    Federal Procurement: Trends and Challenges in Contracting With
    Women-Owned Small Businesses (Letter Report, 02/16/2001, GAO/GAO-01-346).

    Procurement regulations implemented in 1996 mandated that women-owned
    small businesses (WOSB) receive 5 percent of governmentwide contracts.
    While the number of contracts awarded to WOSBs has increased more than
    four times as fast as other federal contracting efforts since 1996, the
    goal of awarding 5 percent of federal contracts to WOSBs has not been
    met. More agencies succeeded in meeting the WOSB subcontracting goal
    than their prime contracting goal. GAO found that three federal
    agencies, the Department of Veterans Affairs, the Department of State,
    and the National Aeronautics and Space Administration, met or exceeded
    both goals in three of the four years it studied. Because the Department
    of Defense, which accounted for 64 percent of federal procurement in
    1999, did not come close to achieving its 5 percent goal, the
    governmentwide goal for prime contracting with WOSBs could not have been
    met even if all other federal agencies reached their prime contracting
    goals. Government officials cited numerous obstacles to increasing
    federal contracting with WOSBs, including a reduced contracting
    personnel force and the absense of a targeted WOSB government program.
    These contracting officers offered suggestions for increasing WOSB
    participation in federal contracting, including a strengthened outreach
    program and expanded excess to contract financing.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GAO-01-346
         TITLE:  Federal Procurement: Trends and Challenges in Contracting
    	     With Women-Owned Small Businesses
          DATE:  02/16/2001
       SUBJECT:  Women-owned businesses
    	     Federal procurement
    	     Small business set-asides
    	     Small business contracts
    	     Small disadvantaged business contractors
    IDENTIFIER:  GSA Federal Procurement Data System
    	     SBA 8(a) Program
    	     SBA HUBZone Empowerment Contracting Program
    	     SBA Women's Business Center Program

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    GAO-01-346

    A

    Report to Congressional Committees

    February 2001 FEDERAL PROCUREMENT

    Trends and Challenges in Contracting With Women- Owned Small Businesses

    GAO- 01- 346

    Letter 3 Appendixes Appendix I: Objectives, Scope, and Methodology 48

    Appendix II: Federal Agencies' Goals and Percentages of Contracts Annually
    Awarded to Women- Owned Small Businesses 50

    Appendix III: Comments From the Small Business Administration 52 Appendix
    IV: Comments From the Department of Defense 54 Appendix V: Comments From the
    National Aeronautics and Space

    Administration 55 Appendix VI: Comments From the National Women's Business

    Council 56 Appendix VII: GAO Contacts and Staff Acknowledgments 61

    Tables Table 1: Governmentwide Expenditures for All Prime and Subcontracts
    and Prime and Subcontracts Awarded to

    WOSBs, Fiscal Years 1996- 99 15 Table 2: Agencies' Share of Government
    Expenditures for Prime

    Contracts and WOSB Prime Contracts, Fiscal Year 1999 21 Table 3:
    Expenditures for New Contracts With WOSBs Qualifying

    as SDBs or 8( a) Firms, Fiscal Years 1996- 99 23 Table 4: Small Business
    Categories With Statutory Governmentwide

    Contracting Goals 24 Table 5: Goals and Actual Percentage of Prime Contracts
    Awarded to WOSBs by Major Federal Agencies, Fiscal Years 1996- 99 50

    Table 6: Goals and Actual Percentage of Subcontracts Awarded to WOSBs by
    Major Federal Agencies, Fiscal Years 1996- 99 51 Figures Figure 1:
    Governmentwide WOSB Goal and Actual Shares for Prime and Subcontracts,
    Fiscal Years 1996- 99 17

    Figure 2: Number of 20 Top Procurement Agencies Meeting WOSB Goals, Fiscal
    Years 1996- 99 19

    Abbreviations

    AID U. S. Agency of International Development DOD Department of Defense DOE
    Department of Energy EPA Environmental Protection Agency FASA Federal
    Acquisition Streamlining Act of 1994 FPDC Federal Procurement Data Center
    FPDS Federal Procurement Data System FY fiscal year GAO General Accounting
    Office GSA General Services Administration HUBZone Historically
    Underutilized Business Zone NASA National Aeronautics and Space
    Administration NAWBO National Association of Women Business Owners NWBC
    National Women's Business Council OFPP Office of Federal Procurement Policy
    OMB Office of Management and Budget OSDBU Office of Small Disadvantaged
    Business Utilization PEC Procurement Executive Council SBA Small Business
    Administration

    SDB Small Disadvantaged Business VA Department of Veterans Affairs WBC
    Women's Business Center WBENC Women's Business Enterprise National Council
    WOSB women- owned small business

    Lett er

    February 16, 2001 The Honorable Christopher S. Bond Chairman The Honorable
    John Kerry Ranking Member Committee on Small Business United States Senate

    The Honorable Donald A. Manzullo Chairman The Honorable Nydia M. Velazquez
    Ranking Minority Member Committee on Small Business House of Representatives

    Concerned that women- owned small businesses (WOSB) were receiving contracts
    for only 2.2 percent- less than one- half of the 5- percent governmentwide
    goal- of the almost $200 billion in goods and services the federal
    government purchases each year, the Congress mandated that we review the
    progress the federal government has made to increase its contracting with
    WOSBs and identify any measures that could improve the government's
    performance in contracting with WOSBs. 1 This report responds to the mandate
    by providing information on

    ? trends in federal contracting with WOSBs since fiscal year 1996, ?
    obstacles that federal contracting officials perceive to contracting with
    WOSBs, ? suggestions from these officials to help increase federal
    contracting

    with WOSBs, and ? concerns of these officials about the WOSB contracting
    goals

    established for individual agencies. The mandate also required that, after
    taking into consideration the suggestions we received from federal
    contracting officials, we include in our report any recommendations for
    action that we believe could improve

    procurement opportunities for WOSBs. To provide perspective, we also
    obtained views from representatives of four national women business1

    Section 5( b) of the Women's Business Centers Sustainability Act of 1999 (P.
    L. 106- 165, Dec. 9, 1999).

    owner organizations on issues pertaining to government contracting with
    WOSBs. For information on trends in federal contracting with WOSBs, we
    analyzed data collected since fiscal year 1996 from the Small Business
    Administration (SBA) and the General Services Administration's (GSA) Federal
    Procurement Data System (FPDS), which contains information

    reported by federal agencies about their contracting activities. For
    information on obstacles to contracting with WOSBs and suggestions on how to
    increase contracting with them, we obtained the views of numerous officials
    involved in federal contracting policies and practices. We conducted group
    discussions and individual interviews with officials from the Procurement
    Executive Council (PEC), representatives from the Office of Small and
    Disadvantaged Business Utilization (OSDBU) within

    numerous agencies, 30 contracting officers (from four federal agencies that
    account for over 80 percent of the government's contract purchases each
    year), and officials from the Office of Management and Budget's (OMB) Office
    of Federal Procurement Policy (OFPP) and SBA. While we analyzed the
    information gathered and applied insights from a body of related work we
    previously performed, we did not validate the obstacles identified by the
    individuals we interviewed, nor did we evaluate the potential effectiveness
    or feasibility of the suggestions they provided. Further details about the
    scope and methodology of our review can be found in appendix I.

    After we completed our analysis, the Small Business Reauthorization Act of
    2000 was enacted in December 2000. 2 The act authorized a limited
    procurement program of restricted competition for WOSBs. This program will
    become effective after SBA completes a study identifying industries in which
    WOSBs have been underrepresented and guidance is developed for agencies'
    implementation of the program, including the certification and

    waiver provisions. 2 The Small Business Reauthorization Act of 2000 (H. R.
    5667) was enacted in P. L. 106- 554, December 21, 2000, the Consolidated
    Appropriations Act for Fiscal Year 2001. Section 811 of the act authorizes
    federal agencies to restrict competition for certain federal contracts to
    certified WOSBs that are economically disadvantaged. The contracts will be
    limited to

    industries in which SBA, as a result of a study, has determined that WOSBs
    are underrepresented with respect to federal procurement. This program is
    described in more detail in the background section of this report.

    Results in Brief Since fiscal year 1996, when the 5- percent governmentwide
    contracting goal for WOSBs became effective, 3 federal contracting with
    WOSBs has

    increased more than 4 times as fast as federal contracting with all private
    businesses. However, the governmentwide goals of awarding 5 percent of the
    value of all prime contracts and 5 percent of the value of all subcontracts
    to WOSBs have not been met. In fact, the share of government prime contracts
    awarded to WOSBs showed no upward trend from fiscal year 1996 through fiscal
    year 1999, and the share of subcontracts awarded to WOSBs showed only a
    modest upward trend. Looking back over a 20year

    period, WOSBs' share of total federal procurement grew from 0.2 percent in
    1979 to 2.5 percent in 1999.

    More agencies had greater success meeting their WOSB subcontracting goal
    than their prime contracting goal over this period- at least one- half of
    the agencies met their subcontracting goal each year, whereas only about
    one- third met their prime contracting goal. No agency met its annual goals
    for both prime contracts and subcontracts in each of the 4 years. Three
    agencies met or exceeded both goals in 3 of the 4 years- the Department of
    Veterans Affairs (VA), the Department of State (State), and the National
    Aeronautics and Space Administration (NASA). Individual agency trends

    toward meeting their annual goals for prime contract or subcontract awards
    did not always correlate with individual agency trends of increasing or
    decreasing their annual share of prime or subcontract awards. For example,
    the Environmental Protection Agency (EPA) increased its share of
    expenditures for prime contracts with WOSBs by about 50 percent between 1996
    and 1999 yet never met its goal (which doubled over the

    period). The performance of one agency- the Department of Defense (DOD),
    which accounted for 64 percent of federal procurement in fiscal year 1999-
    is central to the success or failure of efforts to meet the governmentwide
    goal. Because DOD achieved less than half of its 5- percent goal for prime
    contracts with WOSBs in fiscal year 1999, the 3 The governmentwide goal for
    participation by small businesses owned and controlled by women was
    established by statute in 1994 at “not less than 5 percent of the
    total value of all prime and subcontract awards for each fiscal year.”
    The goal was implemented by amendments to procurement regulations effective
    in fiscal year 1996. The OFPP subsequently issued goaling guidelines,
    effective Nov. 8, 1999, which require separate 5-

    percent governmentwide WOSB goals for prime contract and subcontract awards.
    SBA has negotiated separate WOSB prime contract and subcontract goals with
    individual federal agencies since fiscal year 1996 that are intended to
    achieve the governmentwide goal. The individual agency contracting goals for
    WOSBs may be greater than or less than the governmentwide goals.

    governmentwide goal for prime contracting with WOSBs could not have been met
    even if every other federal agency had reached its WOSB prime contracting
    goal. Only by substantially exceeding their cummulative WOSB goals for prime
    contracts could other federal agencies have compensated

    for DOD's shortfall. The government contracting officials we contacted cited
    numerous obstacles to increasing federal contracting with WOSBs. The
    officials widely agreed on two major obstacles. First, they said that the
    numerous and complex contracting programs for small businesses reduce the
    number of contracts available for WOSBs and the time available for
    contracting officers to “reach out” to WOSBs. The key impediment
    they cited is the resource intensiveness of the administrative requirements
    associated with these other small business programs that must be implemented
    despite reductions in the acquisition workforce. Second, they said that the
    absence- at the time of our interviews- of a targeted government program for
    contracting with WOSBs places WOSBs at a disadvantage when competing with
    other small business groups that have such programs.

    Other obstacles cited by these officials, but with less consensus, included
    the practice of contract consolidation by federal agencies (a practice that
    they believe can limit opportunities for all small businesses to compete for
    some procurements), a lack of commitment or accountability of agencies'

    managers and contracting officers for increasing WOSB contracts, limited
    WOSB access to working capital, not enough qualified WOSBs competing in some
    fields, and resource constraints that affect the ability of agencies to
    monitor and oversee prime contractors' subcontracting plans that include
    WOSBs.

    These same contracting officials suggested ways to increase federal
    contracting with WOSBs. Most of the officials we interviewed indicated that
    the most effective way to increase federal contracting with WOSBs would be
    to create a program targeting WOSBs similar to those available to other
    types of small businesses. However, many of these same officials

    believed that creating another small business contracting program that
    targets WOSBs could exacerbate the existing burden on contracting officers
    and might adversely affect their ability to meet the other existing small
    business program goals. 4 Other suggestions for increasing 4 As noted, the
    Congress recently amended the Small Business Act to authorize a program of

    restricted competition for WOSBs for contracts in industries in which they
    are underrepresented.

    contracting with WOSBs that we heard with some frequency included
    encouraging agencies to (1) improve the focus and delivery of agency
    outreach to identify and encourage qualified WOSBs to participate in federal
    procurement, (2) promote contracting with WOSBs through incentive and
    recognition programs for their contracting personnel, (3) implement mentor-
    prot�g� programs that include WOSBs, (4) inform WOSBs of the possible use of
    teaming arrangements in certain

    procurements to enhance their competitiveness, and (5) expand access to
    contract financing such as through higher progress payment rates. While many
    of the suggestions made by contracting officials merit further review, an
    analysis of the benefits and effects of implementing the specific measures
    was beyond the scope of our review. As a result, while the

    mandate for this study called for us to make recommendations we consider
    appropriate for actions to increase federal contract awards to WOSBs, we
    believe further analysis is required before any particular strategies can be
    categorically endorsed. This report contains a recommendation that the
    Administrator of SBA assess the benefits and effects of these proposals to
    identify specific measures to increase federal contracting with WOSBs.

    SBA officials indicated that the agency generally agrees with the
    recommendation but expressed concern that more resources might be necessary
    to implement it. In addition to providing views on obstacles to and
    suggestions for increasing federal contracts with WOSBs, many contracting
    officials commented on the individual agency goals and how they are
    established.

    They said that the annual WOSB contracting goals established by SBA for
    individual agencies might not be attainable by some agencies. According to
    these officials, the goals are not based on an analysis of the
    representation

    of WOSBs in the locations and industries where those agencies procure their
    goods and services. Contracting officials from DOD and other agencies
    expressed doubt that the 5- percent governmentwide goal could be met
    regardless of other initiatives that might be implemented for WOSBs, given
    the current lack of an informed basis for establishing agency- specific
    goals. Many of these officials suggested revising the method used to

    establish these goals so that the goals become more realistic. This report
    contains a recommendation to the Administrator of SBA designed to enhance
    the value of the SBA study of the representation of WOSBs in federal
    procurement required by the Small Business Reauthorization Act of 2000 to
    provide a basis for establishing more realistic agency goals. SBA officials
    agreed with this recommendation.

    Background According to information contained in the mandate for this
    report, the number of WOSBs in the United States increased by 78 percent
    between

    1987 and 1996, almost twice the rate of growth of all U. S. businesses.
    Also, approximately 8 million WOSBs in the United States provide jobs for
    over 15 million individuals and generate almost $1.4 trillion in sales each
    year. The administration and the Congress have long been concerned about the
    disparity between WOSBs' prevalence in the economy and the level of
    government procurements of their products and services. In 1979, when an
    executive order first made SBA responsible for negotiating WOSB contracting
    goals with federal agencies, WOSBs received only 0.2 percent of all federal
    procurements. By 1988, this percentage had grown to only 1 percent, and
    although legislation was enacted to provide a program of assistance and
    support to WOSBs, 5 no statutory goal for their participation

    in federal procurements was established until 1994. Section 7106 of the
    Federal Acquisition Streamlining Act of 1994 (FASA) 6 amended the Small
    Business Act to require establishment of a governmentwide goal for
    participation by WOSBs in procurement contracts of not less than 5 percent
    of the total value of all prime contract and subcontract awards for each
    fiscal year. 7 The goal was implemented by procurement regulations effective
    in fiscal year 1996. The FASA conference report indicated that the 5-
    percent goal was not intended to create a new set- aside or program of
    restricted competition for WOSBs, but rather to establish a target that
    would result in greater opportunity for WOSBs to compete for federal
    contracts. The report recognized that, given the slow progress toward
    increasing contracting with WOSBs, it could take some time before the goal
    would be reached.

    5 The Women's Business Ownership Act of 1988 (P. L. 100- 533, Oct. 25,
    1988). 6 P. L. 103- 355, Oct. 13, 1994. 7 FASA defined a WOSB as a small
    business that is at least 51 percent owned by one or more women (or, in the
    case of any publicly owned business, at least 51 percent of the stock of
    which is owned by one or more women) and whose management and daily business
    operations are controlled by one or more women.

    Through FASA, the governmentwide goal of 5 percent for WOSBs joined the
    existing governmentwide contracting goals in the Small Business Act for
    small business concerns (then no less than 20 percent of the total value of
    all prime contract awards for each fiscal year) 8 and small disadvantaged
    businesses (SDB) (no less than 5 percent of the total value of all prime
    contract and subcontract awards each year). 9 Under the Small Business Act,
    all small business goals are to represent for each procuring agency, the

    “maximum practicable opportunity” for small businesses'
    participation in that agency's contracts. 10 In addition, an agency's goals
    are to “realistically reflect the potential of small business
    concerns” to perform such contracts and subcontracts. At the same
    time, the cumulative annual goals for all agencies are to meet or exceed the
    annual governmentwide goal. 11 Also, agencies are to make a consistent
    effort to annually expand participation by small business concerns in their
    contracts. Agencies are to report each year to SBA on the extent of
    participation by small businesses, including WOSBs, as well as any
    justifications for failure to meet the goals. SBA, in

    turn, is required to report this information to the President. 8 Since the
    5- percent WOSB goal was enacted in 1994, the governmentwide goal for small
    business has been raised from 20 to 23 percent, and programs and goals have
    been added for small businesses owned and controlled by service- disabled
    veterans (not less than 3 percent) as well as for Historically Underutilized
    Business Zone (HUBZone) small businesses (increasing to not less than 3
    percent by fiscal year 2003). Agencies may count prime contract awards to
    small businesses toward more than one goal. For example, prime contract
    awards to small businesses, WOSBs, SDBs, 8( a) firms, and HUBZone small
    businesses all count toward the governmentwide small business goal. In
    addition, a WOSB qualified as an SDB would count toward both the WOSB and
    SDB goals. 9 The SDB goal includes awards under SBA's 8( a) business
    development program for small businesses owned and controlled by socially
    and economically disadvantaged individuals. Under the 8( a) program,
    agencies contract with SBA for goods or services under a subcontract by an
    SBD (in some cases, SBA has delegated direct contracting authority to

    agencies). Depending on circumstances, 8( a) procurements may be conducted
    on a solesource or a competitive basis. The 8( a) and the other small
    business programs are not mutually exclusive. For example, an eligible WOSB
    could also be an SDB and participate in the 8( a) program, although there is
    no statutory goal for 8( a). 10 According to SBA, the small business
    contracting goals established for federal agencies exclude contracts
    involving foreign military sales and nonappropriated funds, contracts
    awarded and performed entirely outside the United States, and contracts with
    mandatory

    sources of supplies and services, such as Federal Prison Industries, Inc.,
    and wholesale supply sources, such as stock programs of the Defense
    Logistics Agency.

    11 As we recently reported, as of fiscal year 1999, the federal government
    was meeting the governmentwide small business goal ( Small Business: Trends
    in Federal Procurement in the 1990s (GAO- 01- 119, Jan. 18, 2001).

    FASA added WOSBs to the existing policy that small businesses and small
    disadvantaged businesses have the maximum practicable opportunity to become
    subcontractors for federal contracts exceeding $100, 000 and to receive
    timely payment from prime contractors. FASA also included WOSBs in the
    requirement that for contracts exceeding $500,000 (or $1 million for
    construction contracts) prime contractors prepare

    subcontracting plans that provide the maximum practicable opportunity for
    small businesses to participate in the performance of the prime contract.
    FASA also required agencies to report contracts over a certain dollar

    threshold with WOSBs to the Federal Procurement Data Center (FPDC). 12
    Quarterly, approximately 70 executive branch agencies 13 report contracting
    data either by individual contract for acquisitions above $25,000 or as
    summary data for acquisitions at or below $25,000 to FPDC. Twenty of these
    agencies account for over 99 percent of federal contract expenditures, 4
    account for over 85 percent, and 1- the Department of Defense- accounts for
    over 64 percent.

    12 At FPDC, the data are entered into FPDS, compiled, and annually published
    in the Federal Procurement Report that contains summarized data by agency,
    industry, and geographical location.

    13 The U. S. Postal Service and legislative and judicial branch agencies,
    among other agencies, are not required to report their procurement
    activities to FPDC. Also, FPDS does not contain data on certain kinds of
    procurements, such as those from credit card purchases.

    If a business submitting an offer for a federal procurement represents that
    it is a small business concern, and meets the definition of a WOSB, it can
    “self- certify” as a WOSB when it completes the small business
    program representations required in solicitations for procurements above
    $2,500. In doing so, the business represents (by checking the appropriate
    box) that it is, or is not, a WOSB. Generally, a contracting agency will
    accept the selfrepresentation

    to be accurate. The federal government does not currently require that WOSBs
    submitting offers as prime contractors on federal procurements receive
    certification (from SBA or an outside entity) of their status as WOSBs. 14
    However, if a WOSB submits an offer for a federal subcontract, the prime
    contractor may, according to SBA, require

    certification that the business is in fact woman- owned. Furthermore, a WOSB
    submitting an offer as an SDB, 8( a) firm, or HUBZone small business will be
    required to meet the certification requirements for those programs. 15

    Both the Congress and the Administration have recently reiterated concern
    about the continued disparity between the number of WOSBs in the economy and
    the extent of the government's contracting with them. As of fiscal year
    1999, when women- owned businesses made up 38 percent of all businesses in
    the United States, WOSBs received 2.5 percent of the approximately $189
    billion in federal prime contracts awarded that year. This discrepancy led
    the Senate to adopt Resolution 311 on May 23, 2000,

    which urged the President to adopt a policy supporting the 5- percent WOSB
    contracting goal, encouraged agencies to make concerted efforts to meet the
    goal before the end of fiscal year 2000, and holds agencies accountable for
    achieving the goal. 14 According to SBA, there is currently no formal WOSB
    certification requirement because no specific contracting programs such as
    those for SDBs, 8( a) firms, and HUBZone small businesses exist to award
    prime contracts to WOSBs. As will be described elsewhere in this

    report, such a program for WOSBs was recently authorized and requires formal
    certification of participating WOSBs.

    15 Some agencies do have statutory programs that consider WOSBs as SDBs. The
    Department of Transportation considers WOSBs as disadvantaged for the
    purposes of its Disadvantaged Business Enterprise Program. Both NASA and EPA
    have statutory goals for contracting with SDBs that include women within
    their programs' definition of socially and economically disadvantaged
    individuals.

    Also on May 23, President Clinton, in culmination of work by the Interagency
    Committee on Women's Business Enterprise, 16 issued Executive Order 13157 to
    reaffirm the government's commitment to increasing opportunities for WOSBs
    in the federal procurement market. The order reiterated executive branch
    policy to take the steps necessary to meet or exceed the 5- percent
    governmentwide WOSB contracting goal and

    to implement this policy by establishing separate 5- percent governmentwide
    goals for both prime contract awards and subcontract awards each fiscal
    year. The order requires each agency with procurement authority to develop a
    long- term comprehensive strategy to expand

    opportunities for WOSBs. The order lists methods and programs these agency
    strategies should include, such as

    ? designating a senior acquisition official who will work with SBA to
    identify and promote contracting with WOSBs; ? requiring contracting
    officers, to the maximum extent practicable, to

    include WOSBs in competitive acquisitions; ? implementing procedures for
    acquisition planners to structure

    acquisitions (including multiple award contracts) and provide guidance to
    facilitate competition among small businesses, HUBZone small businesses,
    SDBs, and WOSBs;

    ? implementing mentor- prot�g� programs that include WOSBs; and ? offering
    outreach, training and technical assistance programs to assist WOSBs in
    developing their products, skills, business planning practices,

    and marketing techniques. The order further directs agencies, when feasible
    and consistent with the effective and efficient performance of their
    missions, to establish 5- percent WOSB goals for both prime and subcontract
    awards each fiscal year. SBA

    informs us that as a result of this executive order, it is moving from a
    negotiated agency goal process to an assigned process whereby SBA will set
    goals with possible input from the agencies. SBA may start setting all
    agencies' goals at 5 percent, although officials believe the 5- percent goal
    is

    unattainable for some agencies, which means that other agencies will have
    goals set at a higher point for the federal government to meet the 5-
    percent governmentwide goal. 16 The Interagency Committee on Woman's
    Business Enterprise was established to lead a coordinated effort to ensure
    that women's economic issues are being addressed. The Interagency Committee
    comprises high- level policy officials from federal agencies and departments
    and is chaired by the Deputy Director of Management at OMB.

    The executive order further establishes certain responsibilities for SBA and
    instructs SBA to establish an Assistant Administrator for Women's
    Procurement (within SBA's Office of Government Contracting). This official
    will head the Office of Federal Contract Assistance for Women Business
    Owners and coordinate agencies' efforts to achieve the WOSB goals.
    Specifically, this office will be responsible for

    ? working with each agency to develop and implement policies to achieve WOSB
    contracting goals and advising agencies on how to increase WOSB contracting;
    ? evaluating whether agencies are meeting their WOSB contracting goals on a
    semiannual basis and preparing a report to the President (through

    the SBA Administrator, the Interagency Committee on Women's Business
    Enterprise, and OFPP) on findings regarding contract awards to WOSBs; ?
    making recommendations and working with agencies to increase WOSB
    contracting and taking corrective actions with those agencies not

    meeting the 5- percent goal; 17 ? providing a program of training and
    development seminars and

    conferences to instruct WOSBs on participation in SBA's 8( a), SDB, and
    HUBZone programs, and other small business contracting programs for which
    WOSBs might be eligible; and

    ? developing and implementing a single uniform federal governmentwide Web
    site that is linked to other acquisition, small business, and womenowned
    business sites and provides current procurement information to WOSBs and
    other small businesses. 18 A recent change to the government's procurement
    program for WOSBs

    emerged from the Small Business Reauthorization Act of 2000, which amended
    the Small Business Act to give federal agencies authority to restrict
    competition for certain contracts to certified WOSBs that are economically
    disadvantaged. The authority, which is permissive, not mandatory, is limited
    to contracts not exceeding $3 million ($ 5 million for

    17 The executive order requires that an agency failing to meet its annual
    WOSB goals must work with SBA to develop an action plan increasing the
    likelihood that the goals will be met or exceeded in future years. 18 In
    September 2000, a new World Wide Web site, WomenBiz. gov, was launched under
    the auspices of the National Women's Business Council, the Interagency
    Committee on Women's Business Enterprise, and SBA to serve as a gateway to
    procurement information and to increase procurement and networking
    opportunities for women- owned businesses.

    manufacturing) in those industries SBA identifies as underrepresented by
    WOSBs in federal procurement. The act requires SBA to conduct a study to
    pinpoint such industries. Federal contracting officers must also have a
    reasonable expectation that two or more WOSBs will submit offers and that
    the contract can be awarded at a fair and reasonable price before the
    officers may exercise their new authority. SBA may waive the requirement for
    businesses owned by women who are economically disadvantaged if the business
    is in an industry in which small businesses owned and

    controlled by women are “substantially” underrepresented. The
    new legislation will require WOSBs participating in the program to be
    certified as such by a government or outside entity and requires SBA to
    establish procedures to verify the WOSBs' eligibility and the accuracy of
    any certifications.

    SBA currently has several initiatives under way in coordination with federal
    agencies and departments to work towards meeting the WOSB goals. For
    example, SBA offers training workshops for women business

    owners and designates agency liaisons (Federal Agency Advocates for Women)
    who are to strive to expand the pool of WOSBs receiving federal contracts.
    In addition, according to SBA, its Office of Federal Contract Assistance to
    Women Business Owners has been working with the newly appointed senior
    acquisition officials in each agency who have been selected to help their
    respective agencies increase federal procurement opportunities for WOSBs.

    Trends Reveal Little We examined a number of trends pertaining to government
    contracting

    Progress in Federal with WOSBs since fiscal year 1996 to determine changes,
    patterns, and

    progress towards increasing federal contracting and meeting both the
    Contracting With governmentwide and agency- specific goals for both prime
    and WOSBs

    subcontracting with WOSBs. We compared the government's overall expenditures
    for prime and subcontracts with its expenditures for prime and subcontracts
    with WOSBs. From SBA data, we examined governmentwide and agency trends
    toward meeting the goals for prime and subcontracts with WOSBs. We also
    reviewed the performance of the 20 largest government procurement agencies
    in meeting their annual negotiated goals and analyzed how this effort
    relates to their share of prime and subcontracts awarded to WOSBs. Finally,
    we examined the variation in

    the dollar amounts represented by agency- specific WOSB contracting goals
    and WOSBs' access to government contracts through other small business
    programs.

    Contracting With WOSBs Over the last several years, contracting with WOSBs
    grew more rapidly Increased Faster Than Total

    than government contracting with all businesses. From fiscal year 1996
    Contracting

    through fiscal year 1999, federal expenditures for prime contracts awarded
    by the approximately 70 executive branch agencies that report procurement
    contract obligations to FPDC increased by 7. 5 percent in real terms, from
    $184.9 billion to $198.8 billion, while these agencies' expenditures for
    prime contracts with WOSBs increased by over 31 percent, from $3.2 billion
    to $4. 2 billion. In addition, these agencies' expenditures on all
    subcontracts increased by more than 15 percent, from $63.9 billion in 1996
    to $73.8 billion in 1999, while their expenditures for

    subcontracts awarded to WOSBs increased by nearly 48 percent, from $2.3
    billion to $3. 4 billion. Thus, these agencies' expenditures for WOSB prime
    contracts grew over 4 times more rapidly than their expenditures for all
    prime contracts and over 3 times more rapidly for WOSB subcontracts than for
    all subcontracts. Table 1 shows trends in both total contract expenditures
    and expenditures for prime and subcontracts awarded to WOSBs since fiscal
    year 1996.

    Table 1: Governmentwide Expenditures for All Prime and Subcontracts and
    Prime and Subcontracts Awarded to WOSBs, Fiscal Years 1996- 99

    Dollars in billions

    Change, Dollar value of 1996 1997 1998 1999 1996- 99

    Prime contracts $184.9 $184.7 $194. 6 $198.8 +7.5 % WOSB prime 3.2 3. 2 3. 6
    4. 2 +31.3 % contracts Subcontracts 63.9 106. 2 71. 7 73. 8 +15.5 %

    WOSB 2.3 4. 2 3. 5 3. 4 +47.8 % subcontracts Note: Expenditures are in 1999
    constant dollars.

    Source: GAO's analysis of FPDS data.

    No Upward Trend in Since fiscal year 1996, when the 5- percent
    governmentwide WOSB

    WOSBs' Share for Prime contracting goal was implemented, the share of the
    government's

    Contracts and Modest expenditures for prime contracts awarded to WOSBs has
    changed very

    Upward Trend for little. The share of expenditures for subcontracts awarded
    to WOSBs has only modestly increased. Moreover, the separate 5- percent
    Subcontracts; Both governmentwide WOSB goals for prime contracts and
    subcontracts were

    Remained Below Goals not met in any of the 4 years. 19 WOSBs' share of prime
    contract expenditures in 1999 was 2.5 percent, the highest for any of the 4
    years, but

    only one- half of the 5- percent goal. Although greater progress was made
    over this period in meeting the governmentwide WOSB goal for subcontracts,
    that goal was not met during the 4 years. The share of subcontract
    expenditures for WOSBs increased from fiscal year 1996 to its

    highest point in fiscal year 1998, but decreased slightly the next year.
    Figure 1 shows the trends in the government's share of prime contract and
    subcontract expenditures for WOSBs since fiscal year 1996. From a historical
    perspective, WOSBs' share of total federal procurement grew from 0.2 percent
    in 1979 to 2.5 percent in 1999.

    19 OFPP Policy Letter 99- 1, effective November 8, 1999, established
    separate 5- percent governmentwide goals for both prime contracts and
    subcontracts. Because the separate goals were not effective before fiscal
    year 2000, prior government trends are measured against the separate goals
    to compare with the current requirement. Although the separate
    governmentwide goals were only recently established, SBA has negotiated
    separate individual agency prime contract and subcontract goals since fiscal
    year 1996.

    Figure 1: Governmentwide WOSB Goal and Actual Shares for Prime and
    Subcontracts, Fiscal Years 1996- 99

    Source: GAO's analysis of SBA data.

    No Clear Trend in Meeting Of the 20 federal agencies that account for about
    99 percent of annual Individual Agency WOSB federal contract expenditures,
    none has met its annual WOSB goals for

    both prime and subcontracting each year since fiscal year 1996. 20 More of
    Prime and Subcontracting these agencies had success meeting their WOSB
    subcontracting goal than Goals

    their prime contracting goal over this period- each year at least one- half
    of the agencies met their subcontracting goal while only about one- third
    met their prime contracting goal. VA, State, and NASA were most successful,
    meeting or exceeding both goals 3 of the 4 years.

    For prime contracts, 7 or fewer of the 20 largest agencies met their WOSB
    goal in each of the 4 years. As illustrated in figure 2, 7 of the 20
    agencies met their prime goal in fiscal years 1996 and 1997; the following
    year, only 3

    agencies met their prime goal. In fiscal year 1999, six agencies reached
    their prime goal. Only VA met or exceeded its WOSB prime goal each year;
    State and NASA met or exceeded their prime goal in 3 of the 4 years. For
    subcontracts, more of these agencies met their WOSB goals. As shown in
    figure 2, at least 10 of the 20 largest agencies met their subcontracting
    goal each year from fiscal year 1996 through fiscal year 1999. The greatest
    success came in fiscal year 1998, when 13 agencies met their subcontracting
    goal. Five agencies- the U. S. Agency for International

    Development (AID), NASA, Interior, State, and Treasury- met their
    subcontracting goal each year. Further detailed information on each of these
    20 agencies' share of prime and subcontracts with WOSBs and their WOSB goals
    is shown in appendix II.

    20 This discussion focuses on each agency's achievement of its individual
    goals, which varied over the period from 1. 3 percent to 8 percent. One
    agency- the Department of State- exceeded the governmentwide goal of 5
    percent for both prime contract and subcontract awards, even though it did
    not meet its own higher goals every year.

    Figure 2: Number of 20 Top Procurement Agencies Meeting WOSB Goals, Fiscal
    Years 1996- 99

    Source: GAO's analysis of SBA data on the top 20 federal agencies' contracts
    for fiscal years 1996- 99.

    Increasing WOSB Contract In terms of meeting their individual WOSB
    contracting goals, it did not Awards and Meeting WOSB

    always matter whether these 20 agencies increased or decreased their Goals
    Not Always

    share of expenditures for contracts with WOSBs. Some increased their
    Correlated share of prime or subcontract expenditures for WOSBs from fiscal
    year 1996 through fiscal year 1999 but never reached their goals, whereas
    others decreased their share each year and still met or exceeded their WOSB

    goals. For example, EPA increased its share of expenditures for prime
    contracts with WOSBs by about 50 percent between fiscal year 1996 and

    fiscal year 1999, yet it never met its WOSB prime contracting goal (which
    doubled over the period). On the other hand, VA's share of prime contract
    expenditures for WOSBs decreased from 5. 8 percent in fiscal year 1996 to
    5.6 percent in fiscal year 1999, yet VA met its goal each year, as its goal
    increased from 4 percent to 5 percent over the period.

    The same inconsistency emerged in these agencies' shares of subcontracts
    with WOSBs. Sixteen agencies maintained or increased their share of
    subcontract expenditures for WOSBs between fiscal year 1996 and fiscal year
    1999, but only four of these agencies- State, NASA, Interior, and Treasury-
    met their WOSB subcontracting goal each year. AID reduced its share of
    subcontract expenditures for WOSBs between fiscal year 1996 and fiscal year
    1999 yet reached its WOSB subcontracting goal each year.

    Correlating agencies' success in meeting their WOSB goals to their success
    in increasing shares of prime and subcontract expenditures for WOSBs is
    complicated by the fact that individual agencies' goals can and sometimes do
    move up or down each year. Moreover, there was not always a correlation
    between an agency's level of procurement from WOSBs and its goals. For
    example, some agencies with relatively low shares of prime contracts awarded
    to WOSBs appear to have been able to negotiate lower goals with SBA. NASA,
    with a historically low level of procurements from WOSBs, had a WOSB prime
    contracting goal of 1.4 percent in fiscal year 1999 (and exceeded its goal
    by awarding 1. 64 percent of prime contracts to WOSBs). In the same year,
    Justice had a goal of 3 percent and exceeded its

    goal by awarding 3. 27 percent to WOSBs. Others, like DOD and the Department
    of Education, had rates of prime contract awards consistently under 2
    percent over the period, yet both had goals of 5 percent in fiscal year
    1999.

    DOD Dominates Government contract expenditures are concentrated in just a
    few agencies

    Governmentwide Contract and dominated by DOD. Table 2 shows the share of
    total prime contract

    Spending and Determines expenditures and WOSB prime contract expenditures by
    the top 20 Success or Failure of WOSB

    agencies (as well as all others combined) in fiscal year 1999. As shown in
    Goals

    the table, the four largest procuring agencies- DOD, DOE, NASA, and GSA-
    together accounted for over 82 percent of all federal prime contracts. The
    same four agencies accounted for about 71 percent of the contracts with
    WOSBs. In fiscal year 1999, DOD alone accounted for over 64 percent, or
    nearly $120 billion, of all federal prime contract expenditures. DOD awarded
    1.9 percent of its prime contracts to WOSBs,

    representing approximately $2.3 billion or about 50 percent of all federal
    prime contract expenditures with WOSBs in 1999.

    Table 2: Agencies' Share of Government Expenditures for Prime Contracts and
    WOSB Prime Contracts, FiscalYear 1999

    Dollars in millions

    Percent of total Percent of

    Total prime contract government

    Total WOSB government

    Major federal agency expenditures expenditures contract awards

    WOSB awards

    Department of Defense $119,732. 7 64. 4 $2, 304.3 50. 2 Department of Energy
    15,650. 3 8. 4 399.1 8. 7 National Aeronautics and Space

    11,003. 3 5. 9 180.7 3. 9 Administration General Services Administration
    7,405. 4 4. 0 352.1 7. 7

    Department of Health and Human 4,984. 3 2. 7 166.0 3. 6 Services Department
    of Veterans Affairs 3, 846. 1 2. 1 215.2 4. 7

    Department of Justice 3, 641. 2 2. 0 119.1 2. 6 Department of Agriculture 3,
    532. 2 1. 9 134.4 2. 9 Tennessee Valley Authority 2, 679. 7 1. 4 42.1 0. 9
    Department of the Treasury 2,168. 6 1. 2 101.9 2. 2 Department of
    Transportation a 1,847. 4 1. 0 75.3 1. 6 Environmental Protection Agency 1,
    288. 6 0. 7 39.2 0. 9 Department of the Interior 1,248. 4 0. 7 56.0 1. 2
    Department of Commerce 1,203. 9 0. 6 63.4 1. 4 Department of Labor 1,136. 5
    0. 6 35.7 0. 8 Department of State 902. 9 0. 5 75.0 1. 6 Department of
    Housing and Urban 792. 2 0. 4 118.4 2. 6 Development Department of Education
    680. 8 0.4 5. 9 0.1

    Social Security Administration 493. 5 0. 3 19.0 0. 4 U. S. Agency for
    International 431. 5 0. 2 19.1 0. 4 Development Other agencies 1,119. 7 0. 6
    69.0 1. 5

    Total $185,789. 2 100. 0 $ 4,590.9 100. 0

    Note: Totals do not include dollars from contracts excluded from SBA's goal
    calculations and therefore differ from the total prime dollars indicated in
    table 1. a The figures for the Department of Transportation exclude those
    for the Federal Aviation

    Administration. Source: GAO's analysis of FPDS data.

    For two of the top four agencies, their share of the total procurement from
    WOSBs is smaller than their share of total federal procurement. For example,
    DOD buys 50. 2 percent of the total amount the government purchases from
    WOSBs but it accounts for 64. 4 percent of the value of all federal
    procurements. Similarly, NASA, with its 4- percent share of total
    procurements from WOSBs, accounts for 5.9 percent of total federal
    procurements. The two other largest procuring agencies accumulated a

    larger share of total procurements from WOSBs than their share of total
    federal procurements. DOE accounts for 8.7 percent of federal purchases from
    WOSBs while accounting for 8. 4 percent of total procurement, and

    GSA accounts for 7.7 percent of federal procurements from WOSBs while
    accounting for 4 percent of federal procurements. Without benchmarks of
    realistic WOSB contracting goals for individual agencies, it is unclear
    whether the level of an agency's contracting with WOSBs represents
    successful outreach efforts or a better match between what the agency

    buys and what WOSBs produce in these industries. Nevertheless, the dominance
    of DOD in both total contracts and contracts with WOSBs justifies special
    attention. The government's success or failure in meeting the annual 5-
    percent governmentwide goals for prime and subcontracting with WOSBs depends
    to a large extent on DOD's ability to meet its WOSB goals. Because DOD
    achieved less than half of its 5- percent goal for prime contracts with
    WOSBs in fiscal year 1999, the governmentwide goal for prime contracting
    with WOSBs could not have

    been met even if every other federal agency had reached its WOSB prime
    contracting goal. Only by substantially exceeding their cummulative WOSB
    goals for prime contracts could other federal agencies have compensated

    for DOD's shortfall. WOSBs Used Other Small In fiscal years 1996 through
    1999, WOSBs received a large majority of new Business Programs to federal
    prime contract awards on the basis of their status as another type of Obtain
    Government small business rather than as a WOSB. Our analysis of FPDS data
    on new

    Contracts prime contract awards for each of these years showed that WOSBs
    received the majority of their federal contract dollar awards as SDBs or 8(
    a) firms. In fiscal year 1996, about 57 percent of the new federal contract

    dollars awarded to WOSBs were awarded to WOSBs that qualified for the
    contracts as another type of small business. In fiscal years 1997, 1998, and
    1999, the figure was about 70 percent. Table 3 illustrates the expenditures
    for new contracts with WOSBs and the expenditures for WOSBs that qualified
    for the contracts under other small business programs since fiscal

    year 1996.

    Table 3: Expenditures for New Contracts With WOSBs Qualifying as SDBs or 8(
    a) Firms, Fiscal Years 1996- 99 Value of new Value of new

    Value of new contracts

    contracts contracts

    Value of new awarded to

    awarded to awarded to

    contracts WOSBs

    WOSB- SDB WOSBs

    WOSB- 8( a) WOSBs not

    WOSB awarded to

    qualifying as percentage of

    qualifying as percentage of

    qualifying as percentage of

    Fiscal WOSBs during

    SDBs during WOSB new

    8( a) firms WOSB new

    SDBs or 8( a) WOSB new

    year year

    year contracts

    during year contracts

    firms contracts

    1996 $1, 015,989 $408, 026 40.2 $169, 300 16. 7 $438,663 43. 2 1997
    1,025,341 483, 555 47.2 254, 745 24. 8 287,041 28. 0 1998 1,074,353 516, 343
    48.1 235, 043 21. 9 322,967 30. 1 1999 1,074,758 497, 052 46.2 257, 897 24.
    0 319,809 29. 8

    Source: GAO's analysis of FPDS data.

    Federal Procurement We found wide consensus among the government contracting
    officials we

    Officials Perceive contacted about obstacles to increasing government
    contracting with

    WOSBs. In fulfilling the mandate for this review, we interviewed officials
    Obstacles to Increasing

    throughout the federal government- chief procurement officers, line
    Contracts

    contracting officers, and small business advocacy officials at agencywide
    and program- specific levels- and solicited their views based on their
    direct experiences and responsibilities for federal contracting and meeting
    socioeconomic goals. These officials most frequently cited two obstacles to
    increasing federal contracting with WOSBs: ? the numerous and complex
    federal contracting programs for small

    businesses and ? the absence of a specific contracting program targeting
    WOSBs.

    Other obstacles cited by officials but with less consensus included ? the
    practice of contract consolidation (including bundling), which they believe
    can deny a reasonable opportunity for WOSBs and other small businesses to
    compete for some procurements;

    ? a lack of commitment or accountability of agency executives, contracting
    officials, and/ or program managers to increasing contracting with WOSBs and
    meeting the WOSB goals; ? a lack of sufficient WOSB access to working
    capital;

    ? a lack of qualified WOSBs competing in some areas; and

    ? resource constraints that limit federal agencies' efforts to monitor and
    enforce the plans submitted by prime contractors for subcontracting with
    small businesses, including WOSBs.

    Other Small Business While recognizing the value and public policy purpose
    of meeting Contracting Programs socioeconomic goals for small businesses,
    government contracting

    Crowd Out WOSBs officials at all levels told us that they were generally
    overwhelmed by the number and complexity of the requirements of small
    business contracting

    programs and their related goals. More specifically, these officials believe
    that the programs tend to crowd out WOSBs. They stated that, for some
    procurements, federal agencies are required by law to consider and give
    preference to certain categories of small businesses other than WOSBs when
    awarding contracts and that each of these programs has different rules,
    regulations, and eligibility criteria. Also, they said that the type of
    program for each small business category varies. For example, depending on
    the small business program involved, some procurements may be set aside for
    exclusive small business participation, some procurements may use price
    evaluation adjustments, and others may be conducted on a solesource

    basis. Table 4 shows the different statutory governmentwide small business
    contracting goals.

    Table 4: Small Business Categories With Statutory Governmentwide Contracting
    Goals

    Small business category Prime contract goal Subcontract goal

    Small business 23% a Small disadvantaged business 5% b 5% b Women- owned
    small business 5% b 5% b HUBZone small business 1- 3% c c Service- disabled
    veteran- owned

    3% d 3% d small business a Not applicable. b OFPP Policy Letter 99- 1,
    effective November 8, 1999, established separate 5- percent governmentwide
    goals for both prime contracts and subcontracts under the statutory goals
    for WOSBs and SDBs. c By statute, the HUBZone prime contract goal was 1
    percent in fiscal year 1999, increasing to 1.5 percent in fiscal year 2000,
    and is scheduled to increase progressively to 3 percent by 2003. Agencies
    must mutually establish with SBA acceptable goals for subcontract awards to
    HUBZone small businesses.

    d The Veterans Entrepreneurship and Small Business Development Act of 1999
    (P. L. 106- 50) established a governmentwide goal for service- disabled
    veteran- owned businesses of not less than 3 percent of the total value of
    all prime contract and subcontract awards each fiscal year. The program was
    effective October 1, 2000. Source: GAO's analysis of governmentwide small
    business contracting goals.

    The following small business contracting programs are used, as applicable,
    to reach the small business goals set forth in table 4.

    ? Small business reservation ($ 2,500 to $100,000) ? Small business set-
    asides (total or partial) ? 8( a) Business Development Program (sole- source
    or competitive) ? Emerging small business set- asides of the Small Business
    Competitive

    Demonstration Program ? Very small business set- asides of the Very Small
    Business Pilot Program ? HUBZone small business set- asides (competitive or
    noncompetitive) ? HUBZone price evaluation preference ? SDB price evaluation
    adjustment ? SDB participation program (sole selection factor or monetary
    incentive

    for actual SDB subcontracting) ? Subcontracting plans for small businesses,
    SDBs, HUBZone small

    businesses, WOSBs, and veteran- owned small businesses ? Mentor- prot�g�
    programs

    The officials said that these small business programs both potentially
    reduce the number of contracts available to WOSBs and cause contracting
    officers to spend significant amounts of time administering the programs'
    often complex implementation requirements. Thus, they said that the time
    available for them to reach out to WOSBs for contracting purposes is
    significantly reduced. Officials noted that the situation has been
    exacerbated by reductions in the acquisition workforce and the addition of
    new small business contracting programs and requirements. It was also

    noted that before using sources such as small businesses, contracting
    officials are required to consider using certain other sources of supply,
    such as Federal Prison Industries and the Committee for Purchase from People
    Who Are Blind or Severely Disabled, and this potentially reduces contracts
    available to WOSBs. WOSBs Are Not Targeted

    As the list following table 4 indicates, WOSBs had no vehicle that helped
    for Contracts

    contracting officials target prime contract awards to them before the Small
    Business Reauthorization Act of 2000 was enacted. According to the
    contracting officials we contacted, unless a WOSB also meets the

    requirements of one of these other small business programs, the WOSB will
    usually have to compete with other businesses in these targeted groups and
    other businesses for federal contracts. 21 Furthermore, they said that,
    depending on the procurement, government agencies might be required to
    provide targeted contracting opportunities to these other groups. An OFPP
    official also said that this could result in other small businesses
    receiving

    preference over WOSBs. Thus, officials generally agreed that without a
    specific vehicle or targeted contracting program, agencies cannot as
    effectively award contracts to WOSBs as they can to some other small
    business and meet their WOSB contracting goals.

    Officials Believe Contract According to government procurement officials,
    reductions in the Consolidation Reduces

    acquisition workforce have increased the practice of contract Opportunities
    for WOSBs

    consolidation by agencies, which reduces the opportunities for WOSBs to
    obtain some government contracts. They said that, to streamline and reduce
    contract administration costs, federal agencies sometimes combine a number
    of smaller contracts, which individually might be sought by and awarded to
    small businesses, including WOSBs, into fewer contracts. According to these
    officials, after the consolidation, the contract requirements sometimes
    become too large, complex, or geographically

    dispersed to be managed by a small business, thus making it more difficult
    to award these contracts to a WOSB or any small business. 21 Some officials
    told us that they informally targeted WOSBs for certain procurements, but
    other agency officials did not agree this was a viable strategy.

    A subset of consolidated contracts has been defined by the Small Business
    Reauthorization Act of 1997 (P. L. 105- 135) as “bundled
    contracts.” Specifically, the act defines bundling of contract
    requirements as the consolidation of two or more procurement requirements
    for goods or services previously provided or performed under separate,
    smaller

    contracts into a solicitation of offers for a single contract that is likely
    to be unsuitable for award to a small business concern because of specified
    factors. 22 The act requires federal agencies to avoid unnecessary and
    unjustified bundling of contract requirements that precludes small
    businesses from participating in procurements as prime contractors. It also

    requires each federal agency to promote small businesses' participation by
    structuring its contracting requirements to facilitate competition by and
    among small businesses.

    Representatives of WOSBs generally regard contract bundling as an obstacle
    to increasing their contracting with the federal government. However, we
    have been unable to confirm this. In conducting a review of contract
    bundling earlier this year, we reported that data were not currently
    available to determine its impact on small businesses. 23 We recommended
    that SBA develop a strategy setting forth how the agency can best achieve
    the results desired from oversight of contract bundling by considering the
    staffing resources and training needed, the timely resolution of potential
    bundling cases, and constraints the agency faces in

    implementing the strategy. We also reported that the only study concluding
    that contract bundling negatively affected small businesses provided no
    convincing evidence that contract bundling had adversely affected small
    businesses. 24

    22 These factors include (1) the diversity, size, or specialized nature of
    the performance specified; (2) the aggregate dollar value of the anticipated
    award; (3) the geographic dispersion of contract performance sites; or (4)
    any combination of the three criteria. 23 Small Businesses: Limited
    Information Available on Contract Bundling's Extent and Effects (GAO/ GGD-
    00- 82, Mar. 31, 2000).

    24 Final Report: Bundled Contract Study FY 91- FY 95 (Eagle Eye Publishers,
    Inc., for SBA's Office of Advocacy, June 20, 1997). We have not fully
    analyzed a recently released follow- up report: The Impact of Contract
    Bundling on Small Business: FY 1992- FY 1999 (Eagle Eye Publishers, Inc.,
    for SBA's Office of Advocacy, Sept. 2000) although we note that it continues
    to apply a definition of bundling that differs from the statutory
    definition.

    Some Say Procurement According to some of the government procurement
    officials with whom we

    Officials Not Committed to spoke, some federal agency officials are not
    committed to increasing or Accountable for

    contracts with WOSBs and meeting the WOSB contracting goals. They said
    Contracting With WOSBs

    that some agencies do not hold their procurement officials accountable for
    meeting the goals, so contracting personnel there are not fully committed to
    using the tools available to them for increasing procurement opportunities
    for small businesses, including WOSBs, and meeting agency WOSB contracting
    goals. Several contracting officials said that support for and commitment to
    the

    goals at the highest organizational levels within agencies were needed for
    contracting personnel to be committed to increasing contract awards to WOSBs
    and meeting the related goals. They said that this support and commitment
    are lacking; frequently, no individual within an agency is responsible and
    held accountable for meeting WOSB goals. A contracting

    officer at DOE told us he believes that an important reason DOE does as well
    as it does in meeting its WOSB goals is the strong support throughout the
    agency for awarding contracts to WOSBs. DOE officials further noted that the
    performance expectations and pay considerations of its

    contracting officials are linked to DOE's achievement of the goals.
    Similarly, procurement officials from NASA told us that the performance
    expectations for NASA's contracting officers include meeting small business
    contracting goals, including those for WOSBs. They believe that this
    expectation is partially responsible for NASA's meeting many of its small
    business contracting goals.

    A study by the National Women's Business Council (NWBC) also emphasized the
    importance of accountability. 25 It concluded that a key element to any
    successful supplier diversity program is commitment from

    the top. The study said that supplier diversity programs are successful only
    when an organization's senior officials promote women as suppliers and
    vendors and include them as part of the acquisition strategy.
    Representatives from the Women's Business Center (WBC) Washington, D. C.
    Metropolitan Area, and from the Dallas- Ft. Worth Chapter of National
    Association of Women Business Owners (NAWBO) told us that the limited
    support and accountability for increasing contracting with WOSBs from
    officials within federal agencies has hindered the growth of contracting
    with WOSBs. A representative from the Women's Business Enterprise

    25 1999 NWBC Best Practices Guide: Contracting with Women (Washington, D.
    C.: National Women's Business Council, July 1999).

    National Council (WBENC) also told us that she believes some agencies do not
    reach their contracting goals because federal contracting officials do not
    look hard enough for available WOSBs.

    Some Believe That WOSBs A procurement official and representatives of some
    of the women businessowners

    Lack Sufficient Access to associations told us that a lack of sufficient
    access to working

    Working Capital capital discourages some WOSBs from competing for government
    contracts. To meet the needs of ongoing capital expenses, contractors
    sometimes receive contract financing, such as progress payments based

    upon costs incurred in certain large fixed- price contracts and subcontracts
    in which the first delivery occurs several months after the award has been
    made. Under the Federal Acquisition Regulation, the customary progress
    payment rate is 85 percent of the total costs incurred under a contract with
    a small business. However, some believe that such provisions do not always
    provide WOSBs with the amount of working capital necessary to compete for
    government contracts. Some agencies have instituted higher customary
    progress payment rates for small businesses and SDBs. For

    example, DOD has customary progress payment rates of 90 percent for small
    businesses and 95 percent for SDBs.

    Some Say Not Enough According to some contracting officials, some agencies
    have difficulty Qualified WOSBs

    meeting their WOSB contracting goals because few qualified WOSBs Competing
    in Some Fields

    compete for government contracts in the fields in which those agencies are
    procuring goods or services. They said that this obstacle remains, even
    though many agencies have developed outreach efforts to find and encourage
    WOSBs to compete for government contracts. Some of these officials said that
    WOSBs do not always compete for government contracts because they perceive
    the federal procurement process as too complex, they lack the expertise to
    meet many of the procedural requirements, or both. One senior procurement
    executive with 15 years of experience stated that even though women
    business- owners associations and others

    generally say that women- owned businesses, including WOSBs, are not given
    opportunities to participate in the procurement process, he believes that
    the problem often is that these businesses do not seek contracting
    opportunities with the federal government. A representative from an
    association of women business owners we contacted agreed that some

    WOSBs view the federal procurement process as complex and costly. She
    conjectured that this complexity, combined with an anticipation of limited
    success in winning awards, might keep many WOSBs from submitting offers for
    government contracts.

    Resource Constraints Affect According to federal procurement officials with
    whom we spoke, Monitoring and Enforcing

    reductions in the federal acquisition workforce mean that fewer agency Plans
    for Subcontracting contracting personnel must meet an increasing workload.
    They said that With WOSBs they often lack the resources to effectively
    oversee and administer contractors' performance. Thus, according to these
    officials, agencies' contracting personnel do not always monitor and enforce
    plans submitted

    by prime contractors for subcontracting with small businesses, including
    WOSBs. Without appropriate monitoring and enforcement, these officials said,
    prime contractors do not always follow through with their plans to award
    small business subcontracts. Similarly, an official of GSA's Office of
    Enterprise Development stated that often little oversight or enforcement
    occurs after a prime contractor's plan

    for subcontracting with small businesses is approved. The official said that
    her office is constantly asked by small business representatives to request
    changes to legislation that would provide for greater enforcement of
    subcontracting plans and make government contracting officers accountable if
    prime contractors did not honor these plans. Finally, she said that because
    prime contractors have such an uneven record of using WOSBs and other small
    businesses, some WOSBs (as well as other small businesses in general) become
    frustrated and discouraged from pursuing federal subcontracting
    opportunities.

    An opportunity for improving the enforcement of subcontracting plans is
    presented by the recent executive order for increasing opportunities for
    WOSBs. The order requires each agency to work closely with SBA, OFPP, and
    others to develop procedures to increase compliance by prime contractors
    with subcontracting plans, including subcontracting plans involving WOSBs.

    Federal Procurement Among the government contracting officials with whom we
    spoke, there Officials Have was general agreement on several suggestions for
    improving the

    environment for contracting with WOSBs and increasing federal Suggestions
    for contracting with WOSBs. They suggested

    Increasing WOSB ? creating a contract program targeting WOSBs,

    Contracts but Caution ? focusing and coordinating federal agencies' WOSB
    outreach activities, Against Possible

    ? promoting contracting with WOSBs through agency incentive and Unintended

    recognition programs, ? including WOSBs in agency mentor- prot�g� programs,
    Consequences

    ? providing more information to WOSBs about participation in teaming
    arrangements, and ? providing expanded contract financing.

    Simultaneously, officials cautioned that some of these suggestions could
    lead to some unintended consequences (notably a possible reduction in
    procurements from other small business groups) and that even if the

    suggestions were implemented, the 5- percent governmentwide goals might
    still not be achievable. Officials Suggest a Specific Federal contracting
    officials, particularly those in PEC and the OSDBU Contracting Program for

    Council, generally agreed that a targeted contracting program, such as one
    WOSBs

    that would grant authority to restrict competition for contracts
    specifically to WOSBs, could help increase the number of contracts awarded
    to WOSBs. In addition, 22 of the 30 contracting officers we contacted from
    four federal agencies 26 awarding large numbers of contracts each year
    stated that such a program could be a valuable tool in their efforts to
    increase contracting with WOSBs and help them achieve their WOSB

    contracting goals. Despite the broad consensus on the need for a formalized
    vehicle to target qualified WOSBs for federal contracts, many of these same
    officials expressed concern that creating such a program would add to the
    already large and complex universe of federal contract programs for small
    businesses. Also, some of these officials said they recognize that such a

    program would not guarantee that the 5- percent governmentwide goals for
    prime and subcontracts would be achieved. For example, not enough

    26 These agencies are DOD (the Air Force and the Navy), GSA, NASA, and DOE.

    qualified WOSBs might exist in those industries in which much federal
    procurement occurs, meaning that a new contracting program might not be
    sufficiently effective in increasing contracting with WOSBs to achieve the
    governmentwide goals. In addition, officials said that because a number of
    small business groups already must be considered for government contracts,
    they would have to make choices between competing small business groups and,
    ultimately, there might not be enough contracts to go

    around. Thus, while WOSBs might benefit from a new targeted contracting
    program, such a program might compete with existing programs for other small
    business groups. To combat this problem, some officials suggested broadening
    or combining existing programs to incorporate WOSBs (such as broadening the
    definition of a small disadvantaged business to encompass all WOSBs). 27
    Several of the representatives from the women's groups we contacted believed
    that a targeted contracting program would help to accelerate progress toward
    achieving the WOSB goals.

    The Small Business Reauthorization Act of 2000 authorized a targeted
    contracting program for certain WOSBs. Contracting officers are authorized
    to restrict competition for contracts for supplies or services in certain
    industries when specific conditions are met (the contract is for goods or
    services in an industry identified by SBA where WOSBs are underrepresented
    in federal procurement, two or more WOSBs who are economically disadvantaged
    are expected to compete, the award price

    does not exceed $3 million- or $5 million for manufacturing- and the award
    can be made at a fair and reasonable price). The program's implementation,
    however, will require several actions by SBA, including (1) the completion
    of a study to identify industries in which WOSBs are underrepresented and
    substantially underrepresented in federal

    procurement; (2) the establishment of a process for approving federal,
    state, or national certifying entities to complete certifications of WOSBs;
    (3) the establishment of standards for documentation to be required by
    contracting officers to support certifications of WOSBs; (4) the development
    of criteria for determining industries where WOSBs are

    “substantially” underrepresented and therefore eligible for a
    waiver of the requirement that WOSB firms be economically disadvantaged to
    benefit

    27 The Women's Coalition on Access to Procurement filed a petition with the
    SBA Administrator on September 22, 1999, requesting the designation of
    women- owned businesses as a group “presumed” to be socially
    disadvantaged for the purposes of the 8( a) and SDB programs.

    from the program; and (5) the establishment of procedures to challenge
    firms' eligibility and a program to verify firms' eligibility. Officials
    Believe More Contracting officials from the Air Force, NASA, DOE, and GSA
    said that Focused and Collaborative

    their respective agencies have active and focused WOSB outreach programs. 28
    They said that these programs attempt to attract WOSBs to Agency Outreach
    Could

    contracting opportunities and that they teach these businesses how to
    Increase Contracting With compete for federal contracts, navigate through
    the federal procurement WOSBs process, and complete necessary paperwork. For
    example, Air Force small business advocates told us they had effective
    outreach efforts educating

    WOSBs on technical requirements and encouraging WOSBs to gain needed skills.

    Other officials with whom we spoke said that giving greater effort and focus
    to some federal agencies' outreach activities could increase the number of
    contracts with WOSBs. In particular, PEC officials agreed that agencies
    needed to be more collaborative in their outreach efforts to

    WOSBs. PEC and other officials said that greater emphasis by federal
    agencies on the development of training programs and seminars for WOSBs
    could help increase their participation in the federal procurement process.
    Specifically, they said that with more focused outreach programs, agencies
    could (1) better identify qualified WOSBs in specific industries and (2)
    encourage WOSBs to participate in the federal contracting arena (by teaching
    them about the federal procurement process and strategies for preparing more
    competitive contract offers).

    While some officials suggested more focused outreach programs, PEC and DOD
    officials viewed greater coordination and consolidation of agencies'
    outreach efforts as necessary to make the most of government and WOSB
    resources. Specifically, these officials believed such coordination would
    reduce overlap and duplication of outreach efforts by agencies, reduce the
    multiplicity of outreach conferences faced by individual WOSBs, and provide
    more comprehensive and relevant sources of procurement information and
    networking opportunities to WOSBs. Officials stated that proper coordination
    would allow WOSBs to be more selective in the

    outreach conferences they attend and enable government officials to provide
    them with greater access to key program and contracting 28 According to DOD,
    the information we received from the Air Force also reflects the efforts of
    other military departments.

    personnel. The recent executive order on increasing opportunities for WOSBs
    requires federal agencies to work with SBA in making outreach efforts and
    preparing plans to target WOSBs for greater participation in the procurement
    process. Implementation of the executive order could provide an appropriate
    opportunity to address the suggestion for greater coordination and
    consolidation of the government's outreach efforts.

    Officials Suggest Incentive A number of the procurement officials we
    contacted said that recognition and Recognition Programs

    and incentive programs should be developed or improved to increase May
    Increase Contracting

    federal contracts with WOSBs. They said that such programs increase With
    WOSBs awareness of the importance the agency places on the WOSB goals and
    recognize the accomplishments of agency procurement officials, as well as
    those of prime contractors who successfully meet their plans for
    subcontracting with WOSBs. They cited a Treasury program that annually
    rewards staff and prime contractors who have significantly contributed to
    the agency's efforts to contract with small businesses, including WOSBs.

    The establishment of such rewards and programs at other agencies may be a
    simple method for agencies to increase incentives for agency officials to
    utilize WOSBs in their agency's procurements. Although in 1999 SBA
    established a governmentwide recognition effort, the Frances Perkins
    Vanguard Award, to recognize federal agencies and prime contractors for
    their efforts in contracting and subcontracting with WOSBs, some officials
    said that agency- level recognition awards may provide a more immediate
    incentive for agency outreach to WOSBs.

    Officials Suggest Including Some officials suggested that WOSBs could
    benefit by participating to a WOSBs in Mentor- Prot�g� greater extent in
    agency mentor- prot�g� programs. For example, an Programs

    OSDBU at NASA was very enthusiastic about NASA's achievements using the
    mentor- prot�g� program for assisting WOSBs. Furthermore, the NWBC study on
    best practices mentioned earlier describes how some agencies have
    established mentor- prot�g� programs to develop and increase the number of
    WOSBs as subcontractors. 29 The study points out that under

    these programs, both mentors and prot�g�s benefit when agencies provide
    financial incentives to prime contractors to help small businesses,
    including eligible WOSBs, and enhance their technical capabilities for
    participation as subcontractors and suppliers for government and 29 The
    WomenBiz. gov Web site provides a list of, and links to, government mentor-
    prot�g� programs available for WOSBs.

    commercial contracts. According to the study, at some agencies the mentor-
    prot�g� program provides incentives for mentors to establish and implement a
    developmental assistance plan to enable the prot�g� company to compete more
    successfully for prime and subcontract awards. The study stated that
    potential benefits to prot�g� companies include technical advice, market
    access, credibility, financial support, and the possibility of partnering
    with other businesses to enable them to better compete for

    federal contracts. The recent executive order on increasing opportunities
    for WOSBs lists the implementation of mentor- prot�g� programs that include
    WOSBs among the steps agencies should take to maximize WOSBs' participation
    in the procurement process. Recently, section 807 of the National Defense
    Authorization Act for Fiscal Year 2001 made WOSBs eligible for

    participation as prot�g� firms under DOD's statutory mentor- prot�g�
    program. 30 The suggested inclusion of WOSBs in agencies' mentor- prot�g�
    programs thus appears to be under way.

    Officials Suggest Informing Some officials suggested that WOSBs could
    benefit from being made aware

    WOSBs About Participation that teaming with other small businesses (and in
    some cases, large firms) in Teaming Arrangements

    could enhance their competitiveness for certain procurements. For example,
    DOD officials said that teaming was an excellent tool that DOD uses to
    increase contracting with WOSBs. In addition, under the recent executive
    order, SBA is required to offer a program of training development seminars
    and conferences to instruct women business owners on how to

    participate in SBA's 8( a) program, the SDB program, the HUBZone program,
    and other small business contracting programs for which they may be
    eligible. Since these programs allow teaming arrangements, the training
    development seminars and conferences the executive order requires SBA to
    provide to WOSBs could include information or instruction on such teaming
    arrangements. For example, a qualified WOSB may enter into a joint venture
    with a qualified HUBZone small business for the

    purpose of performing a specific HUBZone contract so long as each business
    is small under the applicable size standard and the procurement 30 DOD has a
    statutory mentor- prot�g� program under which mentor firms may receive
    reimbursement of the costs of mentoring activities or receive credit toward
    meeting SDB subcontracting goals (established under subcontracting plans
    entered into with an agency).

    As required by section 811 of the National Defense Authorization Act for
    Fiscal Year 2000 (P. L. 106- 65, Oct. 5, 1999), we are currently reviewing
    the operation and effectiveness of DOD's mentor- prot�g� program.

    exceeds a certain value. For competitive 8( a) program procurements, a WOSB
    may enter into a joint venture or teaming arrangement with at least one 8(
    a) participant without regard to small business size standards if certain
    conditions are met. Clearly, WOSBs could benefit from outreach efforts that
    include information or instruction on participation by WOSBs in teaming
    arrangements or joint ventures for procurements where such arrangements are
    permitted.

    Officials Suggest Providing To address the problem of limited access to
    working capital experienced by

    Expanded Contract many WOSBs (and other small businesses), contracting
    officials suggested

    Financing that expanded contract financing could be helpful, such as through

    advance payments and higher rates of progress payments under government
    contracts. This idea is consistent with NWBC's recommendations. NWBC has
    suggested that by increasing the customary progress payment rate for WOSBs
    to 95- percent and lowering the threshold for inclusion of customary
    progress payments in contracts with WOSBs to the lower threshold ($ 50, 000)
    that DOD uses for SDBs, more working

    capital might flow to WOSBs. 31 Officials Said More Federal procurement
    officials frequently mentioned that the WOSB Realistic WOSB Goals

    contracting goals established for individual agencies are unrealistic: that
    is, they are established without regard to the capability and availability
    of Could Improve the WOSBs in specific industries from which federal
    agencies procure their Program's Credibility goods and services. Officials
    in contracting agencies and SBA agreed that the goals are not based on an
    analysis of the presence, capability, or interest of WOSBs in the business
    sectors or industries in which government agencies make most of their
    purchases.

    According to a number of contracting officials, it makes no difference how
    hard contracting officers try to meet a goal if WOSBs are not in a specific
    location or industry where an agency procurement is to be made. If the WOSBs
    in the industry are not capable of performance, do not want the contract, or
    do not respond to contract solicitations, the agency cannot

    award the contract to a WOSB. Ten of the 30 contracting officers with whom
    we spoke stated they specifically had experienced difficulties

    31 The NWBC also recommended that authority be provided to allow advanced
    payments for successful WOSB offerors on certain requirements, such as
    contracts of $5 million or greater.

    identifying WOSBs for certain contract solicitations. They said this was
    particularly a problem for those contracts with specialized requirements,
    such as those for weapons systems or highly technical services. Contracting
    officers at NASA and DOE told us that for many of their procurements for
    highly technical research and development projects, they

    often have difficulty identifying qualified WOSBs. These contracting
    officials further said that they believe the credibility of the WOSB
    contracting program could be enhanced if the individual agency goals better
    reflected the number of WOSBs in locations and industries where government
    agencies purchase goods and services. SBA officials have recognized the
    absence, but also the potential usefulness, of information on the presence
    of WOSBs in various industries when establishing individual agency goals. In
    our discussions with SBA officials, they expressed an interest in analyzing
    new data just becoming available from the 1997 business census. However,
    they said that they have lacked sufficient resources to perform the breadth
    of analysis needed. They cited the complexity of the effort undertaken by
    experienced census staff who had completed a similar analysis for the
    Department of Commerce;

    that study sought to identify industries in which disadvantaged businesses
    were underrepresented in federal procurement. 32 In commenting on a draft of
    this report, SBA said that it agreed that a disciplined study of WOSBs in

    different industries must be performed and, in accordance with Executive
    Order 13157 and applicable laws, this study will be done. PEC officials told
    us that included in PEC's strategic plan for fiscal years

    2001 through 2005 is an objective to improve those goal- setting processes
    and achievement measures for contracting with small businesses that align
    agency missions with procurement and socioeconomic goals. They believe such
    an effort, which would yield greater consensus in the federal community on
    the purpose and intended outcome of small business contracting programs,
    could improve the effectiveness of these measures.

    32 The Commerce methodology, used to determine industry groups for the SDB
    program, includes (1) identifying firms that are “ready and
    willing” to supply the federal government, (2) calculating the
    government's utilization of each “ready and willing” firm, (3)
    estimating the capacity of each “ready and willing” firm, and
    (4) comparing the SDB shares of utilization and capacity held by such firms.
    Officials responsible for the Commerce analysis described this level of
    effort as “extraordinary” and indicated that completing a
    similar study of WOSBs could require the full- time effort of a qualified
    economist for at least 6 months. DOD officials indicated that they, too, had
    devoted significant resources to the study.

    A representative from NAWBO with whom we spoke questioned whether federal
    agency officials always make concerted efforts to find WOSBs to help meet
    their goals or whether they find it easier to go with previous suppliers. A
    representative from the WBENC told us that she believes some agencies fail
    to reach their contracting goals for WOSBs because of a lack of effort on
    the part of federal contracting officials- not because qualified

    WOSBs are unavailable. A representative from WBC told us that she agrees
    with these views and added that there may not be enough WOSBs in certain
    locations and industries where some agencies have specialized requirements.
    On the other hand, representatives of several of these

    organizations indicated they view proposals to reexamine the validity of
    WOSB contracting goals as largely an effort to lower goals rather than to
    increase contract awards to WOSBs.

    Conclusions As the FASA conference report recognized, reaching the 5-
    percent governmentwide goals for WOSBs will take time: Even though federal
    contracting with WOSBs increased at a faster rate than overall federal

    contracting during the past 4 years, limited progress has been made in
    achieving these governmentwide goals. Furthermore, the apparent lack of
    correlation between individual federal agencies' success in increasing their
    contracting with WOSBs and in meeting their WOSB contracting goals makes it
    difficult to tell which agencies are making progress and which

    strategies are most effective. Moreover, even if a number of agencies reach
    their goals, there appears to be little likelihood that the 5- percent
    governmentwide goals can be met until DOD- with nearly two- thirds of all

    federal procurements- comes closer to reaching its goals. Many of the
    initiatives suggested by contracting officials for increasing contracting
    with WOSBs merit further examination such as mentorprot�g� programs,
    teaming, expanded contract financing, and more focused and coordinated
    outreach activities. Important issues have also been raised about how
    reductions in the acquisition workforce may be affecting the oversight of
    subcontracting plans or affecting contracting

    strategies- by, for example, increasing agencies' use of consolidated
    contracts or other vehicles, that may be disadvantageous to all small
    businesses. However, analyzing the benefits and effects of the various

    suggestions we received from federal contracting officials or women
    business- owner organizations for increasing the number of federal contracts
    awarded to WOSBs was beyond the scope of our review. At the

    same time, a number of these suggestions are covered by the recent executive
    order assigning a leadership role to the head of SBA's Office of

    Federal Contract Assistance for Women Business Owners to expand contracting
    opportunities for WOSBs. As a result, while the congressional mandate for
    this study called for us to make recommendations we consider appropriate for
    actions that might increase federal contract awards to

    WOSBs, we conclude that further analysis is required before any particular
    strategies can be endorsed. There was wide consensus among contracting
    officials about the value of developing an analytical foundation for agency
    goals, even though this was not directly a strategy to increase contracting
    with WOSBs. They noted that more realistic goals could improve the
    credibility of the program and improve the feasibility of developing
    stricter accountability for achieving the goals. PEC officials report a
    related effort under way to develop more complex and meaningful indicators
    of the success of socioeconomic procurement programs. They believe such an
    effort, which would yield greater consensus in the federal community of the
    underlying purpose and intended outcome of small business contracting
    programs, could improve the effectiveness of these measures.

    The Small Business Reauthorization Act of 2000 requires SBA to conduct a
    study to identify industries in which WOSBs are underrepresented in federal
    contracting. While such a study is essential for identifying

    industries eligible for the newly authorized WOSB contracting program, its
    analysis could also be more broadly useful for improving the realism of and
    then improving the accountability for agency WOSB contracting goals. Without
    information on the representation of WOSBs in the industries in which
    federal agencies procure goods and services, SBA has not been able to ensure
    that its agency goals represent “the maximum practicable
    opportunity” for participation in agencies' contracts or
    “realistically reflect the potential of small business to perform such
    contracts,” as called for in

    the Small Business Act, while at the same time ensuring that the cumulative
    goals for all agencies meet or exceed the governmentwide goal. The analysis
    of the representation of WOSBs in various industries required by the new
    legislation could provide a foundation for SBA to establish more realistic
    agency WOSB contracting goals and thus provide a solid basis for

    holding agencies accountable for achieving those goals. Determining more
    realistic goals for DOD, in particular, would provide an objective basis for
    reconciling the conflicting claims of contracting officials and women
    business- owner organizations over whether WOSBs are unavailable in various
    sectors or federal contracting officials are not trying hard enough to
    identify and work effectively with WOSBs.

    Before the new contracting program for WOSBs was authorized, SBA officials
    had questioned their capacity to perform the breadth of analysis needed to
    determine the representation of WOSBs in various sectors. Given

    that the implementation of the new WOSB contracting program depends on a
    wide range of actions by SBA and that SBA has concerns about its capacity to
    complete the required steps, the Congress may benefit from being kept
    informed as SBA develops its strategy for responding to the new legislative
    requirements. Recommendations for

    We recommend that the Administrator, SBA, direct the new Office of Executive
    Action

    Federal Contracting Assistance for Women Business Owners to evaluate the
    benefits and effects of the suggestions for increasing federal contracting
    with WOSBs that surfaced in this review. These include the implementation of
    agency mentor- prot�g� programs that include WOSBs, of measures to
    facilitate teaming arrangements and expand contract

    financing, as well as the exploration of initiatives to consolidate and
    improve the efficiency and effectiveness of outreach efforts. Another issue
    worthy of further study is the extent to which pressures on the acquisition

    workforce may be contributing to contracting practices that reduce
    opportunities for small businesses. These actions are consistent with the
    broad authority as well as specific direction given to SBA under the recent
    executive order. Any of the suggestions deemed feasible should be

    considered for implementation. In addition, we recommend that the
    Administrator, SBA, include in SBA's mandated study of industries in which
    WOSBs are underrepresented sufficient analysis to establish more realistic
    agency- specific annual goals for prime and subcontracts with WOSBs. Given
    DOD's predominance in

    government contracting, we believe that SBA would benefit from the active
    collaboration and support of DOD in performing the study. SBA should also
    keep the Congress informed as it develops a strategy for implementing the

    new provisions designed to expand federal contracting with WOSBs. In
    particular, SBA should notify its authorizing and appropriations committees
    if it determines that its capacity to implement the key provisions of the
    legislation will be impaired by insurmountable resource constraints.

    Agency Comments and We requested comments on a draft of this report from the
    Administrator, Our Evaluation

    SBA, and officials from OMB/ OFPP, as well as from PEC and the Council of
    Offices of Small and Disadvantaged Business Utilization. We also requested
    comments from the four major contracting agencies from which we surveyed
    contracting officials- DOD, NASA, DOE and GSA. Furthermore, we requested
    comments from representatives of the four women's business organizations
    that we had discussions with during the course of our review.

    We received responses from both PEC and the OSDBU Council and each of the
    government agencies except DOE. Each agency, except GSA, which had no
    general comments, said it generally agreed with our report and supported our
    recommendation. 33 Each of the four women's business organizations provided
    us with comments. Three generally agreed with the report and said that it
    provided a generally accurate overview of the federal procurement
    environment facing WOSBs. One- NWBC- raised a number of concerns about the
    methodology of our study and our recommendation

    in the draft report. We received written comments from the SBA
    Administrator. She stated that SBA appreciated our thorough investigation
    and the care we had taken in framing the issues and possible solutions
    involved in reaching higher percentages of federal contract and subcontract
    dollars for WOSBs. Furthermore, she stated that SBA generally agrees with
    the recommendation in the report that SBA complete a disciplined study of
    the percentages and numbers of WOSBs in different industries. She said that
    in accordance with Executive Order 13157 and the applicable laws, this would
    be done by the new Office of Federal Contract Assistance for Women Business
    Owners in SBA's Office of Government Contracting.

    Additionally, she stated that, as suggested in our report, SBA is currently
    assessing its capacity to implement the WOSB provisions of the recently
    passed Small Business Reauthorization Act and will notify appropriate
    congressional committees if additional resources are required. The head of
    SBA's Office of Government Contracting said that the agency generally

    33 The draft of the report provided for agency comments contained only the
    recommendation that SBA broaden the required study of WOSBs to provide a
    more informed basis for prime contract and subcontract goals. The
    recommendation in the final report that SBA assess the

    suggestions for increasing contracting with WOSBs that surfaced during our
    review was added on the basis of various comments we received on the draft
    report. Because of time limitations, we gave only SBA an opportunity to
    comment on the additional recommendation.

    agreed with our recommendation for further analysis of the benefits and
    effects of the suggestions we received from federal contracting officials
    for increasing contracting with WOSBs. However, she reiterated a concern
    about whether resources would be available. The SBA Administrator
    additionally provided us with several technical comments that we
    incorporated into the final report as appropriate. Appendix III contains the
    written comments we received from the SBA Administrator.

    We received oral comments from the Associate Administrator for Procurement
    Law, Legislation and Implementation, at OMB/ OFPP. She said that OFPP
    generally concurred with the report and provided us with several technical
    comments, which we incorporated into the final report as appropriate. We
    received oral comments from the co- chair and several members of the PEC
    socioeconomic committee, reflecting comments

    collected from additional members of that committee. They indicated that the
    report did a very good job reflecting the contracting environment in
    agencies. They strongly supported the recommendation to improve the
    analytical foundation for annual agency goals but noted that more complex
    measures of success besides contracting “share” were needed.
    They noted their efforts to form an interagency group to better capture the
    success of various agencies' efforts.

    PEC officials also noted that while the report captured the complexity of
    the diverse small business contracting programs, the draft did not reflect
    several required sources of government supply and services, such as Federal
    Prison Industries and the Committee for Purchase from People Who Are
    Severely Blind or Severely Disabled, that must be considered before awarding
    contracts to small businesses. We added a reference to these programs. PEC
    officials also indicated that there were opportunities

    to reduce the overlap and improve the efficiency of agencies' outreach
    efforts. They believed agencies could collaborate and reduce the
    multiplicity of outreach conferences, thereby saving costs and time for both
    government agencies and targeted small businesses. We incorporated these
    observations into the discussion of both barriers and suggestions for

    increasing contracting with WOSBs. Finally, PEC officials emphasized that,
    notwithstanding the potential noted above for some improvements in the
    efficiency of outreach efforts, attempts to increase contracting within
    various small business contracting

    programs is largely a zero- sum problem- that is, increased efforts in one
    area are likely to adversely affect other programs. They noted that the
    workload pressures on contracting officers are contributing further to the

    use of contracting practices that some have alleged limit opportunities for
    small businesses to compete for federal contracts. We expanded our
    discussion of these issues and added an observation about the value of
    overseeing this trend and its possible adverse effects on WOSBs and other
    small business groups.

    We also received oral comments from the co- chair of the OSDBU Council, who
    represented the views of a number of their members. The Council members were
    generally positive about the report and supported the

    recommendation but expressed concern that the significant efforts and
    successes of various agencies were not reflected in the report. They
    believed the draft overemphasized the achievement of goals, particularly
    noting that we described how no agency had met both its prime and

    subcontract goals over the 4- year period examined. They stated that this
    focus failed to recognize that some agencies set “stretch” goals
    and that some agencies have continually achieved or exceeded procurement
    levels

    for WOSBs above the 5- percent governmentwide goal. We retained our
    observations about the achievement of agency goals since individual agency
    goals (whether above or below 5 percent) are key to the

    achievement of the governmentwide goal. However, we did incorporate a
    reference to the one agency that has continually achieved or exceeded the 5-
    percent governmentwide goal. OSDBU Council members also provided

    technical comments that we incorporated into the report as appropriate. We
    received written comments from DOD and NASA. DOD's Under Secretary of
    Acquisition Technology and Logistics provided written comments stating that
    DOD generally agreed with the facts in the report and supports our
    recommendation to SBA, including that SBA officials seek the active
    collaboration and support of DOD officials in the study. Separately, DOD
    provided us with several technical comments, which we incorporated into the
    final report as appropriate. DOD's letter to us appears in appendix IV. A
    NASA Associate Deputy Administrator provided us with written

    comments stating that NASA agreed with our recommendation to SBA. He noted
    that when establishing the 5- percent goal for WOSBs, FASA specified that
    the goal be no less than 5 percent of the total value of all prime and
    subcontract awards for each fiscal year and it was not until November 1999
    that OFPP interpreted the requirement to mean that there were separate 5-
    percent goals for prime and subcontracts. He recommended that we clarify our
    report on this point. We agree and clarified our report accordingly. NASA's
    letter to us appears in appendix V.

    We received oral comments from the executive director of WBC, the president
    of WBENC, and both the current and immediate past president of the Dallas-
    Ft. Worth Chapter of NAWBO. Each of these officials had positive comments
    about the report and had no substantive or technical disagreements with its
    content. We received written comments from the deputy director, NWBC. She
    said that she did not believe the draft report was responsive to the mandate
    and did not support our recommendation to SBA. She also provided a number of
    general and technical comments on the draft report. She was particularly
    concerned about our interpretation of certain requirements of the
    legislative mandate for this report. She commented that our methodology of
    focusing on the views of federal officials to discern the obstacles to, and
    suggestions for, increasing contract awards to WOSBs was flawed and
    indiscriminately repeated unverified assertions by federal officials. She
    said that we should have talked with women- owned businesses in the
    contracting arena and incorporated those discussions into the report
    together with the comments we received from federal employees involved

    in the federal procurement system. We disagree and believe the mandate
    clearly specifies that we solicit views from federal employees involved in
    the federal procurement system about their experiences pertaining to
    obstacles and suggestions for increasing the number of contracts awarded

    to WOSBs. In addition, we did contact representatives of four womenowned
    business organizations and solicited their views on any obstacles to and
    suggestions for increasing federal contracts with WOSBs, although this

    effort was not called for in the mandate. The deputy director of NWBC
    specifically said she disagreed with our recommendation that SBA conduct a
    study to improve the analytical basis of agency WOSB contracting goals and
    believes it is inconsistent with the mandate calling for GAO recommendations
    to “increase contract awards” to WOSBs. We agree that this
    recommendation is not strictly a means to increase awards to WOSBs. However,
    we found the evidence persuasive

    that establishing an analytical foundation for the goals was relevant to the
    credibility and performance of the program. Accordingly, we retained this
    recommendation. We believe more realistic agency- specific WOSB contracting
    goals can improve the integrity of this program, can provide a solid basis
    for holding agencies accountable for achieving those goals, and over time
    could contribute to increases in agency contracts with WOSBs. In her view,
    the mandate required us to make recommendations to increase

    such awards. The mandate does state that we are to make

    recommendations we consider appropriate after taking into consideration any
    suggestions we received during our discussions with federal contracting
    officials. However, an analysis of the benefits and effects of the various
    suggestions put forth was not within the scope of our review, so we cannot
    endorse any particular strategy. Nonetheless, considering the

    breadth of consensus on the potential merit of various measures, we added a
    discussion of some of the promising suggestions for increasing awards to
    WOSBs and included a recommendation for SBA to further study their
    potential. Finally, we incorporated as appropriate some of her general and

    technical comments. Her complete written comments are included in appendix
    VI.

    We performed our work from May 2000 through January 2001 in accordance with
    generally accepted government auditing standards. For details about our
    scope and methodology for this study, see appendix I.

    We are sending copies of this report to the Honorable Ted Stevens, Chairman,
    and the Honorable Robert C. Byrd, Ranking Member, Senate Committee on
    Appropriations; the Honorable C. W. Bill Young, Chairman,

    and the Honorable David R. Obey, Ranking Minority Member, House Committee on
    Appropriations; the Honorable Donald H. Rumsfeld, Secretary of Defense; the
    Honorable Spencer Abraham, Secretary of Energy; the Honorable Fred P.
    Hochberg, Acting Administrator of SBA; the Honorable Thurman M. Davis, Sr.,
    Acting Administrator of GSA; the

    Honorable Daniel S. Goldin, Administrator of NASA; and the Honorable
    Mitchell Daniels, Director of OMB. We will also make copies available to
    others on request.

    If you have any questions about this report, please call me on (202) 512-
    2834. Key contributors to this report are acknowledged in appendix VII.

    Sincerely yours, JayEtta Z. Hecker Director, Physical Infrastructure Issues

    Appendi Appendi xes x I

    Objectives, Scope, and Methodology Our objectives were to (1) review the
    federal procurement system for the 3 preceding fiscal years (1997 through
    1999) to identify any trends in federal contracting with respect to women-
    owned small businesses (WOSBs), (2) solicit from federal employees involved
    in the federal procurement system any suggestions for increasing the number
    of federal contracts awarded to WOSBs, (3) report to the Congress on (a) any
    suggestions for increasing

    the number of federal contracts awarded to WOSBs that we consider
    appropriate after considering suggestions we received from the federal
    employees solicited per requirement 2 above, including any such means that
    incorporate the concepts of teaming and partnering, and (b) any barriers to
    the receipt of federal contracts by WOSBs and other small businesses that
    are created by legal or regulatory procurement requirements or practices,
    and (4) identify concerns of federal contracting

    officials about agencies' ability to meet their WOSB contracting goals. To
    meet our first objective, we interviewed staff from the Federal Procurement
    Data Center (FPDC) and the Small Business Administration (SBA) to determine
    the availability of federal procurement data pertaining specifically to
    WOSBs. We acquired data from FPDC on overall federal procurement
    expenditures and procurement expenditures on small businesses, small
    disadvantaged businesses (SDBs), 8( a) businesses, and WOSBs for fiscal
    years 1996 (the first year the implementation of the 5- percent WOSB
    governmentwide goal was in effect) through 1999. We acquired data from SBA
    on federal agencies' prime contracting and

    subcontracting WOSB goals and the agencies' related annual contract awards
    for fiscal years 1996 through 1999. We analyzed the FPDC data to determine
    the overall trends of federal procurement expenditures and the trends of
    federal contracting with WOSBs for the 4 fiscal years. We analyzed the SBA
    data to determine the percentage of agencies' contracts awarded to WOSBs
    each year, the number of agencies meeting their WOSB goal, and the small
    business programs that WOSBs used to receive their contract awards.

    To meet our other three objectives, we selected four agencies that accounted
    for over 80 percent of all federal contracting expenditures for fiscal years
    1997 through1999: Department of Defense (DOD), Department of Energy (DOE),
    National Aeronautics and Space Administration (NASA),

    and General Services Administration (GSA). We contacted procurement
    officials, agency Small Business Office representatives, and 30 contracting
    officers from these agencies to discuss any obstacles (legal or regulatory)
    they encountered in awarding contracts to WOSBs and their suggestions for
    increasing the number of contracts awarded to WOSBs, and meeting

    agencies' annual WOSB contracting goals. We conducted focused interviews and
    group discussions with officials from the Procurement Executive Council
    (PEC) and numerous agencies' Office of Small and

    Disadvantaged Business Utilization (OSDBU). We contacted officials from the
    Office of Federal Procurement Policy (OFPP), Office of Management and Budget
    (OMB), and SBA to discuss policy and regulations governing federal
    contracting with WOSBs and their suggestions for increasing contracts
    awarded to WOSBs and meeting WOSB contracting goals. We contacted
    representatives from the Office of Small Disadvantaged Business Utilization
    of 20 major agencies to determine why the agencies' WOSB

    goals were or were not met for the fiscal years 1996 through 1999 and any
    obstacles to and suggestions for awarding contracts to WOSBs and meeting
    WOSB contracting goals. These officials were selected for the most part
    based on their substantial experience in the field of federal contracting.

    In addition, we contacted representatives of four women business- owner
    organizations to gain their perspective on obstacles to and suggestions for
    increasing federal contract awards to WOSBs. We did not validate the

    obstacles identified nor assess the benefits and effects of the suggestions
    we received from the federal contracting officials and others we
    interviewed. In addition, we analyzed the information gathered and applied
    insights from a body of related work we previously performed. Our work was
    performed between May 2000 through January 2001 in accordance with generally
    accepted government auditing standards.

    Federal Agencies' Goals and Percentages of Contracts Annually Awarded to
    WomenOwned

    Appendi x II

    Small Businesses Table 5: Goals and Actual Percentage of Prime Contracts
    Awarded to WOSBs by Major Federal Agencies, Fiscal Years 1996- 99 FY 1999 FY
    1998 FY 1997 FY 1996 Federal agency Goal Actual Goal Actual Goal Actual Goal
    Actual

    Department of Agriculture 5. 0 3. 8 5. 0 3.1 5. 0 2. 5 3. 5 2. 8 Department
    of Commerce 5.0 5. 3 8.0 5. 0 8. 0 5. 7 7. 0 7. 6 Department of Defense 5. 0
    1. 9 5. 0 1.8 5. 0 1. 7 5. 0 1. 8 Department of Education 5. 0 0.9 4. 0 1. 2
    5. 0 1.2 5. 0 1.8 Department of Energy 2.6 2. 6 3.0 2. 9 3. 0 2. 1 3. 1 2. 7
    Department of Health and 4.6 3. 3 5.3 3. 4 5. 0 5. 0 5. 0 5. 6 Human
    Services Department of Housing and

    5.0 15. 0 5. 0 2.5 6. 0 1. 7 8. 8 10. 3 Urban Development Department of the
    Interior 4.7 4. 5 5.1 4. 1 4. 8 4. 8 4. 5 5. 1

    Department of Justice 3. 0 3. 3 3. 0 2.9 5. 0 2. 0 5. 0 2. 6 Department of
    Labor 5.5 3. 1 5.6 1. 4 5. 9 1. 5 5. 5 2. 0 Department of State 5. 0 8. 3 5.
    0 6.0 5. 0 8. 0 5. 1 5. 0 Department of Transportation 5.0 4. 1 5.0 3. 7 5.
    0 4. 0 5. 0 2. 4 Department of the Treasury 5.0 4. 7 5.0 3. 7 5. 0 6. 7 5. 0
    5. 2 Department of Veterans Affairs 5. 0 5. 6 4. 0 5.4 3. 5 6. 1 4. 0 5. 8
    Environmental Protection 5.0 3. 0 3.5 2. 6 3. 5 2. 2 2. 5 2. 1 Agency
    General Services 5.0 4. 8 5.0 3. 3 5. 0 2. 5 5. 0 3. 3

    Administration National Aeronautics and 1.4 1. 6 1.3 1. 4 1. 4 1. 6 2. 0 1.
    6 Space Administration Social Security Administration 5.0 3. 8 5.0 4. 4 5. 0
    5. 2 5. 0 2. 4

    Tennessee Valley Authority 3. 5 1. 6 1. 9 1.0 1. 9 1. 5 1. 8 1. 6 U. S.
    Agency for International 5.0 4. 4 5.0 4. 5 5. 0 3. 0 5. 0 3. 7 Development
    Source: Small Business Administration.

    Table 6: Goals and Actual Percentage of Subcontracts Awarded to WOSBs by
    Major Federal Agencies, Fiscal Years 1996- 99 FY 1999 FY 1998 FY 1997 FY
    1996 Federal agency Goal Actual Goal Actual Goal Actual Goal Actual

    Department of Agriculture 5. 0 3.3 5. 0 2.9 5. 0 4. 8 2. 0 2. 5 Department
    of Commerce 8. 0 5. 5 8. 0 4. 6 8.0 9. 4 7.0 6. 0 Department of Defense 5. 0
    3.9 5. 0 4.5 5. 0 3. 4 5. 0 3. 3 Department of Education 5. 0 3.0 3. 9 4.7
    6. 6 3. 8 6. 0 6. 5 Department of Energy 6. 0 6. 6 4. 0 3. 7 4.0 7. 6 4.1 3.
    8 Department of Health and 17. 7 4.1 2. 5 3.3 1. 7 5. 0 2. 0 1. 7 Human
    Services Department of Housing and

    5. 0 8. 3 5. 0 14.1 5. 0 10 8.0 5. 1 Urban Development Department of the
    Interior 2. 3 4. 5 2. 0 7. 1 2.0 8. 5 2.0 2. 2

    Department of Justice 7. 0 5.5 7. 0 5 6. 5 8. 3 5. 5 6. 3 Department of
    Labor 5. 4 6. 3 5. 3 5. 5 5.3 4. 8 5.0 5. 8 Department of State 5. 0 9.7 5.
    0 8.6 5. 0 8. 0 5. 0 9. 7 Department of Transportation 5. 0 4. 0 5. 0 3. 8
    5.0 12. 1 5. 0 2. 6 Department of the Treasury 5. 0 7. 2 5. 0 6. 4 5.0 7. 8
    4.0 5. 6 Department of Veterans 5. 0 5. 7 1. 0 2. 1 1.0 5. 5 2.0 1. 4
    Affairs Environmental Protection 6. 0 8. 1 3. 5 7. 0 3.5 3. 4 3.3 2. 9

    Agency General Services 5. 0 4. 5 5. 0 4. 2 5.0 4. 5 5.0 3. 0 Administration
    National Aeronautics and

    6. 6 6. 8 6. 4 6. 8 6.0 6. 7 5.0 5. 9 Space Administration Social Security
    5. 0 10.5 5. 0 16. 3 5.0 4. 9 5.0 0. 0

    Administration Tennessee Valley Authority 4. 0 4.3 4. 0 9.3 4. 0 3. 5 3. 5
    4. 0 U. S. Agency for International 3. 3 7. 8 5. 0 5. 7 5.0 8. 8 5.0 12
    Development Source: Small Business Administration.

    Comments From the Small Business

    Appendi x II I Administration

    Now on p. 11. Now on p. 13. Now on p. 14.

    Now on p. 12. Now on pp. 37 and 38.

    Appendi x V I Comments From the Department of Defense

    Comments From the National Aeronautics

    Appendi x V and Space Administration

    Comments From the National Women's

    Appendi x VI Business Council

    Now on p. 8. Now on p. 28. Now on p. 13.

    Now on p. 22. Now on p. 27.

    Now on p. 35. Now on pp. 39 and 40.

    Now on p. 4.

    Appendi x VII

    GAO Contacts and Staff Acknowledgments GAO Contact JayEtta Z. Hecker, (202)
    512- 8387 Acknowledgments In addition, William R. Chatlos, Elizabeth R.
    Eisenstadt, Colin J. Fallon,

    Sherrill H. Johnson, Frederick Lyles, Dorothy M. Tejada, and Adam Vodraska
    made key contributions to this report.

    (240388) Lett er

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    GAO United States General Accounting Office

    Page 1 GAO- 01- 346 Contracting With Women- Owned Small Businesses

    Contents

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    Appendix I

    Appendix I Objectives, Scope, and Methodology

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    Appendix II

    Appendix II Federal Agencies' Goals and Percentages of Contracts Annually
    Awarded to WomenOwned

    Small Businesses Page 51 GAO- 01- 346 Contracting With Women- Owned Small
    Businesses

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    Appendix III

    Appendix III Comments From the Small Business Administration

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    Appendix IV

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    Appendix V

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    Appendix VI

    Appendix VI Comments From the National Women's Business Council

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    Appendix VI Comments From the National Women's Business Council

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    Appendix VI Comments From the National Women's Business Council

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    Appendix VI Comments From the National Women's Business Council

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    Appendix VII

    United States General Accounting Office Washington, D. C. 20548- 0001

    Official Business Penalty for Private Use $300

    Address Correction Requested Presorted Standard

    Postage & Fees Paid GAO Permit No. GI00
    *** End of document. ***