A review of big changes coming for WOSB program participants, as well as what these changes mean for current and prospective program members.
Big changes are on the horizon for participants in the Small Business Administration (SBA) Woman-Owned Small Business (WOSB) federal contracting program.
During the summer of 2019, the SBA proposed an amendment to its regulations that will require WOSB program participants to receive formal certification from the SBA or an SBA-approved third-party certifier.What will this mean for current and prospective program members? Read on!
The Backdrop: What Is the SBA WOSB Program and How Did It Get Here?
The SBA WOSB program is a federal contracting program that aims to help WOSBs (or Economically Disadvantaged Woman-Owned Small Businesses (EDWOSBs)) receive government contracts. To achieve its goals, the program allows agencies to set aside contracts for WOSBs under specified circumstances.
Congress planted the seed for an SBA WOSB program almost two decades ago. In 2000, it passed a law authorizing the SBA to establish a program to assist the government in meeting its goal of dedicating at least 5% of its contracting dollars to WOSBs.Though the law was on the books, the SBA did not propose regulations to govern a WOSB program until six years later.Those 2006 proposed regulations provided procedures for WOSB certification by “a Federal agency, a State government, or a national certifying entity” approved by the SBA, but overall, outlined a program that was incredibly limited. Industry complaints about the boundaries of the proposed program, interagency discussions, and a study conducted by the RAND Corporationcaused the SBA to reevaluate.
In 2007, the SBA updated its proposed regulations.In many ways, this proposed update of the WOSB program made it similar to the SBA’s 8(a) Business Development Program, with one notable exception: the certification process. The 2007 update was the first time the SBA proposed allowing WOSBs or EDWOSBs to “self-certify” their eligibility for set-aside solicitations.
Self-certification simply required businesses to be registered and to certify “under the penalty of perjury” that the business met all WOSB or EDWOSB eligibility requirements in the two systems preceding the System for Award Management.From there, contracting officers could take businesses claiming WOSB status at their word. Agencies could look into a business’ self-certification when “a protest or other credible information” called it into question, but otherwise usually would not.
Self-certification took a backseat to other issues with the 2007 update, which failed to expand the program enough to quiet industry complaints. The program’s applicability remained incredibly narrow, as only contracts under four specific North American Industry Classification System (NAICS) codes could be set aside for WOSBs. The SBA once again went back to the drawing board.
At long last, in 2010, the SBA issued a final rule establishing a much more comprehensive WOSB program.The established WOSB program, however, retained the self-certification option. This version only required self-certifying WOSBs to provide copies of documents verifying eligibility to contracting officers upon submitting an initial offer, but award could not be made until all documents were provided via the SBA’s WOSB Program Repository. WOSBs could also attain “third-party certification” from entities approved by the SBA. These two certification methods have stayed largely intact since then but are due for a major shakeup in the near future.
The WOSB Program Today: What’s Changing and Why?
After a few years under the 2010 version of the WOSB program, the U.S. Government Accountability Office (GAO) investigated the program’s impact. Issuing a report in 2014, GAO highlighted a number of issues with the program’s structure, particularly regarding certification.The report specifically determined that the SBA had little oversight of either the third-party or self-certification processes and that, as a result, a number of potentially ineligible businesses improperly identified as WOSBs.
Following GAO’s findings, Congress took matters into its own hands, proposing significant changes to the WOSB program through the 2015 National Defense Authorization Act (NDAA).Among other changes, the 2015 NDAA redrafted sections of the Small Business Act governing WOSBs, specifically requesting that SBA remove the self-certification option and replace it with a formal certification process. Much like the law authorizing the SBA’s establishment of the WOSB program, however, SBA has taken a while to implement this new certification process.
One year after the 2015 NDAA became law, the SBA requested public comments on how to implement a more formal certification process. A little over a month after the public comment period closed, however, the SBA launched a new website: certify.SBA.gov. The site was intended to simplify the process for becoming a participant in the SBA’s 8(a) Business Development, HUBZone, or WOSB programs, or at least make it more user-friendly. Though it was largely successful, the site was built to support WOSB self-certification despite Congress’ removal of the option.
Since then, the self-certification process has continued to receive criticism. For instance, GAO has recently issued two reports, both concluding that because SBA had not yet implemented Congress’ removal of the self-certification method, “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.”
At long last, SBA proposed an amendment to its regulations on May 14 of this year that removes the self-certification option.When adopted, the 2019 amendment will have a significant impact on the certification process for WOSBs and EDWOSBs, as well as on the requirements for recertification.
Before Certification: WOSB Program Eligibility.
As a preliminary matter, the eligibility requirements for becoming a certified WOSB or EDWOSB will remain about the same under the proposed amendment. A small business will be able to apply for certification “whenever it meets the eligibility requirements” listed in the Code of Federal Regulations at 13 CFR 127, Subpart B.
The WOSB program has two basic eligibility requirements. To become a WOSB, a business must at least:
- Be considered a “small business” for its primary industry classification; and
- Be at least 51% unconditionally and directly owned and controlled by one or more women who are U.S. citizens.
- “Ownership” and “control” have specific regulatory definitions, so businesses should review them thoroughly before submitting their applications.
To retain EDWOSB status, a WOSB must meet additional eligibility standards, including the ability to demonstrate that its owners are “economically disadvantaged” as defined by regulation.
After determining eligibility, businesses must then choose which certification path to pursue:
- Certification by SBA, or
- Certification by a third-party certifier.
Certification: Choose Your Own Adventure
As previously discussed, the 2019 proposed amendment does away with self-certification entirely, replacing it with a new certification process through the SBA. But what about third-party certifiers? They are here to stay, at least for now, but will undergo a few changes. The remainder of this article will cover the application requirements, processing methods, and pros and cons for each type of certification, then discuss the amendment’s impact on those already certified.
Certification by SBA
As with most application processes these days, submitting an application for WOSB or EDWOSB certification through the SBA starts with creating an online account. First, a business must create a free account through certify.SBA.gov, which enables it to submit the information SBA needs to verify the business’ eligibility for the WOSB program.
What information will I need to submit to SBA to apply for certification?
At a minimum, new WOSB program applicants must usually submit the following information through their certify.SBA.gov account:
- SAM.gov registration information—Applicants must maintain an active registration in the System for Award Management (SAM). SAM is maintained by the General Services Administration. Registration in SAM is always required to do business with the U.S. government.
- Proof of U.S. citizenship for qualifying individual(s)—The female owner or owners must provide their birth certificates, naturalization papers, or unexpired passports to demonstrate U.S. citizenship.
- Joint venture agreements—These are only required if applicable.
- Other business-related documentation—The documentation required varies with the type of business seeking certification. For example, a corporation must submit its Articles of Incorporation, copies of its stock certificates, its stock ledger, and its corporate bylaws and any amendments, while an LLC must submit the company’s operating agreement and articles of organization. In contrast, partnerships need only submit their partnership agreement (as amended) and sole proprietors must submit their DBA or trade name certificate.
In addition to these documents, EDWOSB applicants must also submit the personal financial information of the business’ female owner and, if applicable, the owner’s spouse.This information includes:
- IRS Form 4506-T, Request for Tax Transcript—Must be completed and signed.
- IRS Form 1040 personal income tax returns—Must provide the three most recent sets of tax returns, including all schedules.
- W-2’s—Must provide the three most recent forms.
Additional Information—Must include detailed description of “the value of all assets (including cash on hand and in banks, accounts and notes receivable, retirement accounts, stocks, bonds, real estate, personal property, life insurance, and any other assets), liabilities (such as loans, mortgages, tax debts, and any other liabilities), and income (including salary, investment income, real estate income, and any other income).”
Businesses that are already certified 8(a) Business Development Program participants, approved service-disabled veteran–owned small businesses, or disadvantaged business enterprises authorized by the Department of Transportation are at a distinct advantage when it comes to WOSB certification. Because much of the same qualifying information is used, these applicants only need to provide the SBA evidence demonstrating that they are woman-owned businesses and verify their certification or approval under these programs to receive WOSB certification.
Finally, if a business chooses the third-party WOSB certification option, as will be discussed later, it will still need to submit evidence of its third-party certification to the SBA.
How will SBA review applications?
After applicants submit the required information, the proposed amendment requires the SBA to notify applicants whether their application is complete enough for evaluation within 15 days, and if not, to indicate any additional information or clarification it needs to proceed. The amendment requires SBA to make its final certification determination within 90 days “whenever practicable.”
When the SBA approves or denies an application, it must notify the applicant in writing. If it denies an application, it must provide specific reasons for denial as well. Denied applicants may request reconsideration within 30 days of the SBA’s denial and provide additional, relevant information. The SBA may either approve the application in light of the additional information or deny it again on the same or new grounds. In any case, a reconsideration decision is SBA’s final decision: There is no further appeal. Finally, if SBA ultimately declines a certification application, the denied business must wait at least one year to reapply for WOSB status.
Certification by Third-Party Certifiers
Due to ongoing WOSB third-party certification practices, the SBA’s proposed amendment still allows the SBA to approve third-party certifiers to “certify that an applicant is qualified for the WOSB or EDWOSB contracting program.” SBA also plans to list approved third-party certifiers on its website, as before.
How will SBA approve third-party certifiers?
Under the proposed amendment, third-party certifiers may be either for-profit or nonprofit entities. To become a third-party certifier, an entity must submit a proposal to the SBA, which “will periodically hold open solicitations.” If the SBA determines that an entity’s proposal meets its criteria, “the SBA will enter into an agreement and designate the entity as an approved third-party certifier.” The agreement will contain the minimum certification standards for the third-party certifier. Generally, these standards should mirror the standards for SBA certification.
To ensure that third-party certifiers continue to color inside the lines drawn by the SBA, the proposed amendment requires these certifiers to submit quarterly reports to the SBA and allow the SBA to periodically review certifier compliance. If the SBA determines that a third-party certifier isn’t keeping up its end of the bargain, the SBA may revoke its approval of the certifier. While the amendment does not require existing third-party certifiers to resubmit proposals or form new agreements with the SBA, they will still be subject to the SBA’s compliance review.
Third-Party Certification Processes
Currently, there are four approved third-party certifiers. While all are required to hold applicants to approximately the same core standards as the SBA, each has its own certification process.
National Women Business Owners Corporation—The National Women Business Owners Corporation is a 501(c)(3) nonprofit organization. All application information and documents required for certification through the Corporation is available on its website.The fee to apply for certification is $400 minimum and is nonrefundable if an applicant withdraws its application, closes, or sells the business, or is denied certification. The Corporation also requires annual recertification for an additional $200 fee (or $300 if the business’ annual revenue is over $2 million). Its website does not indicate its current anticipated certification processing time.
Women’s Business Enterprise National Council (WBENC)—According to WBENC, it “is the largest certifier of women-owned businesses in the U.S.”While WBENC is also an SBA-approved third-party WOSB certifier, its primary role is providing a “Women's Business Enterprise (WBE) Certification,” which permits access to a number of WBENC’s resources.The application fee for WBENC’s WBE certification varies from $350 to $1,250 based on the applicant’s annual revenue and requires more detailed information than SBA WOSB certification.Still, as a benefit to certified WBEs, “WBENC is currently providing WOSB certification as a complimentary service during the WBENC WBE certification process.”After becoming a certified WBENC WBE, WBENC also states that the SBA WOSB certification process will take “approximately 30 days.”
U.S. Women’s Chamber of Commerce—The U.S. Women’s Chamber of Commerce charges SBA WOSB certification fees of $275 for “Business and Suppliers Members” of the organization and $350 for nonmembers.The Chamber of Commerce website offers certification and document checklists, as well as a sample application. These documents aim to help applicants with document production and prepare them to answer the questions on the application but applicants cannot submit them in lieu of the online form. Still, it might be helpful to fill out the paper forms anyways: The Chamber of Commerce site requires applicants to complete its online application in one sitting.
El Paso Hispanic Chamber of Commerce—The process utilized by the El Paso Hispanic Chamber of Commerce’s Women’s Business Border Center is the most mysterious of the four. While its website indicates that it is an SBA-approved third-party WOSB certifier, it includes no other information about its certification procedures (other than indicating that an “initial consultation” call is $25).
Overall, third-party certification is not as different from SBA certification as it may appear. Even if a business takes the third-party certification route, it will still be required to submit all required documents through a certify.SBA.gov profile. It will then need to provide its chosen third-party certifier access to the profile so that the certifier can review from there.
In the long run, the 2019 proposed amendment is likely to change each third-party certifier’s process only slightly. Additionally, the new requirements might mean that SBA will reevaluate all four current third-party certifiers once the amendment is in effect. Overall, businesses now having the choice between SBA certification and third-party certification will probably have the greatest impact on third-party certifiers.
Pros and Cons: Which Certification Path Is for Me?
Businesses applying for WOSB certification through the SBA will receive one potentially major benefit: Applying for certification through the SBA is free! In contrast, third-party certifiers under the amendment are permitted to “charge a reasonable fee” for certification, but only if certifiers also tell applicants the SBA will certify for free. At present, all third-party certifiers charge some amount for their services.
Adding points to the SBA certification column, it is unclear under the proposed regulations what could happen to a business’ WOSB status if it is certified by a third party whose SBA-approval is subsequently revoked. In any case, certification directly by the SBA is more likely to remain consistent and stable.
On the flip side, SBA certification has the potential to take much longer than certification through an approved third party. The amendment’s 90-day SBA application approval or denial deadline is only in place “whenever practicable.” The amendment does not clarify what this means or mandate any sort of punishment if the SBA exceeds the 90-day timeline. Suffice it to say, the SBA is often overburdened and will likely take its time, meaning the application process could extend much longer than it would on the third-party path. While the proposed amendment doesn’t include many regulations holding third-party certifiers to similar timelines, third-party certification has the potential to be a much speedier process.
Maintaining Certification: Keeping Your WOSB Status
Once certified, the proposed amendment requires WOSBs and EDWOSBs to recertify every three years. Under the prior regulations, the SBA “in its sole discretion” could “perform eligibility examinations at any time after a concern self-certified,” but was not bound to review on any sort of time schedule. Now, in addition to recertifying every three years, WOSBs must also “immediately notify the SBA of any material change that could affect its eligibility.” Material changes include, at minimum, ownership, business structure, or management changes. Not surprisingly, failure to recertify every three years or notify the SBA of material changes will result in decertification.
In addition to mandatory recertification and reporting, the SBA can still conduct “program examinations.” “Program examinations” allow the SBA examiners to verify that a business meets all WOSB or EDWOSB certification requirements at any time after applying to the program. Examinations can include review of documents and even site visits if the SBA deems them appropriate. Further, the regulations don’t require the SBA to notify businesses of their examinations, so WOSBs and EDWOSBs should always be ready for unexpected visitors.
Ultimately, if a business fails to provide or maintain the documents the SBA requests during an examination, or no longer meets the relevant eligibility requirements, the SBA may propose decertification. At that point, the business will receive15 (or 20) calendar days to respond to the proposed decertification.Ability to respond, however, is limited because the SBA “will generally not consider new evidence in a response.” After reviewing any responses, the SBA may decide whether to permit the business to retain its certification or to decertify it.
Finally, a WOSB or EDWOSB’s certification may be challenged through the SBA’s protest procedures, regardless of certification method.These protests can become relatively complex, but generally consist of a status challenge posed by a competing contractor (or other “interested party”) and review of the protested business’ status by the relevant SBA Area Office. From there, parties may appeal the SBA Area Office’s decision to the SBA Office of Hearings and Appeals (OHA).
If decertified based on failure to recertify, the results of an SBA program examination, or a protest determination, businesses will have to wait at minimum one year before reapplying to the program.
As a whole, the proposed changes to the WOSB program are likely to have a significant impact on the program and its participants. A more robust certification process might mean more paperwork for new applicants in some cases, but also has the potential to ensure more eligible WOSBs and EDWOSBs receive the opportunity to compete for awards. CM
Haley Claxton, Esq.
Attorney, Koprince Law LLC.
Frequent contributor to SMALLGOVCON (www.smallgovcon.com).
1. See “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business-Certification,” 84 Fed. Reg. 21256 (May 14, 2019), available at https://www.federalregister.gov/documents/2019/05/14/2019-09684/women-owned-small-business-and-economically-disadvantaged-women-owned-small-business-certification.
2. See, generally, 13 CFR 127.100, et seq.
3. Federal Procurement Opportunities for Women-Owned Businesses, S. 4330, 106th Cong. § 2 (2000), available at https://www.congress.gov/congressional-record/2000/5/23/senate-section/article/s4330-1?q=%7B%22search%22%3A%5B%22%5C%22women-owned+small+business%5C%22%22%5D%7D&s=5&r=200.
4. “The Women-Owned Small Business Federal Contract Assistance Program,” 71 Fed. Reg. 34550 (June 15, 2006), available at https://www.federalregister.gov/documents/2006/06/15/06-5354/the-women-owned-small-business-federal-contract-assistance-program.
5. Elaine Reardon, et al., The Utilization of Women-Owned Small Businesses in Federal Contracting (2007), available at https://www.rand.org/pubs/technical_reports/TR442.html.
6. See Women-Owned Small Business Federal Contract Assistance Procedures, 72 Fed. Reg. 73285 (December 27, 2007), available at https://www.federalregister.gov/documents/2007/12/27/E7-25056/women-owned-small-business-federal-contract-assistance-procedures.
7. These systems were the Central Contractor Registration (CCR) and Online Representations and Certifications Application (ORCA). SAM replaced both in 2012. SAM can be accessed online at SAM.gov.
8. See “Small Entity Compliance Guide: Women-Owned Small Business Program,” 75 Fed. Reg. 62258 (October 7, 2010), available at https://www.federalregister.gov/documents/2010/10/28/2010-27272/small-entity-compliance-guide-women-owned-small-business-program.
9. U.S. Government Accountability Office (GAO), GAO-15-54, “Small Business Administration: Certifier Oversight and Additional Eligibility Controls Are Needed” (2014), available at https://www.gao.gov/products/GAO-15-54.
10. Staff of the H. Comm. on Rules, Rules Committee Print 113-58, House Amendment to the Text of S. 1847 (December 2, 2014), available at https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf. See 15 USC 637(m).
11. See https://certify.sba.gov/.
12. GAO, GAO-17-573, “Small Business Administration: Government Contracting and Business Development Processes and Rule-Making Activities” (2017), available at https://www.gao.gov/assets/690/685569.pdf. See also GAO-19-168, “Women-Owned Small Business Program: Actions Needed to Address Ongoing Oversight Issues” (2019), https://www.gao.gov/assets/700/697580.pdf.
13. “Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business-Certification,” 84 Fed. Reg. 21256 (May 14, 2019), available at https://www.federalregister.gov/documents/2019/05/14/2019-09684/women-owned-small-business-and-economically-disadvantaged-women-owned-small-business-certification.
14. We anticipate that the amendment will go into effect January 1, 2020. In any case, the Federal Register will publish the final rule and provide its effective date in advance.
15. There are a number of free and accessible resources that allow you to view the Code of Federal Regulations, including the e-CFR maintained by the National Archives: https://gov.ecfr.io/cgi-bin/ECFR.
16. 13 CFR 127.200(b).
17. See 13 CFR 127.201–127.202.
18. 13 CFR 127.200(a); see also 13 CFR 127.203 (the “rules governing the requirement that economically disadvantaged women must own EDWOSBs”). Under the amended regulations, the definition of “economically disadvantaged” for EDWOSBs tracks with the definition used by the 8(a) program regulations.
19. Importantly, SBA clarifies that it requests spousal information because it “may consider a spouse’s financial situation in determining whether qualifying individual(s) are economically disadvantaged where the spouse has a role in the business (e.g., an officer, employee, or director) or has lent money to, provided credit or financial support to, or guaranteed a loan of the business.” (See SBA, “Prepare for SBA small business programs,” available at https://certify.sba.gov/prepare.)
20. National Women Business Owners Corp. (NWBOC), “Application for National Certification as a Woman-Owned and Controlled Business,” available at http://www.nwboc.org/assets/nwboc_wosbedwosb_application_2017.pdf.
21. See https://www.wbenc.org/about-wbenc.
22. “Benefits of WBENC Certification Access,” see https://www.wbenc.org/certification-benefits.
23. “Frequently Asked Questions About Certification,” see https://www.wbenc.org/certification-faqs.
24. “WOSB Certification,” see https://www.wbenc.org/government.
25. U.S. Women’s Chamber of Commerce, “Federal WOSB Certification,” see https://uswcc.org/certification/wosb-certification/.
26. In addition to reviewing the Center’s website, the author of this article also attempted to reach the Center’s staff for information by e-mail, but received no response. (See https://womenbordercenter.com.)
27. Though nothing is ever 100%t stable in government procurement law, the only way SBA’s certification power could be revoked would be through an entirely out-of-left-field act of Congress.
28. 13 CFR 127.400.
29. The summary of the proposed rule indicates that WOSBs/EDWOSBs will be provided “15 calendar days to respond,” where the draft regulations state that responses are due “within 20 calendar days from the date of the proposed decertification.”
30. WOSB/EDWOSB protest procedures are located at 13 CFR 127.600–127.607.
31. OHA procedures for appeals from WOSB/EDWOSB protests are located at 13 CFR 134.701–134.715.