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-
protï¿½gï¿½ 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- protï¿½gï¿½ 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- protï¿½gï¿½
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- protï¿½gï¿½ 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- Protï¿½gï¿½ greater extent in
agency mentor- protï¿½gï¿½ programs. For example, an Programs

OSDBU at NASA was very enthusiastic about NASA's achievements using the
mentor- protï¿½gï¿½ program for assisting WOSBs. Furthermore, the NWBC study on
best practices mentioned earlier describes how some agencies have
established mentor- protï¿½gï¿½ programs to develop and increase the number of
WOSBs as subcontractors. 29 The study points out that under

these programs, both mentors and protï¿½gï¿½s 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-
protï¿½gï¿½ programs available for WOSBs.

commercial contracts. According to the study, at some agencies the mentor-
protï¿½gï¿½ program provides incentives for mentors to establish and implement a
developmental assistance plan to enable the protï¿½gï¿½ company to compete more
successfully for prime and subcontract awards. The study stated that
potential benefits to protï¿½gï¿½ 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- protï¿½gï¿½ 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 protï¿½gï¿½ firms under DOD's statutory mentor- protï¿½gï¿½
program. 30 The suggested inclusion of WOSBs in agencies' mentor- protï¿½gï¿½
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- protï¿½gï¿½ 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- protï¿½gï¿½ 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 mentorprotï¿½gï¿½ 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- protï¿½gï¿½ 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.

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GAO United States General Accounting Office

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Contents

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States General Accounting Office

Washington, D. C. 20548 Page 3 GAO- 01- 346 Contracting With Women- Owned
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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. ***