A federal program designed to help women-owned small businesses compete for government contracts often hands awards to ineligible companies, according to the Government Accountability Office.
What’s more, the Small Business Administration program is falling short of its goal of increasing opportunities for women who own small businesses, GAO said in a new report.
An SBA review in 2012 and 2013 discovered more than 40 percent of companies that had previously received contracts through the program were ineligible to be designated as women-owned or economically disadvantaged women-owned small businesses.
Such businesses can either submit certification of their compliance themselves or enlist a third-party certifier. The report found the SBA “generally has not overseen third-party certifiers” and cannot offer “reasonable assurance that only eligible businesses” participate in the program.
SBA does not keep track of how many companies self-certify and how many rely on outside firms to verify their eligibility. If the businesses self-certify, they submit documents for free to the SBA demonstrating their compliance with the program’s requirements.
If the businesses pay a fee to a third-party firm, they submit their paperwork to that firm in exchange for a certificate that they then give to the SBA. Thus, the SBA’s only evidence of eligibility is the certificate and a signed document in which the business owner attests to the company’s compliance.
The report found federal procurement officers look at a business’ certification forms only after selecting it as a contract awardee. An unnamed representative of an organization that represents women-owned firms told GAO that federal contracting officers tend to select businesses with third-party certifications because contract officers had to review less paperwork.
The SBA does not require contracting officers to assess the validity of documents that show the small businesses in the program are at least 51 percent owned and controlled by a woman. Instead, contracting officers merely check for the presence of such documents, and only do so after awarding those businesses their set-aside contracts.
SBA officials claimed the high levels of program ineligibility found in the 2012 and 2013 reviews were the result of confusion among the women-owned businesses about program requirements.
But “SBA officials could not explain how they had determined lack of understanding was the cause of ineligibility among businesses and have not made efforts to confirm that this was the cause,” the report said.
Congress began requiring federal agencies to set aside contracts for women-owned small businesses in 2000.
The number of businesses owned by women grew twice as fast as those owned by men between 1997 and 2007, according to the Department of Commerce.
Women own nearly 30 percent of all U.S. businesses. Less than five percent of federal set-aside contracts are awarded to women-owned small businesses.
The program has had a “limited effect” on opportunities for women-owned small businesses, the report found. Under current regulations, such companies cannot win sole-source contracts and are given set-aside awards only for specific industries in which the federal government has determined women-owned companies are “underrepresented.”
Between April 2011 and May 2014, the program accounted for just 0.44 percent of all federal contracts awarded to women-owned small businesses. Most others secured their contracts through different set-aside programs, such as one intended to drive contracts to companies located in historically-underutilized business zones.
Even so, the SBA has struggled to effectively oversee its other set-aside programs, GAO said.
“According to SBA officials, the levels of ineligibility found during the examinations were similar to those found in examinations of its other socioeconomic programs,” the report said.
A September report from the SBA inspector general found hundreds of millions of dollars had gone to “disadvantaged” companies that didn’t actually meet requirements for the program.
