SBA Draws Fire Over Women’s Set-Aside Leaders of the House and Senate Small Business committees attacked SBA’s decision to sharply limit eligibility for the set-aside program for woman-owned businesses. In a proposed rule published in the Dec. 27 Federal Register, SBA said companies in only four NAICS codes would be eligible for set-aside contracts: 3328—Coating, Engraving, Heat Treating, and Allied Activities. 3371—Household and Institutional Furniture and Kitchen Cabinet Manufacturing. 4412—Other Motor Vehicle Dealers. The Census Bureau says this category covers dealers in recreational vehicles and motor homes. 9281—National Security and International Affairs. According to the Census Bureau, “This industry comprises government establishments of the Armed Forces, including the National Guard, primarily engaged in national security and related activities.” Denunciation came quickly: •“A slap in the face to women business owners” — Senate Small Business Committee Chairman John Kerry, D-MA. •“This proposal would create an initiative benefiting only a tiny fraction of the businesswomen of this country.” — House Small Business Committee chairwoman Nydia Velazquez, D-NY. •“A continuation of the SBA’s active sabotage of the women’s contracting program” — Margot Dorfman, CEO of the U.S. Women’s Chamber of Commerce. •“SBA’s proposed rules gut the program.” – Erin Fuller, executive director of the National Association of Women Business Owners. •“A drastic step backwards” – Barbara Kasoff, president of Women Impacting Public Policy. “I will call on the administration to throw out this rule and put forward a workable, more inclusive proposal that respects women,” Sen. Kerry said in a statement. Both Kerry and Velazquez said they plan to call SBA Administrator Steven Preston to testify at hearings this month. The set-aside program was created by Congress in 2000, but SBA repeatedly delayed publishing a rule to implement it while the agency wrestled with the issue of eligibility. Congress mandated that set-asides be limited to industries in which women were underrepresented in federal procurement. A study by the Rand Corp. identified 28 different approaches to determine underrepresentation. SBA chose the most restrictive one. SBA said it chose to determine underrepresentation by measuring the contract dollars awarded to woman-owned businesses, instead of the number of contracts awarded. Rand’s study found that woman-owned firms were underrepresented in 87% of industries when measured by the number of contracts, but in only a handful when measured by dollars. In its Federal Register notice, SBA said Congress has established small business goals measured in dollars. It added, “Congress appropriates Federal funding in dollars, the Federal budget is divided in dollars, all Federal government contracts are awarded in dollars, and the accounting and auditing processes focus on how these dollars are spent.” However, the Rand report said, “Most studies examining whether disadvantaged businesses are underrepresented among federal contractors have focused on the number of contracts awarded. If disadvantaged firms receive fewer contracts than their total representation in the industry studied, they are deemed to be underrepresented.” The proposed rule creates an additional hurdle before a contract can be set aside for woman-owned firms. “SBA proposes that the agency must determine whether the set-aside is substantially related to remedying sex discrimination in that industry,” SBA said in its explanation of the rule. Each agency must analyze its own procurement history to determine whether it has discriminated against women in that industry. “Federal courts have generally required that the government establish probative evidence of discrimination in the relevant industry in order to justify sex-based contracting preferences,” SBA said. “We’ve been trying for seven years to get the Administration to end unfair contracting practices,” Sen. Kerry said. “By cherry picking data, they’ve not only done nothing to level the playing field, they’ve actually shut women out of the process for thousands of different types of contracts.” House Small Business Chairwoman Velazquez said she will schedule a hearing “to determine if the agency ignored Congressional intent in crafting this program.” The House approved legislation in October that would permit set-asides in 22 industry sectors, including most categories of services. The Bush administration opposed the bill, and it never came up for a vote in the Senate. Although Congress has set a goal of awarding 5% of federal contract dollars to woman-owned firms, those firms have never received even 4% of the dollars, according to official figures. SBA’s proposed rule is 3245-AF40. Comments are due Feb. 25.