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House Subcommittee Urges Progress on Federal Contracts with Women-Owned Businesses

On March 21, the House Small Business Subcommittee on Contracting and Technology held a hearing on “Federal Government Efforts in Contracting with Women-Owned Businesses.” The hearing focused on eliminating delays in implementing the Women’s Procurement Program (P.L. 106-554) and the failure of federal agencies to meet federal contracting goals established in the Federal Acquisition Streamlining Act (P.L. 103-355). The first panel of witnesses consisted of federal agency officials, while the second panel consisted of women small business owners.

“Women-owned small businesses are an important part of the economy. They employ 7.1 million people, and their annual payroll is almost $175 billion. These firms are driving future growth and job creation in our communities,” said Chair Bruce Braley (D-IA). Rep. Braley continued, “Even with this large market at their disposal, businesses owned by women are still not getting their fair share of opportunities. In 2005, only 3.3 percent of federal contracts went to firms owned by women, the government’s highest achievement to date…Congress set a five percent goal in 1994, as part of the Federal Acquisition Streamlining Act. It quickly became apparent, however, that without a specific procurement mechanism for achieving that goal, real progress would be hard to achieve for women-owned businesses. Between 1994 and 2000, the federal government never came close to meeting this five percent goal.”

In explaining congressional efforts to meet the five percent goal, Rep. Braley said that Congress passed the Women’s Procurement Program in 2000, which “required the Small Business Administration [SBA] to conduct a study to identify particular industries where small businesses owned and controlled by women were underrepresented in federal procurement contracting. It also required the SBA to establish procedures to verify eligibility to participate in the procurement program. More than six years have passed, and the SBA has not yet implemented the program. We are here today to ask, ‘Why?’”

Ranking Member David Davis (R-TN) said, “I understand the challenges faced by SBA in establishing the areas in which women-owned businesses are underrepresented, but what I would like to better understand is what caused such significant delays in the evaluation of the initial study, the contracting for the second study, and publication of the rules. It is my belief that when a mandate is given to an agency by Congress, it is incumbent upon that agency to take all necessary steps as expeditiously as possible to implement that mandate.”

Jovita Carranza, deputy administrator of the Small Business Administration, said, “Statistics do show that there has been growth in the area of contracting to women-owned businesses. Federal Prime Contract dollars going to WOSBs [women-owned small businesses] increased from $4.6 billion in FY2000, or 2.88 percent, to $10.5 billion in FY2005, or 3.342 percent. Subcontracting dollars have increased from $3.6 billion in FY2000 to over $6 billion in FY2003 based on the latest validated data available. Although we have seen an increase in the number of contracting dollars going to WSOBs, the federal government still has not reached the statutory goal.” Ms. Carranza added, “SBA has been and remains committed to implementing the statutorily-mandated set-aside for women-owned businesses, but doing so in a way that would be upheld by the courts as constitutionally valid.” Ms. Carranza further noted that the National Academy of Sciences (NAS) reviewed the original SBA study conducted in compliance with the 2000 law and “concluded that it was flawed.” Subsequently, the SBA hired the Rand Corporation to conduct the original SBA study in a manner consistent with the NAS findings. Ms. Carranza expects the final study to be published in April 2007.

Francis Spampinato, Jr., chief acquisition officer for the Department of Energy (DOE), explained, “In subcontracting, DOE established a women-owned small business goal of 5.8 percent, or $608.8 million…DOE has achieved considerable growth in subcontracts awarded to women-owned small businesses. From the period FY2000 through FY2005, the latest fiscal year for which data is available, subcontracts to women-owned small businesses grew from $495.7 million to $668.4 million, a 35 percent increase.” Dr. Spampinato added that DOE’s FY2007 Strategic Plan for Small Business “continues to focus on strategies specifically designed for women-owned small businesses” and that in addition to its strategies, “DOE has specific prime and subcontracting objectives for women-owned small businesses.” Dr. Spampinato concluded by saying, “DOE will continue to advocate for a strong federal program for women-owned small businesses in prime contracting, subcontracting, and inclusion in financial assistance opportunities…As you will note from the numerous programs, activities, and strategies outlined in this statement, DOE has established women-owned small business contracting as a priority within the Department.”

Larry Warder, chief financial officer for the Department of Education, said, “We recognize our ongoing challenges in prime contracting with women-owned small businesses based on an increased emphasis on identifying specific small business categories during the market research phase of our procurements. The majority of the Department’s contract expenditures are directly attributable to the sizeable Federal Student Aid line of business, which includes the processing of millions of applications for federal student aid…and the servicing of student loan programs. Most of this work requires large businesses with extensive human capital and technology resources. The qualified vendors are large national or international organizations, most of which are publicly-owned.” However, Mr. Warder noted that the department has “made more opportunities available for small businesses” and that there has been “increased emphasis on small business contracting across all Department offices.” He continued, “In areas where large businesses perform a significant portion of contract work, requirements have been reviewed in order to restructure portions of the work for the benefit of small businesses…We estimate a potential increase in dollars awarded to small businesses to be 50 percent in next year to 18 months.”

Thomas Luedtke, assistant administrator for procurement at the National Aeronautics and Space Administration (NASA), said, “NASA annually negotiates Agency women-owned small business prime and subcontracting goals with the Small Business Administration…In addition, at each of the NASA ten field centers, the Agency has designated Small Business Specialists who provide a central point of contact to women-owned and other small businesses in identifying specific contracting opportunities at their respective center.” Mr. Luedtke gave specific examples of women-owned small businesses that have contracted with NASA: Science Systems and Applications, Inc. that contracted with NASA’s Langley Research Center for $140 million over five years; Hernandez Engineering, selected by NASA’s Marshall Space Flight Center for a five-year, $370 million contract; and Analytical Services, Inc., that contracted with NASA’s Dryden Flight Research Center for $51 million over five years. “NASA believes that these examples represent the types of expertise that women-owned businesses can provide in support of the nation’s space program. NASA will continue to seek ways to provide opportunities for women-owned small businesses, including the consideration of additional tools that may assist the Agency in meeting our WSOB goals,” concluded Mr. Luedtke.

During inquiries to the first panel, Rep. Davis asked Ms. Carranza about the constitutional concerns hindering implementation of the Women’s Procurement Program. Ms. Carranza responded that she thought the constitutional concerns focused more on identifying women-owned businesses as a preference group within the law and the need for accurate and sufficient information to support such a designation. She stated that the SBA wants to ensure that the program can “level the playing field” for underserved businesses without raising the legal scrutiny required by Adarand v. Peña (where the Supreme Court held that all racial classifications imposed by government must receive the highest level of review to ensure that such classifications are “narrowly tailored” to further “a compelling government interest”).

Rep. Nydia Velázquez (D-NY), chair of the Small Business Committee, said that outreach to women-owned businesses is “meaningless” if the agencies cannot reach the five percent goal mandated by the Women Procurement Program. She asked Ms. Carranza when the program would be “up and running,” to which Ms. Carranza responded that their goal is to have the program functioning by this summer. Referencing an SBA press release issued the day before, which questioned several provisions of the Women Procurement Program, Rep. Velázquez said, “I resent the fact that the [Women’s Procurement] program has not been implemented after six years…The Administrator will be back before this committee until the program is implemented and we will keep issuing scorecards for each agency until the program is implemented.”

“We are here today to call for an end to the culture of failure that has become pervasive at the SBA and all the federal agencies that are not meeting their goals,” said Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce. Ms. Dorfman reviewed the contracting history between women-owned businesses and the federal government and requested specific action to rectify the situation. “Implement P.L 106-554, the Women’s Procurement Program. Stop blindly setting goals that are never met. Agency acquisition leaders commit to meeting your goals and leverage acquisition strategies that will achieve the congressional[ly] mandated minimum of five percent contracting with women-owned firms. Many, many agencies have proven that they can meet and exceed the five-percent goal. It is time for the culture of failure to end and for our federal government to open its doors to the dynamic women-owned small business marketplace. We are tired of waiting and we will not let this issue rest. Women-owned small businesses lose over five billion dollars annually. We are taxpayers, we are voters, we are community and family leaders.”

Also testifying before the subcommittee were women small businesses owners from around the country: Christina Lomasney, chief executive officer of Isotron Corporation and Modumetal, Inc., in Seattle, Washington; Karyl L. Smith, owner of Iowa Valley Appraisal in Waverly, Iowa; and Sheryl Roberts, chief executive officer of CCS Holdings, LP in Irving, Texas.

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