Women-Owned Business and the SBA: What Does it Mean?

Here’s an explanation of the Small Business Administration’s October 2010 rule defining treatment of women-owned businesses that qualify for federal contracts:

How Will SBA’s Final Rule on Women-Owned Businesses Impact You? by Thompson Coburn. Highlights:

– On Thursday, October 7, 2010, the Small Business Administration (SBA) published a long-awaited final rule laying out the framework for the treatment of women-owned businesses in the Federal marketplace. 75 Fed. Reg. 62,258. The rule will take effect on February 4, 2011. The SBA notice is 35 pages, 22 of which explain the background behind the rules and 13 of which constitute the new regulation. This new program has been 10 years in the making, and it will have a significant impact on the Government contracting community…

– In a nutshell, there soon will be two new kinds of favored entities in Federal contracting: Women-Owned Small Businesses (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB). In the eyes of the contracting officers, WOSBs and EDWOSBs are to receive roughly the same treatment as 8(a), HUBZone and Small Disadvantaged Veteran-Owned Business (SDVOB) concerns…

– When procurements are set aside for either WOSBs or EDWOSBs, large businesses may still participate as subcontractors or joint venturers, just as they currently do with 8(a), HUBZone or SDVOB prime contractors…

– For a firm to qualify as a WOSB, it must demonstrate that (a) it is a “small business” under SBA’s size standards for its primary industry classification, and (b) it is not less than 51 percent “unconditionally and directly owned and controlled” by one or more women who are U.S. citizens. To qualify as an EDWOSB, an applicant must meet the same two tests, but, in addition, the owners must be “economically disadvantaged”…

– With the exception of the 8(a) program and the HUBZone program, the small business size status program in Federal contracting has traditionally relied on a self-certification process under which the Government took an offeror’s certification as valid unless it was challenged by a contracting officer, the SBA or a competitor through a protest. Although protests will still be part of the WOSB and EDWOSB process, the self-certification element will be complemented by a process in which applicants will submit all required information to a “third-party certifier” that will either certify the applicant’s status or reject the application…

– The new rule has introduced a process called an “eligibility examination.” This is described as an investigation that verifies the accuracy of any certification made or information provided as part of the certification process, including third-party certifications or in connection with a WOSB or EDWOSB contract. SBA reserves the right to conduct the examination at the concern’s offices. SBA also will consider allegations made in a protest, even if the protest was denied or dismissed…

– As exciting as this new rule will be for businesswomen, it is complicated and burdensome, and it is going to be the source of great frustration for all parties involved. Women-owned small businesses that can benefit from the new rule would be wise to begin preparing now for certification as either a WOSB or an EDWOSB, knowing that the applications will be scrutinized carefully and that competitors will be quick to challenge their status. In addition, women-owned businesses need to modify their marketing practices to ensure that they are educating their customers, both primes and the Federal agencies, about the new rule. If the new rule directly applies to you and your company, you should take the time to become intimately familiar with it…

Read: Thompson’s entire analysis of the women-owned business SBA rule»

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Also seeSBA Implements Final Rule Authorizing Women-Owned Small Business Set Asides (by McKenna Long & Aldridge)