Set-Aside Alert exclusive research: Why so many errors in WOSB & EDWOSB federal set-aside data?

What started out as basic research to identify the most popular industries for set-asides for women-owned small businesses (WOSBs) and Economically-Disadvantaged WOSBs (EDWOSBs) turned into a lengthy quest that revealed apparently extensive data problems for the programs.

Set-Aside Alert initiated a project to identify the top industry NAICS Codes for WOSB and EDWOSB federal set-asides. We found that the federal data appeared to be seriously compromised, so we discarded our initial goal.

The goal morphed into this: to find out why official data reported for dozens of the largest set-aside contract actions at multiple federal agencies in nine of the 10 most popular NAICS Codes for EDWOSBs apparently was reported erroneously.

We’re still trying to get answers from the agencies involved.

Unfortunately, the data problems appear to permeate the top rungs of the WOSB and EDWOSB federal set-aside data. For that reason, Set-Aside Alert cautions that our previous recent articles on WOSB and EDWOSB set-aside data (see the March 6, March 20 and April 6 editions in 2015)--while reflecting accurately the official federal data--may include erroneous NAICS Codes, or may have erroneously identified the type of set-aside involved, or may contain other data errors.

In other words, we reported the federal data accurately; however, during further research, we later found numerous apparent errors in the federal data set itself.

This is what we found.

To start, Set-Aside Alert identified $139 million in more than 400 WOSB and EDWOSB set-aside contracts expiring in 2015 and beyond from the Federal Procurement Data System. These contracts were identified in the data as either WOSB or EDWOSB set-asides.

Many of those contracts are likely to become available for competition when they expire. The WOSB contracts totaled $86 million, and the EDWOSB contracts, $54 million. Most were awarded in the last two fiscal years.

Under Small Business Administration regulations, WOSBs and EDWOSBs are eligible for set-asides only in industries in which they are poorly represented. A specific NAICS Code is available for a set-aside for either a WOSB or EDWOSB.

Both WOSBs and EDWOSBs are eligible for WOSB set-asides. But only EDWOSBs are eligible for EDWOSB set-asides.

From our initial data set, Set-Aside Alert honed in to identify the most popular NAICS Codes, based on total dollars awarded. We came up with the top 10 NAICS Codes for EDWOSB set-asides and the top 10 NAICS Codes for WOSB set-asides.

But when we looked more closely at the contract actions, we found a surprise.

In the top 10 NAICS Codes for EDWOSBs, awards were supposed to go to EDWOSBs. But in nine of the 10 NAICS codes most of the awards were going to WOSBs.

There were 87 contracts awarded to WOSBs in the nine top NAICS Codes reserved for EDWOSBs only. There were 64 contract actions for EDWOSBs in those NAICS Codes.

The dollars involved in the apparently erroneous data entries were substantial.

For example, we discovered that the top NAICS code for EDWOSB set-asides, with $30 million awarded, was 541512.

However, when looking at the contracts in that NAICS Code, no awards went to EDWOSBs. All were awarded to WOSBs, including a series of contracts awarded to a single WOSB by the U.S. Patent & Trademark Office. The agencies reported the $30 million as WOSB set-asides. However, the 541512 NAICS Code is supposed to be reserved for EDWOSB set-asides only.

Set-Aside Alert asked the PTO for comment, and the agency has responded as of press time that it is working on a response. The SBA also was working on a response at press time.

Similar problems affected contracts in nine of the top 10 NAICS Codes for EDWOSBs-only.

In the second most popular NAICS Code, 541611, there were $23.8 million in awards. They were split roughly in half: 20 to EDWOSBs, and 22 to WOSBs. The contracts were supposed to go to EDWOSBs only.

In the third most popular NAICS Code, 541511, with $14 million in awards, WOSBs got 12 awards while EDWOSBs got five. Again, all were supposed to go to EDWOSBs.

The data problems made it impossible to describe which industries are most popular for EDWOSB and WOSB set-asides. Viewing the problem from a different angle, we found that dozens of the largest contracts identified as WOSB set-asides were in NAICS codes that are supposed to be assigned to EDWOSBs only.

Agency sources suggested that contracting officers may be reporting WOSB non-set-aside awards erroneously as WOSB set-asides because the WOSB and EDWOSB programs set-aside programs are relatively new--initiated in 2011--and they might not be aware of the limitations on the NAICS Codes. Or there might be other patterns at work creating errors.

The problems appear to be widespread. We noted similar errors in reporting for WOSB and EDWOSB awards by the PTO, Air Force, Army, Navy, Farm Service Agency, Food Safety and Inspection Service, Veterans Affairs Department, Bureau of the Census, Agency for International Development, Defense Health Agency and others.

Since the exact nature of the errors is unknown, the data problems have cast a shadow on data-based research for WOSBs and EDWOSBs.

For that reason, in future publications we will be melding our recent two lists --Top 50 Set-Aside Opportunities for WOSBs in 2015 and 2016 and Top 50 Set-Aside Opportunities for EDWOSBs in 2015 and 2016--into a single list to at least partially adjust for the apparent discrepancies in identifying the types of set-asides involved.

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