SBA issues new proposal on small business program, but same questions remain

A revised proposal from the Small Business Administration to implement a long-delayed procurement program for women-owned firms isn't satisfying its critics.

On Wednesday the Federal Register will publish regulations for the Women's Procurement Program at SBA, which will increase from four to 31 the number of industries in which women-owned small businesses reportedly are underrepresented. But lawmakers and others have said the list for women-owned businesses should include at least 70 industries. The government lists 140 industry codes in which companies could be eligible for set-aside contracts with little to no competition.

SBA announced on Tuesday that it had submitted its final proposed rule. The agency's acting administrator, Sandy Baruah, said Congress "should be pleased with our efforts," but Senate Small Business and Entrepreneurship Committee Chairman John Kerry, D-Mass., was not convinced SBA was on target with its analysis.

"Eight years ago, when Congress passed this law, our intent was to level the playing field for women entrepreneurs," Kerry said, calling the new proposed rule "insulting." The senator said delays associated with implementing the program had cost women-owned businesses more than $6 billion in potential revenue.

"This ruling includes more roadblocks and does nothing to make it easier for women to compete," Kerry added.

The new rule is an about-face for SBA, which released a proposal in December 2007 designating preferences for women-owned small businesses in only four categories, including one that doesn't allow private sector participation. That proposal was heavily criticized at congressional hearings and drew the ire of advocacy and industry groups.

"We are hoping the expansion of industries will make people more comfortable with it," Baruah said in an interview with GovernmentExecutive.com. "But at the end of the day, the Hill or anyone else should not be surprised at the methodologies we are using because we have been very clear and transparent about that."

The expanded 31 industries are based on nonpublic Census data from the 2002 Survey of Business Owners. The new data set, which was extracted to find the total number of women-owned small businesses, was then built into a methodology model created by the RAND Corp. SBA had concluded that the original analysis included a "data anomaly" that double-counted some company's total revenues and created a false impression that women-owned firms were competitive in certain industries, Baruah said.

"Everyone who has seen [the data] thinks it is much more reliable and has a higher level of integrity," he said.

But not everyone agrees.

"This is just a Hail Mary pass by the SBA that does not reflect the will of Congress," said Margot Dorfman, CEO of the U.S. Women's Chamber of Commerce. "The SBA has thrown out years of work to find data that they like. … This is just a stall tactic."

The Chamber of Commerce has filed suit against SBA demanding that the agency implement the congressionally mandated procurement program. A court hearing on Monday precipitated SBA's release of the rule.

Sen. Olympia Snowe, R-Maine, the committee's ranking member, said the new proposal falls far short of enabling women-owned businesses to compete fairly for federal contracts.

"The SBA's final rule amounts to little more than a fig leaf," Snowe said. "Women entrepreneurs, who contribute so many jobs to our nation's economy, deserve a final contracting rule that will actually help them receive their fair share of business with the government. The SBA must reexamine the over 1,700 comments I and others made to its original proposal and come back with a plan to properly establish this program."

In February, Snowe introduced S. 2608, the Small Business Women's Procurement Program Improvement Act. The bill would certify that women-owned small businesses are underrepresented in 70 industries. SBA would then have to wait five years until it could conduct another underrepresentation study. The bill has not moved out of the Small Business Committee.

Snowe's legislation also would force SBA to drop a controversial requirement -- which remains in the new rule -- that calls for agencies to admit to past gender discrimination as a prerequisite for involvement in the set-aside program.

Women's small business advocates charge that the discrimination requirement is a red herring that ensures that the program will never get off the ground.

"This legal burden of proof makes it impossible for the program to be implemented," said Denise Farris, who runs a Kansas-based law firm that represents small businesses. "The SBA put out a new and improved version, but it's just window dressing. This program is still dead in the water."

Baruah, however, said the discrimination provision is needed for the program to beat back any potential court challenges.

"We need to have a process that will stand up to constitutional scrutiny and that is not open to legal challenges the day it walks out the door," Baruah said.

Despite accounting for 30 percent of all small businesses, women-owned companies received less than 3.5 percent of federal contracts -- short of the government's 5 percent statutory goal -- in 2006.

SBA is accepting public comment on the new proposal for the next 30 days.