SBA Inspector General Report on WOSB Set-Asides

SBA Inspector General Report on WOSB Set-Asides

On May 14, 2015, the Office of Inspector General at the U.S. Small Business Administration released Evaluation Report 15-10: Improvements Needed in SBA’s Management of Women Owned Small Business Federal Contracting Program (WOSBP).1

Key Findings (from a sampling of contracts):

  • Awards were given to firms with absolutely no documentation provided: Of the 34 WOSBP awards reviewed, only 25 had documentation in the WOSBP repository. 9 firms were awarded $7.1 million in set-asides without any of the required documentation uploaded to the repository.
  • Awards were given to firms without all the required documents: 13 of the 25 firms that did upload some documents to the WOSBP repository did not upload all of the requirement documents.
  • Awards were given to firms that had not proven control: 12 firms did not provide sufficient documentation to prove that a woman or women controlled the day-to-day operations of the firm. These firms received $8 million in WOSBP set-asides.
  • The WOSB set-aside program is underused: Only .7 percent of awards attributed to women-owned small businesses were awarded through the WOSBP set-aside program.
  • There is a high likelihood that government goaling achievements with women-owned small businesses are grossly overstated: 99.3 percent of awards attributed to women-owned firms were attributed outside of the set-aside program with very little scrutiny as firms claiming women-owned small business status outside of the WOSBP program simply check-off a few boxes during SAM.gov registration to claim their status.

The Controversy

The controversy over fraud and misuse of the WOSBP program began when the U.S. Women’s Chamber of Commerce (a third-party certifier for the WOSBP program) brought concerns to the attention of the Small Business Administration and Congress. In a Flash Report issued by the U.S. Women’s Chamber of Commerce on June 19, 2014, the USWCC reported that 39 percent of the firms examined by the U.S. Women’s Chamber of Commerce certification unit were found to be ineligible for certification and 53 percent of the firms denied certification simply “self-certified” their eligibility in the federal database.2

In response to the U.S. Women's Chamber of Commerce report on potential fraud and abuse, the SBA took no action.

During the Fall of 2014, U.S. Women’s Chamber of Commerce advocated in favor of H.R. 2452, legislation authored by Congresswoman Nydia Velázquez (long time Chairwoman of the U.S. House of Representatives Small Business Committee – and currently Ranking Member of the Committee) which (among other actions) included ending the much-abused self-certification option from the WOSBP program. The Small Business Administration pushed back against this legislation as did Women Impacting Public Policy claiming there was no need to end self-certification.3

GAO Report Brings About Congressional Action

Then, on November 17, 2014, the U.S. Government Accountability Office (GAO) published report GAO-15-54, “Women-Owned Small Business Program: Certifier Oversight and Additional Eligibility Controls Are Needed.” This report found that more than 40 percent of women-owned set-aside contracts were awarded to ineligible firms in FY 2012 and 2013.4 The GAO report also revealed that the SBA had been doing very little to prevent ineligible firms from attesting their status as women-owned in the federal database, receiving set-aside contracts and being counted toward the achievement of government-wide small business annual contracts.

The significance of the GAO report cannot be understated. While the SBA advocated to leave the WOSBP program virtually without any verification procedures, the GAO shined the light on the consequences of the SBA’s lack of oversight. Very soon after the GAO report was made public, Congress acted to put an end to the “self-certification” option of the WOSB program through adopting all of the core provisions originally articulated in H.R. 2452 within the FY 2015 National Defense Authorization Act. In addition to ending self-certification, NDAA added sole source authority and compelled the SBA to reassess the industries included in the program more quickly. Leaders from both the House and Senate spoke to the need to assure that women-owned firms not be forced to compete against ineligible firms for women-owned small business set-asides.5  6

Inspector General Report Confirms Abuse; More to Come

The May 2015 Inspector General Report detailing the limited use of the WOSB program, the lack of oversight and the high number of  ineligible firms receiving awards will not be the end of this story. Stay tuned as more news on this topic will be covered in future weeks.


Footnotes

  1. Evaluation Report 15-10: Improvements Needed in SBA’s Management of the Woman Owned Small Business Federal Contracting Program, Office of the Inspector General of the Small Business Administration (May 14, 2015) https://www.sba.gov/sites/default/files/oig/Report_15-10_Improvements_Needed_in_SBAs_Management_of_WOSBP.pdf
  2. "The Integrity of Federal Women-Owned Contracting Program At Risk; Thousands of Self-Certified Firms May Not Be Eligible for Set-Asides." U.S. Women's Chamber of Commerce (June 19, 2014) https://uswcc.org/2014/06/the-integrity-of-federal-women-owned-contracting-program-at-risk-thousands-of-self-certified-firms-may-not-be-eligible-for-set-asides/
  3. Women Impacting Public Policy states, “Although we did not seek these changes, Congress acted.” in “The Case for Expediting Sole Source for Women” (February 2, 2015) http://www.wipp.org/news/214209/The-Case-for-Expediting-Sole-Source-for-Women.htm
  4. Government Accountability Office. (Published October 18, 2014. Publicly Released: November 7, 2014.) U.S. GAO-15-54.  Women-Owned Small Business Program: Certifier Oversight and Additional Eligibility Controls Are Needed. Retrieved from  http://www.gao.gov/products/GAO-15-54
  5. “House Passes Velazquez Women Business Bill” (December 4, 2014) Congresswoman Nydia Velázquez. http://velazquez.house.gov/newsroom/2014/pr-12-04-14WomenBusiness.shtml
  6. In Speech, “Cantwell Urges Passage of Women’s Small Business Provision in Defense Bill” (December 9, 2014) Senator Maria Cantwell. http://www.cantwell.senate.gov/public/index.cfm/press-releases?ID=52aabe01-329c-4c89-ba3b-75c664b40f68
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