SBA published questions and answers about the proposal. Here's what the agency had to say.

SBA has been working on the WOSB rule for 10 years. Why did it take so long to create?

The Small Business Reauthorization Act of 2000 authorized a women-owned small business procurement program in industries where women-owned small businesses (WOSBs) are underrepresented. Since that time various studies were conducted to determine the industries in which WOSBs are underrepresented, first by SBA itself and ultimately by the Kaufmann-Rand Foundation. After the data was collected, SBA proposed several different rules addressing different aspects of the WOSB program. Throughout that time though, the most important rule provisions never became final. The Obama administration committed to proposing a single, comprehensive rule addressing all aspects of the program, and that is what has now been prepared and has been published for public comment.

Why did the Obama administration start over last year proposing a new rule when progress had been made on a different version?

The Obama administration considered it crucial to move forward promptly with a single, effective rule. All previous versions addressed only partial components of the rule. To make sure the public and the agency’s contracting officer community had a single proposal for such a regulation, the administration decided to prepare a new, comprehensive rule addressing all aspects of the program.

To do so, SBA reviewed the collected data carefully, along with comments collected concerning the previously proposed rules; it identified those industries in which the data supported the conclusion that WOSBs were underrepresented; and it prepared an effective structure for implementing a proposed program in those industries.

How does this proposed rule differ from attempts over the past decade?

First, this is a comprehensive proposed rule addressing all aspects of the WOSB contracting program. This gives the public an opportunity to comment on all aspects of the proposed rule before its implementation.

Second, this proposed rule identifies 83 industries as those in which WOSBs are underrepresented or substantially underrepresented. This is based upon the Rand study’s “share of contract dollars awarded” analysis and also its “share of number of contracts awarded” analysis. Prior versions of the proposed rule identified only four industries in which WOSBs are underrepresented based solely on the Rand study’s share of contract dollars awarded analysis; and also identified 31 industries in which underrepresentation was found based upon the share of contract dollars awarded analysis of the non-public data from the Census Survey of Small Business Owners.

Third, this proposed rule removes the requirement that individual federal agencies certify that they have engaged in past discrimination against WOSBs as a requirement for the program to apply to their contracting activities on a going-forward basis. SBA does not believe such a requirement is consistent with the applicable statutory or other legal requirements.

Fourth, this proposed rule establishes a new approach to WOSB self-certification. SBA believes that this new approach, combined with SBA’s ongoing compliance and fraud prevention efforts, will reduce any unnecessary burden on agency contracting officers while also making sure the program provides the maximum benefits to the broadest number of intended participants.

What is the difference in standard between “share of contracting dollars” and “share of number of contracts awarded”?

The share of contracting dollars and share of number of contracts awarded  analyses are two different methods to look into whether WOSBs are successfully competing in federal contracting in proportion to their availability to undertake federal contracts.

The share of contracting dollars analysis compares the proportion of contract dollars received by WOSBs in a particular industry (represented by a North American Industry Classification System code) in a particular year against WOSBs share of overall business in that industry. It therefore looks at how large or small a share of the overall pie of contracting dollars WOSBs are receiving in a particular industry.

The share of number of contracts awarded analysis compares the number contracts awarded to WOSBs in a particular industry against the total number of firms doing business in that industry. It represents one means of identifying whether opportunities to participate in federal contracting are being made available to a broad spectrum of the available WOSB community, rather that concentrating those opportunities in a smaller number of WOSB firms.

Will this new rule meet the new Rothe standard as recently laid out by the U.S. Supreme Court?

Yes, SBA believes the proposed rule complies with all applicable statutory and constitutional requirements. SBA believes the proposed rule addresses a compelling governmental interest, it is narrowly tailored to serve that interest, and it represents a reasonable and sensible regulatory approach based on sound and reliable research, studies, data and analysis.

Rothe background: Under Rothe the federal circuit court determined, as it pertained to the Department of Defense’s Small Disadvantaged Business Program, that there was not a “compelling governmental interest” to support a race-based contracting program. This ruling was based on the legislative history of the Department of Defense’s program. The Rothe case is the most recent applicable case on the constitutional standard that must be applied to set-aside contracting programs.

Posted by Matthew Weigelt on Mar 03, 2010 at 12:44 PM