May 16, 2019

SBA Proposes Changes for Women-Owned Small Businesses and the 8(a) Program

Holland & Knight Government Contracts Blog
Elizabeth N. Jochum

Women-Owned Small Business Certification

The U.S. Small Business Administration (SBA) has published a proposed rule to amend its regulations to implement a statutory requirement to certify Women-Owned Small Businesses (WOSBs) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) participating in the SBA's Women-Owned Small Business Program, under which those businesses can be eligible for set-aside and sole source awards.

The WOSB Federal Contract Program, set forth in section 8(m) of the Small Business Act, 15 U.S.C. 637(m), authorizes contracting officers to restrict competition to eligible WOSBs or EDWOSBs for federal contracts in certain industries. The 2015 National Defense Authorization Act amended the Small Business Act to allow for sole source awards to WOSBs and EDWOSBs. In addition, the 2015 NDAA amended the Small Business Act to create a requirement that a concern must be certified as a WOSB or EDWOSB (by a federal agency, a state government, SBA, or a national certifying entity approved by SBA), in order to be awarded a set aside or sole source contract under the WOSB Federal Contract Program.

The proposed rule would permit an entity to be eligible for award under the program as long as its application is pending. If that offeror were selected for award, its application would be prioritized by SBA and a determination would be made within 15 days. This provision acknowledges that SBA may have difficultly processing all the potential applications in a timely manner, given the approximately 10,000 firms currently in the WOSB repository. The anticipated influx of applications from these firms would likely overwhelm the SBA, which processes approximately 3,000 applications a year for 8(a) status and 1,500 a year for HUBZone status.

If or once the rule is finalized, the certification requirement will apply only to participants wishing to compete for set-aside or sole source contracts under the WOSB Federal Contract Program. WOSBs that are not certified will not be eligible to compete on set asides for the program.

Importantly, women-owned small businesses that do not participate in the program may continue to self-certify their status, receive contract awards outside the program as WOSBs and count toward an agency's goal for awards to WOSBs. For those purposes, which would include subcontracts, full-and-open awards and small business set-asides, contracting officers would be able to accept self-certifications without verification.

According to SBA, the proposed rule will bolster the number of federal contract awards to WOSB and EDWOSB-certified businesses and better empower agencies to meet the 5 percent federal contracting goal for women-owned small businesses. Currently, contracting officers must review a contract awardee's documentation to verify an applicant's WOSB and EDWOSB eligibility. "By establishing a transparent, centralized, and free certification process, the SBA aims to provide contracting officers with reassurance that firms participating in the WOSB Program are eligible for awards and encourage them to set aside contracts for women-owned small businesses."

A New Threshold for 8(a) Economic Disadvantage

The proposed rule also proposes changes to 13 CFR § 124.104(c), to make the economic disadvantage requirements for the 8(a) BD program consistent to the economic disadvantage requirements for women-owned firms seeking EDWOSB status. The proposed change would eliminate the distinction in the 8(a) BD program for initial entry into and continued eligibility for the program. Currently, the economic disadvantage criteria for EDWOSBs equate to the continuing eligibility criteria for the 8(a) BD program, but an entity applying for both EDWOSB and 8(a) status simultaneously might be found to be economically disadvantaged for EDWOSB purposes, but denied eligibility for the 8(a) BD program based on not being economically disadvantaged. The proposed rule intends to make economic disadvantage for the 8(a) BD program consistent to that for a woman seeking to qualify as economically disadvantaged for the EDWOSB program.

The SBA is specifically seeking comment on the net worth standard proposed to be used for the EDWOSB and 8(a) programs. A 2017-2018 study conducted for SBA's Office of Business supported a $375,000 adjusted net worth for initial eligibility, as compared to the current $250,000 threshold. In order to establish the same economic disadvantage criteria for the 8(a) BD program as for the EDWOSB program, SBA considered applying a $375,000 net worth standard to both the 8(a) BD and EDWOSB programs. But the study did not consider differences in economic disadvantage between businesses applying to the 8(a) BD program and those continuing in the program once admitted. Accordingly the rule proposes to adopt the $750,000 net worth continuing eligibility standard for all economic disadvantage determinations in the 8(a) BD program. SBA specifically requests comments on whether the $375,000 net worth standard or the $750,000 net worth standard should be used for both the 8(a) BD and EDWOSB programs and how the different standards would affect small business owners participating in the federal marketplace.

The SBA is seeking public comments on the proposed rule, which can be submitted here, by July 15, 2019.

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