Client Alerts
April 01, 2011

Federal Dollars for Women-Owned Small Businesses

Stites & Harbison Client Alert, April 1, 2011

Ending more than a decade of controversy, on February 4, 2011, the Small Business Administration opened 83 industry categories to federal procurement contract set-asides for Women-Owned Small Businesses (WOSB’s) and Economically-Disadvantaged Women-Owned Small Businesses (EDWOSB’s). At least eleven of these industries, containing 63 business sub-categories, involve construction-related supply and subcontracting specialties. Representative industries involved are listed below.

The first contracts are expected to be awarded by the fourth quarter of fiscal year 2011. Some commentators believe that the new rule could make as much as $5 billion in new federal procurement contracts available annually to WOSB’s and EDWOSB’s.

In enacting the new rules on October 4, 2010, the SBA implemented legislation first signed into law by President Clinton on December 21, 2000. SBA Administrator Karen Mills commented:

Women-owned businesses are one of the fastest growing sectors of our nation’s economy, and even during the economic downturn of the last few years, have been one of the key job creation engines in communities across the country. . . Despite their growth and the fact that women lead some of the strongest, most innovative companies, women-owned firms continue to be underrepresented in the federal contracting marketplace. This rule will be a platform for changing that by providing greater opportunities for women-owned small businesses to compete for and win federal contracts.

To qualify for the set-asides, firms must be certified as either WOSB’s or EDWOSB’s. The certification process appears to involve a substantial amount of paperwork; and firms that are initially certified will be subject to audit and re-certification requirements.

To participate the firm must first qualify as a Small Business under existing guidelines. If the firm meets that threshold qualification it must substantiate that it is “not less than 51 percent unconditionally and directly owned and controlled by one or more women who are United States citizens.” A series of tests have been included in the Rule to assure that no corporate slights-of-hand are involved that could divest the women of actual ownership or control.

The women owners must be involved in both long-term and short-term business planning and decision making. A woman with requisite managerial experience must hold the highest position in the company and must manage it on a full-time basis during normal working hours. The woman owner/manager can not have other employment that would prevent her from devoting sufficient time and attention to the business seeking a federal set-aside contract.

The woman-owner need not have specific technical expertise or possess licenses required for the business to operate. However, involvement of a man with the required licenses and expertise, and with an equity ownership in the company, can lead to a determination that actual control is vested in that man and not the women majority equity owner(s).

At the current time Federal contracts authorized for the set-asides are at the low range of the procurement scale. WOSB set-asides are authorized for contracts not exceeding $5 million; EDWOSB set-asides are authorized for contracts not exceeding $3 million dollars. Legislation was filed in Congress in May, 2010 to remove these limits from the WOSB and EDWOSB set-aside program.

Some of the North American Industry Classification System (NAICS) codes related to the construction industry and applicable to the WOSB/EDWOSB Program include:

  • 2213 Water, Sewage and Other systems
  • 2361 Residential Building Construction
  • 2371 Utility System Construction
  • 2381 Foundation, Structure, and Building Exterior Contractors
  • 2382 Building Equipment Contractors (includes Electrical, Plumbing, HVAC)
  • 2383 Building Finishing Contractors (includes Drywall, Painting, Flooring, Tile, and Finish Carpentry)
  • 2389 Other Specialty Trade Contractors
  • 3219 Other Wood Product Manufacturing (includes Windows & Doors, Cut Stock, Millwork, Prefabricated Wood Building Manufacturing)
  • 3323 Architectural and Structural Metals Manufacturing
  • 5413 Architectural, Engineering, and Related Services
  • 2372 Land Subdivision
  • 3329 Other Fabricated Metal Product Manufacturing
Related Capabilities
Health Care - Construction