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Federal Market Intelligence for Small Business |
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Set-Aside Alert WOSB investigation:“SBA is very concerned”Set-Aside Alert found dozens of EDWOSB set-aside contracts apparently wrongly awarded to WOSBs; protests may increaseA pattern of errors in official data for women-owned federal contractors suggests that dozens of U.S. government contracts totaling tens of millions of dollars may have been awarded wrongly to ineligible firms, Set-Aside Alert’s exclusive investigation has found. Set-Aside Alert previously reported on its research that led to discovery of widespread errors in official data for federal set-aside contracts for Women-Owned Small businesses (WOSBs) and Economically-Disadvantaged WOSBs (see April 17, 2015 issue). The errors primarily consisted of multiple agencies reporting dozens of large set-aside contracts in industry NAICS codes designated solely for EDWOSBs as having been awarded to WOSBs. The pattern of errors suggests that dozens of set-aside contracts restricted to EDWOSBs may have been awarded wrongly to WOSBs in reality, a Small Business Administration source confirmed on background. We also contacted SBA for an official comment. After the SBA reviewed our findings, Sean Crean, SBA’s director of government contracting, issued a statement to Set-Aside Alert saying the agency is following up on the problems identified in our report. “SBA is very concerned (about) the information reported in the Set-Aside Alert Vol. 23, No. 8 regarding the apparent use of NAICS codes reserved exclusively for the EDWOSB program that apparently were awarded to WOSB firms,” Crean told Set-Aside Alert. “We are looking into the practices and execution of the agencies identified in this report to address how to prevent this from occurring in the future. SBA is committed to ensuring that only eligible EDWOSB firms are awarded contracts from EDWOSB set-aside competitions,” Crean told Set-Aside Alert. Protests may be advisable As a result of the pattern of errors and possible misdirection of set-asides, contract specialists are advising that WOSB and EDWOSB contractors be vigilant in reviewing all future set-aside solicitations and awards to ensure that the proper NAICS Code is applied, and to protest if errors occur. “This is very, very interesting and very troubling for EDWOSBs. I think that it is probably too late for protests involving past contract awards,” Steven Koprince, government contracting attorney, told Set-Aside Alert. Since NAICS codes are considered a solicitation term, such terms generally must be protested before proposals are due, or the protest is untimely, he added. “I would absolutely suggest that EDWOSBs pay very close attention to the NAICS codes and set-aside designations placed on future solicitations. If the solicitation is set-aside for WOSBs, but has been assigned a NAICS code under which only EDWOSB set-asides are allowed, a pre-award protest would likely result in agency corrective action (or a sustain decision, if the agency chose to defend the protest on its merits for some reason),” he said. Megan C. Connor, attorney with Piliero Mazza PLLC, said the investigation shows that contracting officers may be unfamiliar with the NAICS code restrictions in the program. “The findings that contracts were awarded as WOSB set-asides under EDWOSB NAICS codes is, unfortunately, not surprising.” She encouraged WOSBs and EDWOSBs to check immediately after a solicitation to ensure that NAICS code restrictions were being honored. Ann Sullivan, director of government relations for Women Impacting Public Policy, which lobbied for the WOSB program, said she was “dismayed” by the findings. Sullivan said the errors should have been avoided. “It seems to us that the NAICS code lists for WOSB and EDWOSB are pretty straightforward. They are clearly listed on SBA’s website. Women-owned businesses would be wise to check procurements for the proper usage of the NAICS code not only in this program but for every contract they seek.” NAICS code restrictions The SBA source said the pattern of erroneous awards most likely is not intentional but instead probably reflects a lack of understanding of the WOSB and EDWOSB programs and their restrictions. “The WOSB program, the way it is set up, is very complicated,” the SBA source told Set-Aside Alert. “It is the only program that is segmented (into WOSB and EDWOSB) and that may be creating confusion.” Specifically, there may be confusion about the NAICS code restrictions. Under SBA rules, NAICS codes in which women are underrepresented are designated for either WOSBs or EDWOSBs, but not both; there is no overlap between the two sets of NAICS codes. A WOSB set-aside may be awarded to a WOSB or an EDWOSB, while an EDWOSB set-aside must go to an EDWOSB. The division of the NAICS codes is one of the lesser-known aspects of the program, and contracting officers may have made incorrect assumptions, Connor told Set-Aside Alert. “EDWOSBs may pursue set-asides under both EDWOSB and WOSB NAICS codes; WOSBs may only pursue set-asides under WOSB NAICS codes. However, someone not familiar with the regulations and the program may believe that it goes both ways,” Connor said. “I suspect that the WOSB awards under EDWOSB codes are the result of mistake and misinformation, not malfeasance,” she added. Set-Aside Alert’s investigation Set-Aside Alert initiated the investigation after we performed research to identify the top industry NAICS codes for WOSB and EDWOSB federal set-asides. After finding numerous errors in the official data, we began an investigation to determine the source of the errors and to look into the implications for WOSBs and EDWOSBs. 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. The WOSB contracts totaled $86 million, and the EDWOSB contracts, $54 million. From our initial data set, Set-Aside Alert honed in to identify the top 10 NAICS codes for WOSBs and the top 10 NAICS codes for EDWOSBs, based on total dollars awarded. 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 72 contract actions for EDWOSBs in those NAICS codes. Problematic NAICS codes Here are the top 10 NAICS codes reserved for EDWOSBs, in which we found substantial numbers of contracts apparently being awarded wrongly to WOSBs:
Agencies awarding WOSB and EDWOSB contracts in the above NAICS Codes included the Patent & Trademark Office, Army, Navy, National Park Service, Farm Service Agency, Food Safety and Inspection Service, U.S. Customs and Border Protection, Coast Guard, Veterans Affairs Department and Agency for International Development. The problems identified in the top 10 NAICS codes for EDWOSB set-asides also may be occurring in less popular NAICS codes for EDWOSB set-asides. (Correction: EDWOSB contract actions totaled 72 in the top 10 NAICS codes. We erroneously reported 64 such actions in the 4/17 edition.)
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