SBA and Women Entrepreneurs

From today’s NY Times, and the article S.B.A. Readies Remedy for Bias Against Women in Federal Contracting.

The Small Business Administration on Tuesday unveiled a proposed rule that would finally implement a law intended to increase the share of federal contracts to women-owned firms. The law, originally passed by Congress in 2000, allows federal agencies to set aside contracts for small businesses owned by women in industries that the S.B.A. determines “are underrepresented with respect to Federal procurement contracting.”

According to the S.B.A. (pdf), the agency has found 83 industries (pdf) where women-owned small businesses are “under-represented or substantially under-represented.” In those industries (defined by the North American Industrial Classification System, or NAICS, which comprises 313 broad industrial categories), a federal contract officer can restrict competition for contracts worth less than $3 million, or $5 million for manufacturers, to women-owned firms. Generally speaking, women must control and own at least 51 percent of the company and be United States citizens as well as “economically disadvantaged.” In industries where women are substantially under-represented, however, the S.B.A. can waive the disadvantaged requirement.

“We’re very pleased to see the S.B.A. finally moving,” said Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, which says it has 500,000 members, mostly small-business owners. “Women own nearly one-third of all businesses in the United States, but we only receive 3 percent of federal contracts.” Or more precisely: not more than 3.4 percent in 2008.

Federal law sets a goal — not a requirement — that 5 percent of all government contracts go to women-owned firms. Last fall, the U.S. Women’s Chamber concluded that the $12 billion difference between the goal and reality in 2008 amounted to the “largest shortfall ever.” The 5 percent goal has never been met since it became law in 1994, which is what prompted Congress to create contract set-asides 10 years ago.

However, by some accounts, the Bush administration had little interest in the law. Ms. Dorfman said that in 2004, then-S.B.A. Administrator Hector Barreto told her that “the S.B.A. had no intention of implementing the program.” (Mr. Barreto, now chairman of the Latino Coalition, a Hispanic small-business advocacy organization, did not return a phone call seeking comment.)
After Mr. Barreto resigned in 2006, his successor, Steven Preston, moved to establish the Women’s Procurement Program, as it was known — but with limitations. For one thing, federal agencies were put in the awkward position of having to individually certify that they had discriminated against women-owned businesses in the past before the program would apply to them. Moreover, the S.B.A.’s proposed rule initially determined that women were under-represented — and set-asides could occur — in just four industries. The Bush administration’s final proposed rule (subsequently withdrawn by the incoming Obama administration) expanded this to 31 industries.

The rule proposed by the Obama administration this week further expands the field to 83 industries, and removes the department-by-department certification. Backers of the program in Congress greeted the S.B.A.’s proposed rule with guarded optimism. “After three Congressional reports, numerous Congressional hearings, two proposed rules, one highly deficient final rule, and nearly a decade of delay, today’s announcement is long overdue,” said Senator Olympia Snowe of Maine, the ranking Republican on the Small Business Committee, in a statement released by her office. The Democratic chair of the committee, Mary Landrieu of Louisiana, described the announcement as “a step in the right direction.”