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Inviting Women to Uncle Sam's Party

Lydia Schmitt is sure that if she could just get a crack at some government business, her fledgling manufacturing firm in Girard, Kans., would take off. But the plastics engineer says federal prime contractors won't even give her a chance to bid on subcontracts.

The reason: The government doesn't give prime contractors any price breaks for doing business with firms owned by women. Prime contractors do get financial incentives when they hire subcontractors owned by members of other "disadvantaged" groups. Without extra help, she says, she can't break into the federal market. "I'm in a male-dominated industry. I don't have the connections," says Schmitt, 37, president of LPS Injection Molding, which uses a special manufacturing process to make bearings, components, and other products.

Schmitt's difficulties in winning a piece of the federal procurement action are familiar to many women business owners. Some, like Schmitt, complain that many prime contractors don't look at them because they don't have to -- and don't want to. Others find that government purchasing agents like to work with people they already know -- usually established male-owned companies. And while many longtime contractors understand the complex government procurement process, that's not the case for new and small companies, many owned by women. Women business owners stumble through confusing government Web sites, and their calls to agencies often end in frustration.

As a result, while women-owned businesses make up about 40% of the marketplace, they received only 2.3% of the $200 billion the government spent on goods and services in 2000 -- down from 2.5% a year earlier. That falls far short of a 5% goal set by Congress in 1994.

DEFINING TARGETS. This dismal record may be about to change. Last year, Congress passed a law that will give women an edge in their attempts to win government contracts. Under the new law, agencies will be allowed to set aside contracts for women-owned businesses in industries in which they have been underrepresented. Also, some federal departments and agencies, embarrassed by the low numbers, are stepping up their efforts to seek out women for federal business.

Still, women and agencies will have many obstacles to overcome. In a report issued this year by the General Accounting Office, government contracting officers argued that they do not have the time to reach out to women. They told congressional investigators that they were overwhelmed by the number and complexity of federally mandated contracting programs for small businesses.

Purchasing officers also told the GAO that because women don't have a program targeted specifically at them, they are at a disadvantage in competing for contracts against other small businesses. Small businesses have a leg up if they are owned by "socially and economically disadvantaged" individuals. Several ethnic and minority groups -- but not women -- are included in the definition.

Another barrier, the GAO found, was the lack of qualified women business owners in some fields. Also, agencies are attempting to cut costs by consolidating many small contracts into larger ones and by shrinking the size of procurement staffs. Though these actions may reduce opportunities for many small businesses, Lynn King, deputy director of the National Women's Business Council, says, "It's harder for women because it's all about who you know. We were the last ones in the market." The Council is a government advisory panel that promotes business opportunities for women.

SIGNS OF CHANGE. Over the next few years, though, the value of contracts awarded to women could start climbing. In 2000, Congress created the Office of Federal Contract Assistance for Women Business Owners (CAWBO). The new office in the Small Business Administration is charged with identifying industries in which women have won few government contracts.

Sheryl J. Swed, assistant administrator for CAWBO, says her office will develop a list of the Standard Industrial Classification codes in which women have been underrepresented. If a contracting officer is looking for goods or services in one of those codes, the agency will be allowed to restrict competition only to women bidders. To set aside a contract, two women would have to bid.

Swed says that agencies will not set aside the contracts if they can't easily find women to bid on them. "Contracting officers don't have a lot of time to be looking for women business owners," she says, so women must make it easy for them. She suggests that women register with PRO-Net, an Internet database of businesses seeking public- and private-sector contracts. Purchasing agents check PRO-Net regularly.

Beyond that, last year the government launched, a Web site that provides information on government contracts, lists of key agency personnel, and links to lists of goods and services that agencies are seeking. And some departments are giving bonuses to agents who excel at outreach efforts. In recent years, about two dozen departments and agencies started appointing special advocates in their procurement offices who provide outreach and training to women business owners.

DEFENDING WOMEN. The GAO report singled out Defense as the department with the power to make or break efforts to meet the government-wide goal of 5%. Defense accounts for 65% of the value of all procurements, but buys only 50% of total government purchases from women-owned businesses. Because of retirements, the number of procurement personnel at the Defense Dept. dropped by half in the 1990s. "Unfortunately, women-owned businesses are taking the brunt of this shortfall," says Sen. Christopher Bond (R-Mo.), ranking minority member of the Senate Committee on Small Business & Entrepreneurship.

Ironically, one of the most active agencies is the Air Force. Last year, it awarded $800 million in contracts to women-owned businesses, up 25% from 1999. Business groups representing women have praised the efforts of Anthony DeLuca, head of the service's Office of Small & Disadvantaged Business Utilization. At his direction, bases have conducted numerous conferences for prospective women contractors. He also created a program to provide women manufacturers with the business and marketing skills they need to compete for contracts.

FORMER SKEPTICS. Still, DeLuca says, the Air Force awards only 2% of the value of its contracts to women-owned businesses. The sheer size of the $300 billion Air Force procurement budget, much of it for large aircraft orders, is one reason for that small percentage. And a shortage of personnel means outreach can only go so far, he says.

He says that at first some base officers were skeptical that women were selling what the service needed. Not only have they discovered their doubts to be unfounded, DeLuca says, "The experience has been that once a woman gets that contract, they are bent on making it work." Women business owners are hoping that other agencies get the message and redouble their efforts to get women a bigger slice of the government contract pie.

To talk with other business owners about getting government contracts, visit BusinessWeek Online's Small Business Forums. By Susan Garland in Washington, D.C.

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