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April 24, 2014

Small Business Administration (SBA) Removes Limits on Contracts Eligible for Set-Aside for Woman-Owned Small Businesses

Last month, the Small Business Administration (SBA) enacted rules that removed all dollar limits on government contracts eligible to be set-aside under the Woman-Owned Small Businesses (WOSB) program. Prior to the enactment of the rule, only smaller contracts—manufacturing contracts not exceeding $6.5 million and all other contract not exceeding $4 million — could be set-aside for the WOSB program. 

The limitations were removed, in part, because the SBA determined the federal government was not awarding enough WOSB contracts. Under federal statute, contracting agencies must strive to award 5% of their contracts to WOSBs. The SBA found, however, the federal government issued only 3.97% of its contracts to WOSBs in fiscal year 2011. Without the limitation to smaller contracts, it is expected contracting officers will set-aside a greater number of contracts for competition among WOSBs.

The WOSB set-aside program is a relatively new program in the small business government contracting space, in place since late 2010. Previously, agencies were encouraged to meet the quota of 5% of all contract awards to WOSBs, but they did not have a mechanism to set-aside contracts for WOSBs. The ability to set-aside contracts for competition only among members of a certain type of business is the hallmark of the SBA’s socio-economic government contracting programs such as the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, the HUBZone small business program, and the 8(a) program for small socially disadvantaged business owners. Without the option to set-aside contracts for competition among WOSBs, agencies were consistently failing to meet the 5% goal, hence the SBA creating the WOSB set-aside program in 2010.

The WOSB set-aside program is distinct from the similar SDVOSB, HUBZone and 8(a) programs in several important respects. Unlike those other programs, the contracting officer may only set-aside contracts for WOSB competition in certain industries where the SBA has found that women-owned businesses are under-represented. 

Additionally, unlike the other programs, an agency may not make a sole-source award to a WOSB. Compare this to the SDVOSB, HUBZone and 8(a) programs under which an agency may make a sole source award—that is an award to a single contractor, without competition—when certain conditions are met. For the SDVOSB and HUBZone programs, those conditions are: 1) only one SDVOSB or HUBZone company, as the case may be, is capable of performing the contract; 2) the contract does not exceed $6.5 million for a manufacturing contract or $4 million for all other contracts; 3) the requirement is not currently being performed by a non- VOSB or non-HUBZone company, as the case may be; 4) the contractor is a responsible contractor; and 5) award can be made at a fair and reasonable price. 

Lastly, as mentioned, up until the enactment of this rule, the WOSB set-aside program, unlike the other similar programs, was limited to contracts valued at or below the specific dollar thresholds.   

The distinctions between the WOSB program and other similar SBA programs acted to limit the number of contracts that could be set aside for WOSBs and ultimately kept the number of contracts awarded to WOSBs well below the 5% goal. Accordingly, Congress mandated SBA action to remove the dollar thresholds entirely for WOSB set-aside contracts.

The regulation took immediate effect, without the typical notice and comment period, in part, because it was enacted in response to an explicit congressional mandate. The National Defense Authorization Act for Fiscal Year 2013 (NDAA) removed the statutory limitation on the dollar amount of a contract that could be set-aside for the WOSB program and, therefore, the SBA believed that it needed to act immediately to bring its rules into conformity with NDAA and avoid an inconsistency between its regulations and federal statute. 

Typically, the rulemaking process for federal agencies requires the agency to publish a proposed rule that then undergoes a public comment period, and possible amendment in response to those comments, before becoming a final rule. The final rule must then wait 30 days following its publication before it becomes effective. In this case, however, the SBA found consistency with the NDAA and, avoiding confusion within the procurement community, justified dispensing with the standard rulemaking process. Nonetheless, the public is still invited to comment on the rule.

The enactment of this regulation will likely lead to greater contracting opportunities for WOSBs. It remains to be seen, however, whether it will be enough to allow agencies to meet their goal of awarding 5% of all contracts to WOSBs.

©2014 Greenberg Traurig, LLP. All rights reserved.

About the Author

Ryan C Bradel, government contracts attorney, Greenberg Traurig Law FIrm
Associate

Ryan Bradel concentrates his practice in the areas of government contracts litigation, investigations, commercial litigation and election/campaign finance law. Ryan has represented clients on bid protests before the Government Accountability Office, litigated size protests and appeals before the Small Business Administration (SBA) and the Office of Hearing and Appeals, and directed internal investigations of, and litigated disputes in state and federal court with regard to, violations of FAR, SBA regulations and the False Claims Act.

202.331.2387

About the Author

Shareholder

John Stafford is a Shareholder in the Government Contracts Practice Group in Greenberg Traurig's Washington, D.C. office. For more than 30 years his practice has focused on federal regulatory law, compliance, administrative proceedings and litigation. Mr. Stafford has wide-ranging experience in public contracts and grants, and related legal and business issues.  He has a broad range of contract-related experience and has counseled and litigated cases on behalf of numerous companies, both large and small, in controversies involving federal and state procurement agencies...

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