Lax Oversight Allows Women-Only Contracts to Go to Men

Jennifer Dickerson spent more than 40 hours of work over three months to get her Orlando environmental consulting company certified as a women-owned business, a designation that would help her win federal contracts intended to go to disadvantaged businesses. She and her assistant assembled legal documents and tax records, responded to multiple questions, and paid a $275 processing fee to a third-party agency to prove that her small company is majority woman-owned and operated.

“It was important to me to make sure I adhered to all the requirements” of the federal program established in 2000 to set aside a percentage of government contracts for women-owned small businesses, Dickerson says.

Not every business owner shares Dickerson’s sense of responsibility. A recent report critical of the U.S. Small Business Administration’s program revealed that more than 40 percent of companies that got government contracts as women-owned businesses in the last two years were not actually eligible.

The SBA knew about the ineligibility but did not determine why such a high percentage of businesses were misclassified, nor did it start a process to remedy the situation, according to the U.S. Government Accountability Office. “SBA performs minimal oversight of third-party certifiers and has yet to develop procedures that provide reasonable assurance that only eligible businesses obtain [women-owned small business] set-aside contracts,” the GAO’s report states.

SBA spokeswoman Tiffani Shea Clements said in an e-mail that the agency appreciates the GAO’s recommendations and reaffirms “SBA’s commitment to improving eligibility oversight to ensure that only eligible WOSBs receive federal contracts.” Whether that commitment actually includes providing tightened controls remains to be seen: “SBA is currently reviewing the GAO report and will develop appropriate processes and procedures to achieve the program’s intent,” Clements said in the e-mail.

The federal government aims to steer 5 percent of contracts to women-owned enterprises, a goal set by Congress 20 years ago that it has never met. A recent report from the U.S. Senate Committee on Small Business and Entrepreneurship suggests that the missed opportunities add up to at least $63 billion in contracts intended for companies certified as women-owned that went to other businesses. That tally could be much higher if companies are incorrectly certified.

The SBA’s lack of oversight is frustrating and “makes me quite angry” says Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, a nonprofit that acts as third-party certifier for the set-aside program. Her organization issued a blunt challenge last week to President Obama, SBA head Maria Contreras-Sweet, and Congress “to bring real accountability in contracting to women-owned and all small business federal contracting programs.”

But privately, past experience doesn’t make Dorfman optimistic about the response. “We have been telling the SBA over the years about the challenges and flaws in this system, and it’s fallen on deaf ears,” she says. Her organization estimates that more than $5 billion in government contracting funds may have been diverted from legitimately women-owned businesses in 2014 to ineligible companies masquerading as women-owned.

That wouldn’t surprise Dickerson, who calls the report “disheartening but not surprising.” She’s come across companies that purport to be majority women-owned and operated that are in reality run by men, she says. “There are a lot of business owners that want to do it the right way and think they have to go through all this certification, but there are other companies that take advantage. And we’re losing contract opportunities because of that.”

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