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Additional Eligibility Controls Are Needed' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

October 2014: 

Women-Owned Small Business Program: 

Certifier Oversight and Additional Eligibility Controls Are Needed: 

GAO-15-54: 

GAO Highlights: 

Highlights of GAO-15-54, a report to congressional requesters. 

Why GAO Did This Study: 

In 2000, Congress authorized the WOSB program to increase contracting 
opportunities for WOSBs by allowing contracting officers to set aside 
procurements to such businesses. SBA, which administers the program, 
issued implementing regulations that became effective in 2011. GAO was 
asked to review the WOSB program. This report examines (1) how 
businesses are certified as eligible for the WOSB program, (2) SBA's 
oversight of certifications, and (3) the effect the program has had on 
federal contracting opportunities available to WOSBs or EDWOSBs. GAO 
reviewed relevant laws, regulations, and program documents; analyzed 
federal contracting data from April 2011 through May 2014; and 
interviewed SBA, officials from contracting agencies selected to 
obtain a range of experience with the WOSB program, third-party 
certifiers, WOSBs, and organizations that represent their interests. 

What GAO Found: 

Businesses have two options to certify their eligibility for the women-
owned small business (WOSB) program. Whether self-certifying at no 
cost or using the fee-based services of an approved third-party 
certifier, businesses must attest that they are a WOSB or an 
economically disadvantaged WOSB (EDWOSB). Businesses also must submit 
documents supporting their attestation to a repository the Small 
Business Administration (SBA) maintains (required documents vary 
depending on certification type), and, if they obtain a third-party 
certification, to the certifier. 

SBA performs minimal oversight of third-party certifiers and has yet 
to develop procedures that provide reasonable assurance that only 
eligible businesses obtain WOSB set-aside contracts. For example, 

* SBA generally has not reviewed certifier performance or developed or 
implemented procedures for such reviews, including determining whether 
certifiers inform businesses of the no-cost self-certification option, 
a requirement in the agency's agreement with certifiers. 

* SBA also has not completed or implemented procedures to review the 
monthly reports that third-party certifiers must submit. 

Without ongoing monitoring and oversight of the activities and 
performance of third-party certifiers, SBA cannot reasonably assure 
that certifiers fulfill the requirements of the agreement. Moreover, 
in 2012 and 2013, SBA found that more than 40 percent of businesses 
(that previously received contracts) it examined for program 
eligibility should not have attested they were WOSBs or EDWOSBs at the 
time of SBA's review. SBA officials speculated about possible reasons 
for the results, including businesses not providing adequate 
documentation or becoming ineligible after contracts were awarded, but 
SBA has not assessed the results of the examinations to determine the 
actual reasons for the high numbers of businesses found ineligible. 
SBA also has not completed or implemented procedures to conduct 
eligibility examinations. According to federal standards for internal 
control, agencies should have documented procedures, conduct 
monitoring, and ensure that any review findings and deficiencies are 
resolved promptly. As a result of inadequate monitoring and controls, 
potentially ineligible businesses may continue to incorrectly certify 
themselves as WOSBs, increasing the risk that they may receive 
contracts for which they are not eligible. 

The WOSB program has had a limited effect on federal contracting 
opportunities available to WOSBs. Set-aside contracts under the 
program represent less than 1 percent of all federal contract 
obligations to women-owned small businesses. The Departments of 
Defense and Homeland Security and the General Services Administration 
collectively accounted for the majority of the $228.9 million in set-
aside obligations awarded under the program between April 2011 and May 
2014. Contracting officers, business owners, and industry advocates 
with whom GAO spoke identified challenges to program use and suggested 
potential changes that might increase program use, including allowing 
sole-source contracts rather than requiring at least two businesses to 
compete and expanding the list of 330 industries in which WOSBs and 
EDWOSBs were eligible for a set-aside. 

What GAO Recommends: 

GAO recommends that SBA, among other things, establish and implement 
procedures to monitor certifiers and improve annual eligibility 
examinations, including by analyzing examination results. SBA 
generally agreed with GAO's recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-15-54]. For more 
information, contact William Shear at (202) 512-8678 or shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Businesses Can Use Two Methods to Certify Eligibility for WOSB Program: 

SBA's Oversight of Certifiers Has Been Minimal and Does Not Provide 
Reasonable Assurance That Only Eligible Businesses Obtain Set-Aside 
Contracts: 

Program Set-Asides Have Had Minimal Effect on WOSB Contracting: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Small Business Administration: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Fees for Third-Party Certification for the Women-Owned Small 
Business (WOSB) Program: 

Table 2: Top Contracting Departments and Agencies, by Total 
Obligations under the WOSB Program, from April 2011 through May 2014: 

Table 3: Percentage of Contract Obligations Awarded to Women-Owned 
Small Businesses, Fiscal Years 2011-2013: 

Figure: 

Figure 1: Percentage of Obligations for Contracts (Set-Aside and Not 
Set-Aside) Awarded to Women-Owned Small Businesses (WOSB), from April 
2011 through May 2014: 

Abbreviations: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

EDWOSB: economically disadvantaged women-owned small business: 

FPDS-NG: Federal Procurement Data System-Next Generation: 

GSA: General Services Administration: 

HUBZone: Historically Underutilized Business Zone: 

NAICS: North American Industry Classification System: 

SAM: System for Award Management: 

SBA: Small Business Administration: 

SDVOSBC: Service-Disabled Veteran-Owned Small Business Concern: 

SOP: standard operating procedure: 

WBENC: Women's Business Enterprise National Council: 

WOSB: women-owned small business: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

October 8, 2014: 

The Honorable Maria Cantwell: 
Chairwoman: 
Committee on Small Business and Entrepreneurship: 
United States Senate: 

The Honorable Mary Landrieu: 
United States Senate: 

Women-owned businesses contribute significantly to the U.S. economy. 
According to the most recent Census Survey of Business Owners, 28.7 
percent, or 7.8 million, of all U.S. businesses in 2007 were women-
owned.[Footnote 1] Between 1997 and 2007, the number of women-owned 
businesses grew by 44 percent (or twice as fast as businesses owned by 
men) adding roughly 500,000 jobs nationwide, according to the U.S. 
Department of Commerce.[Footnote 2] However, the federal government 
has yet to meet its annual goal of awarding 5 percent of its 
procurement to women-owned small businesses (WOSB). 

Over the years, Congress has taken a number of actions to increase 
opportunities for small business (including minority-owned and 
economically disadvantaged) participation in federal contracting. In 
1978, Congress amended the Small Business Act to require federal 
agencies to negotiate with the Small Business Administration (SBA) to 
establish prime and subcontracting goals for certain businesses, which 
did not specifically include WOSBs until 1994.[Footnote 3] In 2000, 
Congress authorized a contracting program to reserve contracts for 
WOSBs in industries where the businesses were historically 
underrepresented. Its purpose is to enable federal contracting 
officers to identify and establish a sheltered market, or set-aside, 
for competition among only WOSBs or economically disadvantaged WOSBs 
(EDWOSB) to provide goods and services through contracts in designated 
industries.[Footnote 4] On October 7, 2010, SBA issued a final rule to 
implement the WOSB Federal Contract Program and the program started 
operating in 2011.[Footnote 5] To establish WOSB program set-asides, 
SBA conducted studies to identify industries in which WOSBs were 
underrepresented and substantially underrepresented and published a 
list of specific industries in which these businesses needed greater 
access to federal contracts.[Footnote 6] EDWOSBs may receive contracts 
in any industry SBA identified as eligible for the program, and WOSBs 
may receive contracts in industries in which SBA deemed WOSBs to be 
substantially underrepresented. According to SBA officials, program 
staff have been planning a new study of underrepresented EDWOSBs and 
substantially underrepresented WOSBs, which the agency expects to 
complete by 2015. 

You asked us to examine the WOSB program, including any effects it has 
had on increasing contracting opportunities for WOSBs. This report (1) 
describes how WOSBs and EDWOSBs are certified as eligible for the 
program; (2) examines the extent to which SBA has implemented internal 
control and oversight procedures of WOSB program certifications; and 
(3) discusses the effect the program has had on federal contracting 
opportunities available to WOSBs or EDWOSBs. 

To describe how businesses are certified as eligible for the WOSB 
program, we reviewed SBA's policies and procedures to establish 
program eligibility, including the responsibilities of businesses, 
third-party certifiers, contracting officers, and SBA. To evaluate how 
certification procedures may affect program participation, we obtained 
data from SBA and the Federal Procurement Data System-Next Generation 
(FPDS-NG) to determine the number of WOSBs that used third-party 
certifiers from August 2011 through May 2014. Using electronic edit 
checks and a review of data system documentation, we deemed these data 
sufficiently reliable for this purpose.[Footnote 7] We interviewed SBA 
officials, contracting officials at the Departments of Defense (DOD) 
and Homeland Security (DHS), and the General Services Administration 
(GSA); and interviewed selected WOSBs for perspectives on the program. 
The agencies were selected to reflect varying levels of program 
participation (based on contracts issued and program obligations from 
2011 through 2013). To evaluate SBA's internal controls and oversight 
of certification methods, we reviewed the program regulation and 
program documents, agreements with third-party certifiers, and monthly 
reports submitted by third-party certifiers to SBA, among other 
documents. We interviewed three of the four certifiers: El Paso 
Hispanic Chamber of Commerce, the National Women Business Owners 
Corporation, and the U.S. Women's Chamber of Commerce. We were not 
able to interview the fourth certifier, the Women's Business 
Enterprise National Council (WBENC). To evaluate the effect the 
program has had on federal contracting opportunities for WOSBs, we 
analyzed FPDS-NG data from April 2011 through May 2014 and identified 
trends in program participation by agencies. Finally, we interviewed 
SBA officials and contracting agency officials about the extent to 
which the program has met its regulatory purpose of increasing 
contracting opportunities for WOSBs. We deemed the FPDS-NG data 
sufficiently reliable for our purposes. Appendix I contains additional 
information on our scope and methodology. 

We conducted this performance audit from August 2013 to October 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Federal agencies conduct a variety of procurements that are reserved 
for small business participation (through small business set-aside and 
sole-source opportunities, hereafter called set-asides). The set-
asides can be for small businesses in general or be specific to small 
businesses meeting additional eligibility requirements in the Service-
Disabled Veteran-Owned Small Business Concern (SDVOSBC), Historically 
Underutilized Business Zone (HUBZone), 8(a) Business Development, and 
WOSB programs. 

The WOSB program, which started operating in 2011, has requirements 
that pertain to the sectors in which set-asides can be offered as well 
as eligibility requirements for businesses. That is, set-aside 
contracts under the WOSB program can only be made in certain 
industries in which WOSBs were substantially underrepresented and 
EDWOSBs underrepresented, according to the program regulation. 
Additionally, only certain businesses are eligible to participate in 
the WOSB program. The business must be at least 51 percent owned and 
controlled by one or more women. The owner must provide documents 
demonstrating that the business meets program requirements, including 
submitting a document in which the owner attests to the business's 
status as a WOSB or EDWOSB. 

The program's authorizing statute directs that each business either be 
certified by a third party, or self-certified by the business owner. 
SBA's final rule includes these two methods. Self-certification is 
free and businesses pay a fee for third-party certification. 

A third-party certifier is a federal agency, state government, or 
national certifying entity approved by SBA to provide certifications 
of WOSBs or EDWOSBs. To be approved as certifiers, interested 
organizations submit an application to SBA that contains information 
on the organization's structure and staff, policies and procedures for 
certification, and attestations that they will adhere to program 
requirements. SBA has approved four organizations to act as third-
party certifiers: 

* El Paso Hispanic Chamber of Commerce; 

* National Women Business Owners Corporation; 

* U.S. Women's Chamber of Commerce; and: 

* Women's Business Enterprise National Council. 

The most active certifier is the Women's Business Enterprise National 
Council (WBENC), which completed about 76 percent of all WOSB third-
party certifications performed from August 2011 through May 2014. To 
conduct the certifications, WBENC uses 14 regional partner 
organizations. 

The fees for certification vary depending on a WOSB's gross annual 
sales, membership status in the certifying organization, and 
geographic location (see table 1). In the case of businesses that seek 
a WOSB program certification through WBENC's partner organizations, 
businesses that pay for a Women's Business Enterprise certification 
(used for private-sector or some local, state, and federal 
procurement, but not for the WOSB program) can receive WOSB program 
certifications at no additional cost. We discuss the WOSB 
certification process in greater detail later in this report. 

Table 1: Fees for Third-Party Certification for the Women-Owned Small 
Business (WOSB) Program: 

El Paso Hispanic Chamber of Commerce; 
Initial: $225; 
Renewal: $100; 
Member discount: None; 
Fee based on gross annual sales: [Empty]; 
Other characteristics: Fee waiver in select cases. 

U.S. Women's Chamber of Commerce; 
Initial: $275-$350; 
Renewal: $275-$350; 
Member discount: $75 off initial; 
Fee based on gross annual sales: [Empty]; 
Other characteristics: [Empty]. 

National Women Business Owners Corporation; 
Initial: $400; 
Renewal: $200-300 based on gross annual sales; 
Member discount: None; 
Fee based on gross annual sales: $100 additional for renewals for 
businesses with gross annual sales over $2 million; 
Other characteristics: Women-owned small business (WOSB) and 
economically disadvantaged WOSB certification offered as a package 
certification for $700. 

Women's Business Enterprise National Council; 
Initial: $350-$1,000. Fee varies by 14 regional partner organizations; 
Renewal: $350-$1,000. Fee varies by 14 regional partner organizations; 
Member discount: None; 
Fee based on gross annual sales: Varies based on gross annual sales 
with ranges from under $1 million to $100 million and over; 
Other characteristics: A WOSB third-party certification is obtained as 
part of a bundle including a Women's Business Enterprise certification. 

Source: GAO analysis of third-party certifier documents. GAO-15-54. 

[End of table] 

SBA's Office of Government Contracting administers the WOSB program by 
publishing regulations for the program, conducting eligibility 
examinations of businesses that received contracts under the WOSB or 
EDWOSB set-aside, deciding protests related to eligibility for a WOSB 
program contract award, conducting studies to determine eligible 
industries, and working with other federal agencies in assisting WOSBs 
and EDWOSBs. According to SBA officials, the agency also works at the 
regional and local levels with its Small Business Development Centers, 
district offices, and other organizations (such as Procurement 
Technical Assistance Centers) to assist WOSBs and EDWOSBs to receive 
contracts with federal agencies. The services SBA coordinates with 
these offices and organizations include training, counseling, 
mentoring, access to information about federal contracting 
opportunities, and business financing. 

Businesses Can Use Two Methods to Certify Eligibility for WOSB Program: 

According to the program regulation, businesses may use self-or third-
party certification to demonstrate they are eligible for WOSB or 
EDWOSB status. Both certification processes require signed 
representations by businesses about their WOSB or EDWOSB eligibility. 
For this reason, SBA has described all participants in the program as 
self-certified. When using the self-certification option, businesses 
must provide documents supporting their status to the online document 
repository for the WOSB program that SBA maintains.[Footnote 8] 
Required submissions include copies of citizenship papers (birth or 
naturalization certificates or passports) and, depending on business 
type, items including copies of partnership agreements or articles of 
incorporation. Businesses must submit a signed certification on which 
the owners attest that the documents and information provided are true 
and accurate. Moreover, businesses must register and attest to being a 
WOSB in the System for Award Management (SAM), the primary database of 
vendors doing business with the federal government.[Footnote 9] 
Businesses also must make representations about their status in SAM 
before submitting an offer on a WOSB or EDWOSB solicitation. 

For third-party certification, businesses submit documentation to 
approved certifiers. According to third-party certifiers we 
interviewed, they review documents (and some may conduct site visits 
to businesses) and make determinations of eligibility. If approved, 
businesses will receive a document showing receipt of third-party 
certification. Business then can upload the certificate to the WOSB 
program repository along with documents supporting their EDWOSB or 
WOSB status.[Footnote 10] SBA does not track the number of businesses 
that self certify and could not provide information on how many self-
certified businesses obtained contracts under the WOSB program. While 
SBA can look at an individual business profile--which lists the 
documents the business has uploaded to support its eligibility--in the 
repository to determine if a certificate from a third-party certifier 
is present, it has no corresponding mechanism to determine if a 
business lacking such a certificate was self-certified.[Footnote 11] 
That is, there are no data fields for certification type in any of the 
systems used in the program and SBA cannot generate reports to isolate 
information on certification type by business. According to SBA 
officials, such information on certification type is not needed 
because both certification options are treated equally under the 
program and, because all businesses make an attestation of status as a 
WOSB whether or not the business uses a third-party certifier. 
Therefore, SBA considers this a self-certification program. 

Contracting officers obtain a solicitation and conduct market research 
to identify businesses potentially capable of filling contract 
requirements. Once a contracting officer has determined that a 
solicitation can be set aside under the WOSB program, the officer 
obtains bids and selects an awardee for the contract. Only after 
selecting an awardee, does the agency obtain access to the business's 
profile in the WOSB program repository, which lists the documents the 
business has uploaded to support its eligibility (the business must 
grant the contracting agency access). SBA's Contracting Officer's 
Guide to the WOSB Program states that contracting officers must 
determine that specified documents have been uploaded by the business 
to the program repository, but the guide does not require contracting 
officers to assess the validity of those documents. Only after viewing 
the uploaded documents would the contracting officer be able to 
determine if the business was likely self-certified or had a 
certificate from a third-party certifier. Two groups we interviewed 
that represent the interests of WOSBs said that contracting officers 
prefer third-party over self-certified businesses when selecting an 
awardee. A representative of one organization thought that contracting 
officers tended to select businesses with third-party certifications 
because they did not have to review as many documents in the program 
repository as for self-certified businesses. However, the 
certification method does not appear to influence contract awards. 
According to officials from all contracting agencies with whom we 
spoke and SBA officials, contracting staff are unaware of the 
certification method used by a business until after an awardee is 
selected. 

SBA's Oversight of Certifiers Has Been Minimal and Does Not Provide 
Reasonable Assurance That Only Eligible Businesses Obtain Set-Aside 
Contracts: 

SBA generally has not overseen third-party certifiers and lacks 
reasonable assurance that only eligible businesses receive WOSB set-
aside contracts. SBA has not put in place formal policies to review 
the performance of third-party certifiers, including their compliance 
with a requirement to inform businesses of the no-cost, self-
certification option. The agency has not developed formal policies and 
procedures for reviewing required monthly reports submitted to SBA by 
certifiers or standardized reporting formats for the certifiers, or 
addressed most issues raised in the reports. Although SBA examinations 
have found high rates of ineligibility among a sample of businesses 
that previously received set-aside contracts, SBA has not determined 
the causes of ineligibility or made changes to its oversight of 
certifications to better ensure that only eligible businesses 
participate in the program. 

SBA Generally Has Not Reviewed Certifier Performance: 

To date, SBA generally has not conducted performance reviews of third-
party certifiers and does not have procedures in place for such 
reviews. According to federal standards for internal control, agencies 
should conduct control activities such as performance reviews and 
clearly document internal controls.[Footnote 12] Third-party 
certifiers agree to be subject to performance reviews by SBA at any 
time to ensure that they meet the requirements of the agreement with 
SBA and program certification regulations--including requirements 
related to the certification process, obtaining supporting documents, 
informing businesses about the no-cost option for WOSB program 
certification, and reporting to SBA on certifier activities. 

Before beginning the certification process, SBA requires third-party 
certifiers to inform businesses in writing (on an SBA-developed form) 
that they can self certify under the program at no cost. Certifiers, a 
WOSB advocacy group, and WOSBs had perspectives on fees for third-
party certification. Representatives of all three certifiers with whom 
we spoke stated that fees their organization charged for 
certifications were reasonable and affordable for a small business. 
Staff from one WOSB advocacy organization told us that such fees could 
deter some businesses from participating in the program, but owners of 
WOSBs with which we spoke generally did not concur with this view. 
Certifiers with whom we spoke told us that they inform businesses 
about their option to self certify, but SBA does not have a method in 
place to help ensure that certifiers are providing this information to 
businesses and agency officials told us that they do not monitor 
whether certifiers fulfilled the requirement. SBA officials said that 
they believe that the no-cost option ameliorates the risk of excessive 
fees charged to businesses or the risk that fees would deter program 
participation and that because all certifiers must provide national 
coverage, businesses can seek lower fees. Officials also told us that 
they believed that businesses and advocacy groups would inform the 
agency if certifiers were not providing this information. However, 
they were not able to describe how SBA would learn from businesses 
that certifiers had failed to provide this information. The 
requirement is part of SBA's agreement with third-party certifiers, 
but SBA has not described the requirement on the program web-site or 
made it part of informational materials to businesses. Thus, 
businesses may not know of this requirement without being informed by 
the certifier or know to inform SBA if the certifier had not fulfilled 
the requirement. 

The largest certifier, WBENC, has delegated the majority of 
certification activity to other entities that SBA also has not 
reviewed. WBENC has conducted about 76 percent of third-party 
certifications through May 2014. However, WBENC delegates WOSB 
certification responsibilities to 14 regional partner organizations. 
SBA neither maintains nor reviews information about standards and 
procedures at WBENC, including a compliance review process for each of 
its 14 partner organizations that WBENC told SBA it uses. SBA 
officials told us that they rely on information available on public 
websites to determine the fee structures set by WBENC's partner 
organizations. SBA also does not have copies of compliance reviews 
that WBENC told SBA it annually conducts for each partner 
organization. SBA requested documents from WBENC, which included 
information about WBENC's oversight of its 14 partner organizations. 
WBENC's response was incomplete; WBENC referenced but did not provide 
its standards and procedures to oversee partner organizations. SBA 
told us it recognized that WBENC's response was incomplete, and 
indicated it had not followed up on WBENC's response. Without this 
information SBA cannot determine how WBENC has been overseeing the 14 
entities to which it has delegated certification responsibilities. 

Although SBA has not developed or conducted formal performance reviews 
of certifiers, officials described activities they consider to be 
certifier oversight. For example, when a business is denied third-
party certification but wishes to self-certify, it must subject itself 
to an eligibility examination by SBA before doing so. In this case, or 
during a bid protest, SBA conducts its own review of documentation the 
business submitted to the certifier. SBA officials stated that these 
reviews were not intended as a form of certifier oversight but 
described them as de facto reviews of third-party certifier 
performance. However, such reviews do not involve a comprehensive 
assessment of certifiers' activity or performance over time. An SBA 
official acknowledged that the agency could do more to oversee 
certifiers. SBA plans to develop written procedures for certifier 
oversight to be included in the standard operating procedure (SOP) for 
the program, which remains under development. But SBA has not yet 
estimated when it would complete written procedures for certifier 
oversight or the SOP. 

Without ongoing monitoring and oversight of the activities and 
performance of third-party certifiers, SBA cannot reasonably ensure 
that certifiers have fulfilled the performance requirements of their 
agreement with SBA--including informing businesses about no-cost 
certification. 

SBA Lacks Procedures for Reviewing Certifiers' Reports and Has Not 
Followed Up on Issues Reports Raised: 

SBA has not yet developed written procedures to review required 
monthly reports from certifiers and does not have a consistent format 
for reports. In SBA's agreement with third-party certifiers, the 
agency requires each certifier to submit monthly reports that must 
include: 

* the number of WOSB and EDWOSB applications received, approved, and 
denied; 

* identifying information for each certified business, such as the 
business name; 

* concerns about fraud, waste, and abuse; and: 

* a description of any changes to the procedures the organizations 
used to certify businesses as WOSBs and EDWOSBs. 

Internal control should include documented procedures and monitoring 
or review activities that help ensure that review findings and 
deficiencies are brought to the attention of management and resolved 
promptly.[Footnote 13] 

Based on our review of each monthly report submitted from August 2011 
through May 2014 (135 in total), not all reports contained consistent 
information. Some monthly reports were missing the owner names and 
contact information for businesses that had applied for certification. 
One certifier regularly identified potential fraud among businesses to 
which it had denied certification, about one or two per month for 16 
of the 34 reporting months included in our review. This certifier 
provided detailed narrative information in its reports to SBA about 
its concerns. The reporting format and level of detail reported also 
varied among certifiers. One certifier listed detailed information on 
its activities in a spreadsheet. Another described its activities 
using narrative text and an attached list of applicants for 
certification. One certifier included dates for certification, 
recertification, and the expiration of a certification, while other 
certifiers did not include this information. 

According to SBA officials, the agency did not have consistent 
procedures for reviewing monthly reports, including procedures to 
identify and resolve discrepancies in reports or oversee how 
certifiers collect and compile information transmitted to the agency. 
SBA officials said that one official, who recently retired, was 
responsible for reviewing all certifier monthly reports. Current 
officials and staff were not able to tell us what process this 
official used to assess the reports. 

Finally, with one person responsible for reviewing monthly reports 
until recently, SBA generally has not followed up on issues raised in 
reports. Agency officials told us that early in the program they found 
problems with the monthly report of one of the certifiers that 
indicated that the certifier did not understand program requirements 
and they contacted the certifier to address the issue. We found 
additional issues that would appear to warrant follow up from SBA. For 
example, two businesses were denied certification by one third-party 
certifier and approved shortly after by another. SBA stated that it 
had not identified these potential discrepancies but that it was 
possible for businesses to be deemed ineligible, resolve the issue 
preventing certification, and become eligible soon after. However, 
according to the program regulation, if a business was denied third-
party certification and the owner believed the business eligible, the 
owner would have to request that SBA conduct an examination to verify 
its eligibility to represent the business as a WOSB. According to SBA 
officials, the agency was unaware of this business or its 
certification. And, as discussed previously, one certifier regularly 
identified potential fraud among businesses to which it had denied 
certification. SBA officials told us that they had not identified or 
investigated this certifier's concerns about potential fraud. When we 
asked SBA officials how the agency addressed such concerns, an 
official responded that fraudulently entering into a set-aside 
contract was illegal and the business would be subject to prosecution. 
However, without SBA following up on these types of issues, it is 
unclear how businesses committing fraud in the program would be 
prosecuted. 

According to an SBA official, the agency has been developing written 
procedures to review the monthly reports, but has not yet estimated 
when the procedures would be completed. The procedures will be 
included in SBA's SOP for the program, which also remains under 
development. As noted earlier, SBA could not estimate when it would 
complete the SOP. Without procedures in place to consistently review 
monthly reports and respond to problems identified in those reports, 
SBA lacks information about the activities and performance of third-
party certifiers and leaves concerns raised by certifiers unaddressed. 

SBA Found High Rates of Ineligibility among Businesses but Has Not 
Developed Controls to Help Ensure Only Eligible Businesses Receive 
Awards: 

Methods to Assess the Eligibility of Set-Aside Contract Recipients: 

SBA's methods to verify the eligibility of businesses in its WOSB 
program repository include annual examinations of businesses that 
received set-aside contracts. SBA's program responsibilities include 
conducting eligibility examinations of WOSBs and EDWOSBs, according to 
SBA's compliance guide for the WOSB program and its regulation. 
Section 8(m) of the Small Business Act sets forth eligibility criteria 
businesses must meet to receive a contract under the WOSB program set-
aside. SBA examines a sample of businesses with a current attestation 
in SAM and that received a contract during SBA's examination year. SBA 
does not include in its sample businesses that had not yet obtained a 
WOSB program contract. According to SBA officials, staff conducting 
the eligibility examination review the documents each business owner 
uploaded to the WOSB program repository to support the representation 
in SAM of eligibility for WOSB or EDWOSB status. For example, agency 
officials said that reviewers ensure that all documents required have 
been uploaded and review the contents of the documents to ensure that 
a business is eligible. SBA said staff conducting the examination then 
determine that the business has met the requirements to document its 
status as a WOSB, or determine that information is missing or not 
consistent with the program requirements and the business is not 
eligible at the time of SBA's review to certify itself as a WOSB. SBA 
officials said the agency also uses the same process to investigate 
the eligibility of businesses on an ad hoc basis in response to 
referrals from contracting agencies or other parties, such as other 
businesses, that question the eligibility of a business. 

If a business has not sufficiently documented its eligibility 
representation, SBA sends a letter directing the business to enter 
required information or documents into the repository or remove its 
attestation of program eligibility in SAM within 15 days. If SBA 
receives no response after 15 days, it sends a second letter 
instructing the business to remove its WOSB attestation in SAM within 
5 days. In 2012 and 2013, SBA sent final 5-day letters to 44 
businesses identified through annual examinations or examinations 
following a referral. If the business does not do so, it may be 
subject to enforcement actions including suspension or debarment from 
federal contracting or criminal penalties, according to SBA officials. 
An SBA official said that the agency is unaware of any such 
enforcement actions as part of the WOSB program. 

SBA also decides protests from contracting agency staff or any other 
interested parties relating to a business's eligibility. SBA considers 
protests if there is sufficient, credible evidence to show that the 
business may not be at least 51 percent owned and controlled by one or 
more women, or if the business has failed to provide documents 
required to establish eligibility for the program. Once SBA has 
obtained a protest, it examines documents submitted in the case, makes 
a determination of program eligibility based on the content of these 
documents and notifies relevant parties--typically, the contracting 
officer, protester (if not the same), and the business--of the 
determination. If eligible for the set-aside, the contracting officer 
may make an award to the business. Otherwise, the contracting officer 
may not award a contract to the business in question. From program 
implementation in April 2011 through July 2, 2014, SBA responded to 27 
protests, and in 7 protests the businesses involved were found to be 
ineligible for the WOSB program. In the remaining protests, the 
businesses were found eligible, the party that filed the protest 
withdrew it, or SBA dismissed the protest.[Footnote 14] 

As described earlier in the report, contracting officers check for the 
presence of documents in the repository when making a WOSB program 
award. This could be considered part of SBA's framework to oversee 
certifications, but the requirement for contracting officers to review 
documents is limited to ensuring that businesses have uploaded 
documents listed in the regulation. Representatives from some of the 
contracting offices we interviewed believed that they had to assess 
the validity of the documents or did not think they had the necessary 
qualifications to assess the documents. However, program guidance does 
not require contracting officers to assess the validity of these 
documents, and SBA officials told us contracting officers are not 
expected to evaluate the eligibility of businesses. 

SBA's Approach to Eligibility Verification and Enforcement Has 
Weaknesses: 

SBA activities relating to eligibility verifications, particularly 
examinations, have several weaknesses. For instance, SBA: 

* has not yet developed procedures to conduct annual eligibility 
examinations although such efforts are in process, according to 
officials; 

* has not evaluated the results of the eligibility examinations in the 
context of how the actions of businesses, contracting agencies, and 
third-party certifiers may have contributed to the high levels of 
incomplete and inaccurate documentations found in examinations; and: 

* has not assessed its internal controls or made procedural changes in 
response to the findings of its eligibility examinations. 

According to federal standards for internal control, agencies should 
have documented procedures, conduct monitoring, and ensure that any 
review findings and deficiencies are brought to the attention of 
management and are resolved promptly.[Footnote 15] Corrective action 
is to be taken or improvements made within established time frames to 
resolve the matters brought to management's attention. Also, 
management needs to comprehensively identify risks the agency faces 
from both internal and external sources, and management should 
consider all significant interactions between the agency and all other 
parties. 

SBA conducted annual eligibility examinations in 2012 and 2013 on a 
sample of businesses that received contracts under the WOSB program 
and found that 42 percent of businesses in the 2012 sample were 
ineligible for WOSB program contract awards on the date of its review, 
and 43 percent in the 2013 sample were ineligible.[Footnote 16] 
According to SBA officials, both self-and third-party certified 
businesses were found ineligible at the time of review. SBA staff 
reviewed the documents that each business in its sample had posted to 
the program repository to ensure the businesses had sufficiently 
supported their attestations as required in program regulations. 
However, SBA could not provide documentation of a consistent procedure 
to examine each business. SBA staff reviewing documentation in the 
repository did not have guidelines describing how to conduct each 
review. SBA officials told us that they have been developing written 
procedures to conduct annual eligibility examinations, estimated a 
completion date that the agency did not meet, and that the agency does 
not have an estimation of completion. 

SBA officials explained that they determined the eligibility of 
businesses on a given date after the business received a contract. 
According to SBA officials, a finding of ineligibility does not mean 
the business was ineligible at the time of contract award because the 
status of the business might have changed. Although SBA officials did 
not know whether businesses examined were eligible at the time of 
award, the high rate of ineligibility it found raises questions about 
whether contracts may have been awarded to ineligible businesses. 
According to SBA officials, information in its repository constantly 
changes and SBA has yet to determine how or if a business was eligible 
when it received a WOSB set-aside contract. SBA officials told us that 
they believe they may be able to make such a determination but could 
not describe exactly how they would conduct the review or confirm that 
the business was an eligible WOSB or EDWOSB at the time of award. As 
part of its annual examination, SBA only examines businesses at some 
time after the business received a contract and, therefore, SBA's 
examination is limited in its ability to identify potentially 
ineligible businesses prior to a contract award. 

SBA officials said that after the annual examinations they did not 
institute new controls to guard against ineligible businesses 
receiving program contracts because they described the examinations 
and the results as a method to gain insight about the program--
specifically, that WOSBs may lack understanding of program eligibility 
requirements--and not a basis for change in oversight procedures. 
According to SBA officials, the levels of ineligibility found during 
the examinations were similar to those found in examinations of its 
other socioeconomic programs. SBA officials said businesses were 
deemed ineligible because they did not understand the documentation 
requirements for establishing eligibility and also attributed the 
ineligibility of third-party certified businesses to improper 
uploading of documents by the businesses themselves. SBA officials 
said they needed to make additional efforts to train businesses to 
properly document their eligibility. However, 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. As a result, they have missed opportunities 
to obtain meaningful insights into the program. 

SBA regarded the bid protest as means of identifying ineligibility. 
SBA officials referred to the program as a self-policing program, 
because of the bid protest function through which competing 
businesses, contracting officers, or SBA can protest a business's 
claim to be a WOSB or EDWOSB and eligible for contract awards under 
the program. In addition, an SBA official stated that business owners 
affirm their status when awarded a contract and are subject to 
prosecution if they had done so and later were found to have been 
ineligible at the time of contract award--which the official 
considered a program safeguard. 

However, without (1) developing program eligibility controls that 
include procedures for conducting annual eligibility examinations; (2) 
analyzing the results of the examinations to understand the underlying 
causes of ineligibility; (3) developing new procedures for 
examinations, including expanding the sample of businesses to be 
examined to include those that did not receive contracts; and (4) 
investigating businesses based on examination results, SBA may 
continue to find high rates of ineligibility among businesses 
registered in the WOSB program repository. In turn, this would 
continue to expose the program to the risk that ineligible businesses 
may receive set-aside contracts. Also, by reviewing the eligibility of 
businesses that have not received program contracts, SBA may improve 
the quality of the pool of potential program award recipients. 

Program Set-Asides Have Had Minimal Effect on WOSB Contracting: 

Set-asides under the WOSB program to date have had a minimal effect on 
overall contracting obligations to WOSBs and attainment of WOSB 
contracting goals. WOSB program set-aside obligations increased from 
fiscal year 2012 to fiscal year 2013. The Department of Defense (DOD), 
the Department of Homeland Security (DHS), and the General Services 
Administration (GSA) accounted for the majority of these obligations. 
The WOSB program set-asides represented less than 1 percent of total 
federal awards to women-owned small businesses. Contracting officers, 
WOSBs, and others with whom we spoke suggested a number of program 
changes that might increase use of the WOSB program, including 
increasing awareness, allowing for sole-source awards, and expanding 
the list of eligible industries for the set-aside program. 

WOSB Program Set-Aside Obligations Increased from Fiscal Year 2012 to 
Fiscal Year 2013, with Three Agencies Accounting for the Majority of 
Set-Asides: 

WOSB program set-aside obligations increased from fiscal year 2012 to 
fiscal year 2013.[Footnote 17] Obligations to WOSBs under the WOSB set-
aside program increased from $33.3 million in 2012 to $39.9 million in 
2013, and obligations to EDWOSBs increased from $39.2 million in 2012 
to $60.0 million in 2013. The National Defense Authorization Act for 
Fiscal Year 2013 removed the dollar cap on contract awards eligible 
under the WOSB set-aside program, which may account for some of the 
increase in obligations from 2012 to 2013.[Footnote 18] SBA officials 
told us that they expect increased use of the program in the future as 
a result of this change. 

As shown in table 2, three federal agencies--DOD, DHS, and GSA--
collectively accounted for the majority of the obligations awarded 
under the set-aside program. DOD (Air Force, Army, Navy, and all other 
defense agencies) accounted for 62.2 percent of obligations, DHS for 
10.7 percent, and GSA for 4.0 percent of obligations. No other 
individual agency accounted for more than 3.4 percent of obligations 
awarded under the program. 

Table 2: Top Contracting Departments and Agencies, by Total 
Obligations under the WOSB Program, from April 2011 through May 2014: 

Agency: Department of Defense (DOD); 
Percentage of program: 62.2%. 

Agency: Department of Defense (DOD); U.S. Army (DOD); 
Economically disadvantaged women-owned small business set-aside: 
$34,720,817; 
Women-owned small business set-aside: $26,900,145; 
Total program set-aside: $61,620,962; 
Percentage of program: 26.9%. 

Agency: Department of Defense (DOD); U.S. Air Force (DOD); 
Economically disadvantaged women-owned small business set-aside: 
$42,935,173; 
Women-owned small business set-aside: $15,513,431; 
Total program set-aside: $58,448,604; 
Percentage of program: 25.5%. 

Agency: Department of Defense (DOD); Other defense agencies (DOD); 
Economically disadvantaged women-owned small business set-aside: 
$5,259,021; 
Women-owned small business set-aside: $6,356,298; 
Total program set-aside: $11,615,318; 
Percentage of program: 5.1%. 

Agency: Department of Defense (DOD); U.S. Navy (DOD); 
Economically disadvantaged women-owned small business set-aside: 
$5,854,874; 
Women-owned small business set-aside: $4,853,875; 
Total program set-aside: $10,708,748; 
Percentage of program: 4.7%. 

Agency: Department of Homeland Security; 
Economically disadvantaged women-owned small business set-aside: 
$17,863,601; 
Women-owned small business set-aside: $6,571,815; 
Total program set-aside: $24,435,416; 
Percentage of program: 10.7%. 

Agency: General Services Administration; 
Economically disadvantaged women-owned small business set-aside: 
$5,259,176; 
Women-owned small business set-aside: $3,879,886; 
Total program set-aside: $9,139,063; 
Percentage of program: 4.0%. 

Agency: All other agencies; 
Economically disadvantaged women-owned small business set-aside: 
$11,258,193; 
Women-owned small business set-aside: $41,683,849; 
Total program set-aside: $52,942,043; 
Percentage of program: 23.1%. 

Agency: Total; 
Economically disadvantaged women-owned small business set-aside: 
$123,150,855; 
Women-owned small business set-aside: $105,759,299; 
Total program set-aside: $228,910,154; 
Percentage of program: 100%. 

Source: GAO analysis of Federal Procurement Data System-Next 
Generation data. GAO-15-54. 

Note: No other individual agency accounted for more than 3.4 percent 
of total obligations awarded through the program. These figures do not 
include the last 4 months of fiscal year 2014. According to SBA 
officials, the last quarter of each fiscal year is the part of the 
year when most federal contracts are awarded. 

[End of table] 

WOSB Program Set-Asides Accounted for Less Than 1 Percent of 
Obligations Awarded to WOSBs: 

From April 2011 through May 2014, WOSB program set-asides constituted 
a very small percentage (0.44 percent) of all the contracting 
obligations awarded to WOSBs (see figure 1). The majority of 
obligations awarded to WOSBs were made under other, longer-established 
set-aside programs. For example, if eligible, a WOSB could receive a 
contracting award under the 8(a), HUBZone, or SDVOSBC programs, or 
through a general small business set-aside.[Footnote 19] WOSBs also 
can obtain federal contracts without set-asides (through open 
competition). 

Figure 1: Percentage of Obligations for Contracts (Set-Aside and Not 
Set-Aside) Awarded to Women-Owned Small Businesses (WOSB), from April 
2011 through May 2014: 

[Refer to PDF for image: pie-chart] 

WOSB Program set-aside: 0.44%; 
No set-aside: 39.79%; 
Other set-aside: 59.78%. 

Source: GAO analysis of Federal Procurement Data System-Next 
Generation data. GAO-15-54. 

[End of figure] 

Based on our analysis of FPDS-NG data of federal contracting agencies, 
contract obligations awarded through the WOSB set-aside totaled $228.9 
million, or 0.44 percent, of the $52.6 billion in contract obligations 
awarded to WOSBs from April 2011 through May 2014. 

Additionally, the WOSB set-aside has had relatively little impact on 
federal agency achievement of goals for contracting to WOSBs, because 
the program set-asides represent a very small percentage of all 
contracting awards to WOSBs. Since 2011, the overall percentage of 
contracting obligations awarded to WOSBs (through any program or open 
competition) has remained below the government-wide goal of 5 percent 
(see table 3). Goal achievement by the three contracting agencies with 
the highest amount of obligations through the set-aside program 
varied. For example, DOD did not meet its 5 percent goal for 
contracting obligations to WOSBs in any of the 3 years. DHS and GSA 
met their goals in all 3 years. Excluding obligations made by DOD, 
about 5.7 percent of total federal contracting obligations to small 
businesses included in SBA's fiscal year 2013 Small Business Goaling 
Report were awarded to WOSBs.[Footnote 20] For the 24 agencies subject 
to the Chief Financial Officers Act listed in SBA's scorecards, 19 met 
their WOSB contracting goal in fiscal year 2012 and 20 met their goal 
in fiscal year 2013.[Footnote 21] One agency missed its goal in fiscal 
year 2012 but met its goal in fiscal year 2013. Four agencies (the 
same four each year) did not meet their goal for either year. 

Table 3: Percentage of Contract Obligations Awarded to Women-Owned 
Small Businesses, Fiscal Years 2011-2013: 

Government-Wide: 
2011: 3.98%; 
2012: 4.00%; 
2013: 4.32%. 

Department of Defense: 
2011: 3.43%; 
2012: 3.38%; 
2013: 3.57%. 

Department of Homeland Security: 
2011: 5.95%; 
2012: 6.43%; 
2013: 7.04%. 

General Services Administration: 
2011: 9.15%; 
2012: 9.06%; 
2013: 7.75%. 

Source: SBA goaling reports (fiscal years 2011-2013). GAO-15-54. 

[End of table] 

Contracting Officers, WOSBs, and Others Suggested Program Changes That 
Might Increase Use of the Set-Aside: 

Selected federal contracting officials, businesses that received a 
WOSB or EDWOSB set-aside, third-party certifiers, and a WOSB advocacy 
organization with which we spoke gave their perspectives on existing 
challenges and possible changes to increase program usage. 

Complexity and burdensome requirements. Contracting officers described 
challenges to using the WOSB set-aside. Some contracting officers 
noted that generally, all contracts awarded to WOSBs count for the 
purposes of meeting agencies' 5 percent goal and that from their 
perspective it does not matter whether a contract is awarded to a WOSB 
using the WOSB program, another set-aside program, or open 
competition. Some contracting officers said that WOSB program 
requirements were burdensome or complex relative to other SBA programs 
with set-asides. Unlike the other programs, the WOSB program requires 
the use of a separate electronic repository, maintained by SBA, to 
collect and store certification documents. One contracting officer 
noted that the contracting process slowed when officials had to seek 
information from the repository. Another contracting officer told us 
the role of the contracting officer included confirming that 
businesses had uploaded required documents in the SBA repository based 
on a list of required documents in the program regulation--but noted 
this task was not required under other contracting programs. 

Lack of awareness and agency commitment. Representatives from advocacy 
groups also identified awareness of and commitment to the program as 
another area for improvement. An advocacy group representative told us 
that some of their member WOSBs had encountered confusion and 
reluctance on the part of contracting officers to use the program. 
Another advocacy group said that SBA should engender more commitment 
to the program among contracting officers and agencies. Another 
representative noted that there are no consequences for agency leaders 
for failure to meet contracting goals for WOSBs or use the set-aside 
program. SBA officials described to us consequences that included a 
low rating in the publicly available SBA contracting scorecard, which 
may draw negative attention to the agency. Also, the National Defense 
Authorization Act for Fiscal Year 2013 includes the extent to which 
agencies meet contracting goals as a competency by which members of 
the senior executive service are rated. All of the businesses we 
interviewed that received WOSB program contracts cited the need for 
increased agency outreach or awareness of the program. For example, 
one participant advocated increasing contracting officer awareness and 
understanding of how an agency could benefit from using the WOSB set-
aside program. 

Changes to increase use of program. Contracting officers also 
identified changes they believe could increase use of the WOSB set-
aside. For example, some noted that allowing sole-source contracts 
could increase program use. Currently, contract officers can establish 
a set-aside only if there is a reasonable expectation that at least 
two eligible WOSBs will submit a bid for the contract. Some 
contracting officers suggested expanding the list of North American 
Industry Association Classification System (NAICS) codes eligible for 
use under the WOSB set-aside. For example, one contracting office said 
that the designated NAICS for the set-aside program did not meet their 
procurement needs. One representative pointed out that SBA had 
designated some NAICS codes just for EDWOSB and others for WOSBs. SBA 
officials told us the agency does not have the authority to change the 
list of industry sectors eligible for program set-asides without 
conducting a study of industries in which WOSBs were underrepresented 
or substantially underrepresented. Representatives from all of the 
WOSB advocacy groups, three of which are also third-party certifiers, 
said that expanding the NAICS codes would improve the program. For 
example, one advocacy group said that certain WOSBs would like to 
obtain WOSB or EDWOSB set-asides but did not have NAICS codes that 
were listed as eligible. Another said that they would not limit the 
number of eligible industries under the program. Finally, the 
businesses we interviewed also believed that allowing sole-source 
awards or adding more NAICS codes would increase program use. Six 
participants commented on the limitations for awarding sole-source 
contracts through the WOSB set-aside. Five participants felt that the 
NAICS codes under the program were limited.[Footnote 22] One program 
participant mentioned that she felt that limiting set-asides for the 
WOSB program to certain NAICS codes was inconsistent with other SBA 
programs with set-asides, such as 8(a), HUBZone, and SDVOSBC. She gave 
an example of an agency that issued a draft solicitation that sought 
to award two contracts each to WOSB set-asides, HUBZone, and SDVOSBC 
businesses. However when it became clear that the contract was not in 
an eligible NAICS code for the WOSB program, the agency converted the 
two contracts intended for WOSB set-aside to a general small business 
category. 

Some program participants also mentioned positive aspects of the 
program. Five participants believed that the program provided greater 
opportunities for their businesses and WOSBs in general. Furthermore, 
five of the six businesses with whom we spoke that received only one 
or two contracts felt that the program improved their ability to 
compete for a federal contract. For example, one participant noted 
that while she has not seen many set-aside solicitations for the NAICS 
code under which her business primarily operates, the existence of the 
program prompted her to bid on set-asides under other NAICS codes. 

Conclusions: 

As the only federal procurement set-aside specifically for women-owned 
businesses, the WOSB program could play an important role in limiting 
competition to certain federal contracts for WOSBs and EDWOSBs that 
are underrepresented in their industries. However, weaknesses in 
multiple areas of SBA's management of the program hinder effective 
oversight of the WOSB program. Specifically, SBA has limited 
information about the performance of its certifiers and does not use 
what information is available to help ensure certifiers adhere to 
program requirements, a deficiency exacerbated by the highest-volume 
certifier's--about 76 percent of third-party certifications--
delegation of duties to 14 partner organizations. An incomplete 
response to SBA's request for information on WBENC's certification 
process demonstrates the need for an oversight framework to ensure 
that certifiers adhere to agreements with SBA. SBA did not follow up 
on the incomplete response from WBENC, which raises questions about 
SBA's commitment to oversight of the certifiers. Furthermore, the lack 
of procedures for review and analysis of monthly certifier reports 
means that SBA has forgone opportunities to oversee certifiers and 
pursue concerns about fraud of individual businesses identified by one 
certifier. According to federal standards for internal control, 
agencies should conduct control activities such as performance reviews 
and clearly document internal controls. Formalizing existing ad hoc 
processes (by developing procedures) will help SBA obtain the 
information necessary to better ensure that third-party certifiers 
fulfill the requirements of their agreements with SBA-
-an effort SBA said it plans to undertake, although it has not 
estimated a completion date. Additionally, SBA could use results and 
insights from reviews of certifier reports--which are to include 
concerns about businesses--to inform its processes for eligibility 
verification, particularly examinations. 

Weaknesses related to SBA's examination of program participants and 
approach to enforcement mean that the agency cannot offer reasonable 
assurance that only eligible businesses participate in the program. 
Although the agency's examinations found high rates of ineligibility, 
SBA has not yet formalized examination guidance for staff or followed 
up on examination results to determine the status of ineligible 
businesses at the time of contract award. SBA also has not focused on 
identifying factors that may be causing businesses to be found 
ineligible; rather, the agency appears to have determined that more 
training for businesses about eligibility requirements could address 
the issue. However, training alone would be a limited response to 
examination results, and SBA officials could not say what analysis 
determined training to be the relevant response. Additionally, the 
sample of businesses that SBA examines includes only those businesses 
that received WOSB set-aside contracts. All these factors limit SBA's 
ability to better understand the eligibility of businesses before 
applying for and being awarded contracts. Rather than gather and 
regularly analyze information related to program eligibility, SBA 
relies on other parties to identify potential misrepresentation of 
WOSB status (through bid-protest filings and less formal mechanisms)--
a reactive and limited approach to oversight. Federal standards for 
internal control state that agencies should have documented 
procedures, conduct monitoring, and ensure that any review findings 
and deficiencies are brought to the attention of management and are 
resolved promptly. Additionally, the standards state that management 
needs to comprehensively identify risks the agency faces from both 
internal and external sources. By expanding its examination of firms 
and analyzing and following up on the results, SBA could advance the 
key program goal of restricting competition for set-aside contracts to 
WOSBs and EDWOSBs. 

Recommendations for Executive Action: 

We make the following recommendations to improve management and 
oversight of the WOSB program. 

To help ensure the effective oversight of third-party certifiers, the 
Administrator of SBA should establish and implement comprehensive 
procedures to monitor and assess performance of certifiers in accord 
with the requirements of the third-party certifier agreement and 
program regulations. 

To provide reasonable assurance that only eligible businesses obtain 
WOSB set-aside contracts, the Administrator of SBA should enhance 
examination of businesses that register to participate in the WOSB 
program, including actions such as: 

* promptly completing the development of procedures to conduct annual 
eligibility examinations and implementing such procedures; 

* analyzing examination results and individual businesses found to be 
ineligible to better understand the cause of the high rate of 
ineligibility in annual reviews, and determine what actions are needed 
to address the causes; and: 

* implementing ongoing reviews of a sample of all businesses that have 
represented their eligibility to participate in the program. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to SBA, DHS, DOD, and GSA for 
review and comment. SBA provided written comments that are described 
below and reprinted in appendix II. The other agencies--DHS, DOD, and 
GSA--did not provide comments on this report. SBA generally agreed 
with our recommendations and said that the agency is already in the 
process of implementing many of our recommendations. 

While SBA generally agreed with our recommendations, the agency stated 
that the report could be clearer about the program examination 
process. Specifically, SBA stated that the agency has authority to 
conduct eligibility examinations at any time for any firm asserting 
eligibility to receive WOSB program contracts. We have added 
information to the draft to clarify this point. The draft report we 
sent to SBA for comment discussed the agency's process of conducting 
annual eligibility examinations and provided a description of SBA's 
current process. SBA also stated that "the report recommends that SBA 
conduct ongoing annual eligibility examinations and implement such 
procedures." However, our report recommends that SBA complete the 
development of procedures to conduct annual eligibility examinations 
(which SBA has conducted for the past 2 years) and implement such 
procedures. We separately recommend implementing ongoing reviews of a 
sample of all businesses that have represented their eligibility to 
participate in the program. We do not specify that these eligibility 
reviews, which are eligibility examinations, should be annual. SBA 
could choose to conduct these reviews more frequently if deemed 
appropriate. Whether SBA conducts eligibility examinations annually or 
more frequently, examinations should be consistently conducted by 
following written procedures and the results assessed to determine the 
causes of ineligibility. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to appropriate congressional committees and members, the Secretary of 
DOD, the Secretary of DHS, the Administrator of GSA, the Administrator 
of SBA, and other interested parties. This report will also be 
available at no charge on our website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix III. 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report examines the Women-Owned Small Business (WOSB) program of 
the Small Business Administration (SBA). More specifically, the report 
(1) describes how WOSBs and economically disadvantaged WOSBs (EDWOSBs) 
are certified as eligible for the program, (2) examines the extent to 
which SBA has implemented internal control and oversight procedures of 
WOSB program certifications, and (3) discusses the effect the program 
has had on federal contracting opportunities available to WOSBs or 
EDWOSBs. 

To describe how businesses are certified as eligible for the program, 
we reviewed SBA policies and procedures to establish program 
eligibility including the responsibilities of businesses, third-party 
certifiers, contracting officers, and SBA. We interviewed SBA 
officials from the Office of Government Contracting. To evaluate how 
certification procedures may affect program participation, we obtained 
from SBA monthly reports (from September 2011 through May 2014) from 
each of the four third-party certifiers. We took steps to develop a 
dataset we could use for our analyses, including creating and merging 
monthly spreadsheets, identifying missing business names, and clearing 
the list of duplicate entries. We compared this dataset with Federal 
Procurement Data System-Next Generation (FPDS-NG) data for businesses 
that received a WOSB program set-aside contract. We determined that 
the data on how many third-party certified businesses received 
contracts as part of the WOSB program were sufficiently reliable for 
our purposes by corroborating a sample of businesses we identified as 
third-party certified with documentation for the businesses in the 
WOSB program repository. We were not able to determine how many self-
certified businesses obtained contracts under the program, because the 
format of the documentation maintained in the SBA repository does not 
include a record of documents that were present at the time of 
contract award. We also interviewed a sample of contracting officers 
from selected components in the Department of Defense (DOD), 
Department of Homeland Security (DHS), and the General Services 
Administration (GSA). We selected these three agencies to represent a 
range of program participation based on the number and total 
obligation amounts of active set-aside contracts awarded in 2011 
through 2013. Within DOD and DHS, we selected two components from each 
that demonstrated high-and mid-level program participation (based on 
number of contracts and obligation amounts). For DOD, we selected the 
U.S. Army and Defense Logistics Agency. For DHS, we selected the U.S. 
Coast Guard, and Customs and Border Protection. Within each of the 
components and GSA, we compared FPDS-NG data on program activity by 
obligation amount, contract number, and North American Industry 
Classification System (NAICS) codes for 2011 through 2013. For each, 
we selected two contracting offices using the same criteria we used to 
select agencies, which included identifying a high-and mid-level 
program obligation amount and offices with multiple contracts and 
under multiple NAICS codes. We excluded one Customs and Border Patrol 
office because only one office awarded multiple contracts under 
multiple NAICS codes. 

We also interviewed three of the four SBA-approved third-party 
certifiers (the El Paso Hispanic Chamber of Commerce, the National 
Women Business Owners Corporation, and the U.S. Women's Chamber of 
Commerce). We were unable to interview the Women's Business National 
Enterprise Council (WBENC). SBA requested documentation of WBENC's 
oversight procedures for the certification activity and fee structures 
of its regional partner organizations. WBENC provided a written 
response to SBA, which was not fully responsive to the request, as 
discussed in the report. We conducted semi-structured interviews with 
a sample of 10 businesses that were certified for the program, 9 of 
which had received a set-aside contract. 

To evaluate SBA's oversight of certification, we reviewed the program 
regulation and program documents, agreements with third-party 
certifiers, 135 monthly reports submitted by all four third-party 
certifiers, and letters SBA sends to inform businesses when their WOSB 
or EDWOSB status is in question, among other documents. We discussed 
the agency's procedures to monitor certifiers and ensure participant 
eligibility with SBA officials from the Office of Government 
Contracting. We compared officials' descriptions of their oversight 
activities with federal internal control standards.[Footnote 23] We 
inquired about documentation and eligibility examinations conducted in 
2012 and 2013, and a planned examination for 2014, and reviewed 
reports of the 2012 and 2013 examination results. We also inquired 
about ongoing plans to develop a standard operating procedure, and 
future plans to evaluate the program. 

To determine what effect, if any, the WOSB program has had on federal 
contracting opportunities available to WOSBs, we identified set-aside 
contract obligations in FPDS-NG from April 2011 through May 2014 to 
identify trends in program participation by contracting agencies 
included in both FPDS-NG and SBA goaling reports. Using a review of 
FPDS-NG documentation and electronic edit checks, we deemed these data 
sufficiently reliable for our purposes. We also analyzed SBA goaling 
reports from 2011 through 2013 to describe progress made towards 
meeting the 5 percent goal for federal contracting to WOSBs. We 
conducted semi-structured interviews with a sample of 10 businesses 
there were certified for the program, 9 of which had received a set-
aside contract. We selected this nongeneralizable sample of businesses 
to reflect whether they had been certified by a third-party entity, or 
had self-certified. While the results of these interviews could not be 
generalized to all WOSB program participants, they provided insight 
into the benefits and challenges of the program. We interviewed SBA 
officials and contracting agency officials about the extent to which 
the program has met its statutory purpose of increasing contracting 
opportunities for WOSBs. Finally, we interviewed industry advocates, 
including three of the four third-party certifiers (the El Paso 
Hispanic Chamber of Commerce, the National Women Business Owners 
Corporation, and U.S. Women's Chamber of Commerce) and one other 
industry advocate (Women Impacting Public Policy) actively involved in 
promoting the program with WOSBs. 

We conducted this performance audit from August 2013 to October 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Small Business Administration: 

U.S. Small Business Administration: 
Washington, DC 20416: 

September 22, 2014: 

William Shear: 
Director: 
Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Shear: 

The US Small Business Administration (SBA) has reviewed the Government 
Accountability Office's (GAO) report entitled "Women-Owned Small 
Business Program - Certifier Oversight and Additional Eligibility 
Controls are Needed". In this report, GAO states that SSA does not
have formal written procedures and guidelines for evaluating third-
party certifiers and for conducting eligibility examinations. GAO 
recommends that SBA develop and implement procedures to conduct annual 
eligibility examinations. analyze the results to better understand
and address ineligibility in the program, and implement ongoing 
reviews of a sample of all businesses that have represented their 
eligibility to participate in the program. 

SBA generally agrees with the recommendations provided in the GAO 
report, and as noted in the report, SBA is already in the process of 
implementing many of the recommendations. However, SBA believes that 
the report could be clearer about the program examination process.
Specifically. the report recommends that SBA conduct ongoing annual 
eligibility examinations and implement such procedures. SBA notes that 
it has the authority to conduct program examinations at any time, and 
on any firm asserting eligibility. While SBA has conducted program 
examinations on an annual basis in the past, SBA's authority and SBA's 
regulations make clear that this authority is not limited to 
performance of reviews on an annual basis. 

Thank you for the opportunity to comment on this report and for taking 
our views into consideration. 

Sincerely, 

Signed by: 

[Illegible] for: 

John Shoraka: 
Associate Administrator: 
Office of Government Contracting and Business Development: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear, (202) 512-8678, or shearw@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Andrew Pauline (Assistant 
Director), Julie Trinder-Clements (analyst-in-charge), Pamela 
Davidson, Daniel Kaneshiro, Julia Kennon, Barbara Roesmann, Jessica 
Sandler, and Jena Sinkfield made key contributions to this report. 

[End of section] 

Footnotes: 

[1] U.S. Census, 2007 Survey of Business Owners Summaries of Findings 
(Washington, D.C.: 2010). 

[2] U.S. Department of Commerce Economics and Statistics 
Administration, Women-Owned Business in the 21st Century (Washington, 
D.C.: October 2010). 

[3] 15 U.S.C. § 644(g). The Small Business Act defines various 
socioeconomic categories of businesses and SBA administers contracting 
programs targeted to these groups. Small businesses are those that are 
independently owned and operated and are not dominant in their field 
of operations. 15 U.S.C. § 632(a). Women-owned small businesses must 
have at least 51 percent female ownership and must be controlled by 
one or more women who are U.S. citizens. The ownership must be direct, 
not subject to conditions, and the woman must manage the day-to-day 
operations of the business and make its long-term decisions. See 15 
U.S.C. § 632(n); 13 C.F.R. § 127.102; 13 C.F.R. § 127.201; 13 C.F.R. § 
127.202. 

[4] Although the statute requires SBA to conduct a study to identify 
industries in which WOSBs are underrepresented, according to officials 
SBA's interpretation of the statute is that it requires the agency to 
identify industries in which EDWOSBs are underrepresented and 
industries in which WOSBs are substantially underrepresented. 
Economically disadvantaged is a determination made if a woman can 
demonstrate that her ability to compete in the free enterprise system 
is impaired due to diminished capital and credit opportunities as 
compared with others in the same or similar business. For example, a 
woman can demonstrate disadvantage with a net worth of less than 
$750,000 (with certain regulatory exclusions). Generally, a woman with 
an adjusted gross income for the prior 3 years averaging $350,000 or 
with assets of $6 million or more is not deemed economically 
disadvantaged. Additionally, a spouse's financial situation can be 
considered. 

[5] Women-Owned Small Business Federal Contract Program, 75 Fed. Reg. 
62258 (Oct. 7, 2010). WOSB program provisions were formally added to 
the Federal Acquisition Regulations on April 1, 2011. 

[6] In 2006, SBA asked the RAND Corporation to compute disparity 
ratios for WOSBs based on the number and dollar value of federal 
contracts awarded to WOSBs. See Kauffman-RAND Institute for 
Entrepreneurship Public Policy, The Utilization of Women-Owned Small 
Businesses in Federal Contracting (Santa Monica, Calif.: 2007). 
According to this study, underrepresentation in government contracting 
has come to mean that the share of contracts awarded to a particular 
type of business is small relative to the prevalence of such 
businesses in the pool of businesses "ready, willing, and able" to 
perform government contracts. This measure of underrepresentation is 
typically referred to as a disparity ratio. The RAND study identified 
83 North American Industry Classification System (NAICS) sectors, 
which were published in the WOSB program final rule on October 7, 
2010. In 2012, SBA updated four-digit NAICS codes to six-digit codes 
to incorporate Office of Management and Budget modifications of the 
classification system (identified as NAICS 2012) into its table of 
small business size standards. According to SBA's interim final rule 
on August 20, 2012, the large majority of changes involve renumbering 
or redefining codes (or both) without warranting change to the 
agency's size standards. On August 19, 2013, SBA published a list of 
330 industry sectors (identified by six-digit codes) eligible for use 
in the WOSB program, with some codes eligible for use under the WOSB 
set-aside, and some under the EDWOSB set-aside. 

[7] We were not able to determine how many self-certified businesses 
obtained contracts under the program because SBA does not maintain 
this information. 

[8] According to the WOSB program regulation 13 C.F.R. § 127.300(e), 
documents required of self-certified WOSBs include copies of birth 
certificates, naturalization papers, or unexpired passports; joint 
venture agreement, if applicable; for a sole proprietorship, an 
assumed/fictitious name certificate; signed WOSB program certification 
(an attestation by the business of its program eligibility); if a 
limited liability company, articles of organization and operating 
agreement; if a corporation, articles of incorporation, bylaws, and 
any amendments, all issued stock certificates, stock ledger, voting 
agreements, if any; and if a partnership, partnership agreements and 
amendments. Self-certified EDWOSBs also must provide a personal 
financial statement for each woman claiming economic disadvantage (SBA 
Form 413) and a signed EDWOSB program certification. 

[9] Federal Acquisitions Regulations require all prospective vendors 
to be registered in SAM before the award of a contract, basic 
agreement, basic ordering agreement, or blanket purchase agreement. 
SAM, which is maintained by the General Services Administration, 
replaced the Central Contractor Registration database. 

[10] According to the WOSB program regulation, 13 C.F.R. § 127.300(d), 
documents required of third-party certified WOSBs and EDWOSBs include 
a copy of the third-party certification; joint venture agreement, if 
applicable; and signed WOSB or EDWOSB program certification (an 
attestation by the business of its program eligibility). 

[11] If the business had uploaded a third-party certificate, SBA could 
determine that the business had used third-party certification to 
establish its eligibility for the program. If a given business had not 
uploaded a third-party certificate but uploaded all required documents 
for self-certification, SBA might then presume the business to have 
self certified. 

[12] See GAO, Standards for Internal Control in the Federal 
Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[13] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[14] SBA dismisses protests under the WOSB program for various 
reasons. For example, in one case the party that submitted the protest 
was not eligible to do so because no specific solicitation was 
involved in the case. Therefore, SBA dismissed the protest without 
determining whether the business in question would have been eligible 
for the program. 

[15] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[16] In 2012, SBA included 113 businesses in its annual eligibility 
examination, and in 2013 it included 119 businesses in its 
examination. SBA has statutory authority to conduct program 
eligibility examinations at any time for any firm asserting 
eligibility to receive a WOSB program contract. 

[17] The program awarded the first contract in April 2011. Fiscal year 
2011 was not a full fiscal year for the program and full fiscal year 
2014 data were not available at the time of our review. 

[18] Beginning in 2000, the Small Business Act set forth statutory 
thresholds of $5 million for manufacturing and $3 million for all 
other contracts for set-aside awards under the WOSB program. In an 
interim final rule published on April 1, 2011, the Federal Acquisition 
Regulatory Council (FAR Council) adjusted the statutory threshold so 
that the anticipated award price of contracts awarded under WOSB 
Program must not exceed $6.5 million in the case of manufacturing 
contracts and $4 million in the case of all other contracts. 

[19] To participate in the 8(a) program, a business must be certified 
as meeting several criteria, including being a small business as 
defined by SBA; being unconditionally owned and controlled by one or 
more socially and economically disadvantaged individuals who are U.S. 
citizens; and showing potential for success. Under the HUBZone 
program, contracting preferences are available to qualified small 
businesses located in an area designated by SBA as a historically 
underutilized business zone. The SDVOSBC program provides veterans who 
incurred or aggravated disabilities in the line of duty with certain 
sole-source and set-aside contracting opportunities. Finally, 
contracting officers can set aside contracts to small businesses 
(generally for contracts worth $3,000-$150,000 or for contracts worth 
more than $150,000) as long as at least two small businesses are 
likely to compete for the contract. 

[20] SBA's FY2013 Small Business Goaling Report includes federal 
contracting dollars obligated to small businesses, with some 
exclusions including contracts that are funded with agency generated 
sources; acquisitions by agencies on behalf of foreign governments, 
entities, or international organizations; and contracts that are 
performed outside of the United States or its territories. 

[21] The Chief Financial Officer and Federal Financial Reform Act of 
1990, among other measures, created the position of Chief Financial 
Officer in each executive department and in each major executive 
agency in the federal government. Chief Financial Officer Act agencies 
are defined in 31 U.S.C. § 901(b). 

[22] Before changing the list, SBA officials stated that the agency 
interprets the statutory requirements to mandate that the agency first 
must conduct a study to identify industries in which EDWOSBs are 
underrepresented and WOSBs are substantially underrepresented. A study 
could indicate the need for either an increase or a decrease in 
eligible WOSB program industries, and SBA will continue to base their 
NAICS list on such studies. In SBA's final rule implementing the 
program and establishing the NAICS codes, SBA addressed a number of 
comments that advocated expanding the number of NAICS codes beyond the 
83 that SBA determined based on its industry study of WOSB 
underrepresentation. In the final rule, SBA explained that section 
8(m) of the Small Business Act instructs SBA to conduct a study to 
identify industries in which WOSBs are underrepresented in federal 
procurement contracting. Therefore, the only way SBA could expand the 
list of eligible NAICS was to conduct a new study. 

[23] See GAO, Standards for Internal Control in the Federal 
Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[End of section] 

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