Women-Owned Small Business Program: Actions Needed to Address Ongoing Oversight Issues

GAO-19-168 Published: Mar 14, 2019. Publicly Released: Apr 15, 2019.
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Fast Facts

The Women-Owned Small Business program aims to give these businesses an edge when competing for federal contracts in industries where women have traditionally been underrepresented.

Each year, the Small Business Administration examines a sample of businesses that received contracts under the program to determine whether they were eligible to participate. In fiscal year 2017, SBA found about 40 percent of the businesses in its sample weren't eligible. Moreover, SBA doesn't use the examination results to improve its oversight.

We made a recommendation and reiterated previous ones to address this and other persistent problems we found.

Photo of business women reviewing paperwork.

Photo of business women reviewing paperwork.

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What GAO Found

The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). Specifically, in September 2015 SBA published a final rule to implement sole-source authority, effective October 2015. As of February 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by 2015 NDAA. SBA officials stated that this requirement would be addressed as part of the new certification process for the WOSB program, which they expect to implement by January 1, 2020.

SBA has not addressed WOSB program oversight deficiencies identified in GAO's 2014 review (GAO-15-54). For example, GAO previously recommended that SBA establish procedures to assess the performance of four third-party certifiers—private entities approved by SBA to certify the eligibility of WOSB firms. While SBA conducted a compliance review of the certifiers in 2016, it has no plans to regularly monitor them. By not improving its oversight of the WOSB program, SBA is limiting its ability to ensure third-party certifiers are following program requirements. In addition, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk. Consequently, GAO maintains that its prior recommendations should be addressed. In addition, similar to previous findings from SBA's Office of Inspector General, GAO found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018. SBA does not review contracting data that could identify this problem and inform SBA which agencies making awards may need targeted outreach or training. As a result, SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals.

While federal contract obligations to all women-owned small businesses and WOSB program set-asides have increased since fiscal year 2012, WOSB program set-asides remain a small percentage (see figure).

Obligations for the Women-Owned Small Business Program and to All Women-Owned Small Businesses in Similar Industries, Fiscal Years 2012–2017

Obligations for the Women-Owned Small Business Program and to All Women-Owned Small Businesses in Similar Industries, Fiscal Years 2012–2017

Note: Obligations to women-owned small businesses represent contract obligations to women-owned small businesses under WOSB-program-eligible North American Industry Classification System codes. FPDS-NG obligation amounts have been adjusted for inflation.

Why GAO Did This Study

In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented. To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier. However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program and (3) allowing SBA to implement a new certification process.

GAO was asked to review the WOSB program. This report discusses (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program. GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and three of the four private third-party certifiers.

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GAO recommends that SBA develop a process for periodically reviewing the extent to which WOSB program set-asides are awarded for ineligible goods or services and use the results to address identified issues, such as through targeted outreach or training on the WOSB program. SBA agreed with the recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Small Business Administration The SBA Administrator or her designee should (1) develop a process for periodically reviewing Federal Procurement Data System-Next Generation (FPDS-NG) data to determine the extent to which agencies are awarding WOSB program set-asides under ineligible North American Industry Classification System (NAICS) codes and (2) take steps to address any issues identified, such as providing targeted outreach or training to agencies making awards under ineligible codes. (Recommendation 1)
In May 2019, SBA analyzed FPDS-NG data to review the use of ineligible NAICS codes in the WOSB program. As part of their May 2019 analysis, SBA identified federal agencies that had used ineligible NAICS codes and created presentation materials to provide training on NAICS codes to agencies. SBA officials said that they planned to present quarterly at the Small Business Procurement Advisory Council in FY 2020 and as part of their FY 2019 performance reviews of FY 2019 procurement centers. In March 2020, SBA officials said that they will review this information annually during the third quarter of the fiscal year and will initiate these annual reviews starting in FY 2022, which will reflect data from the first full year of the WOSB certification program. The analysis will be similar to that done for the May 2019 review and the annual process will be documented in SBA guidance that is expected to be finalized in January 2022.

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