WOMEN-OWNED SMALL BUSINESSES IN FEDERAL 

SUBCONTRACTING: MEASURES AND DATA 

Prepared By 

MacroSys Research and Technology 

Washington, DC 20006 

Prepared For 

National Women’s Business Council 

U.S. Small Business Administration 

Washington, DC 20024 

September 27, 2002 
Table of Contents 

Executive summary......................................................................................................I
 

1. Introduction........................................................................................................... 1
 

2. The disparity ratio and its approximations................................................ 1
 

2.1 DEFINITION................................................................................................................. 1
 

2.2 APPROXIMATIONS....................................................................................................... 3
 

3. Some data and results......................................................................................... 6
 

3.1 FPDC: SUBCONTRACTING............................................................................................ 6
 

3.2 SSBF: CAPACITY....................................................................................................... 11
 

4. A proposal for data collection....................................................................... 14
 

4.1 DATA COLLECTION STRATEGY.................................................................................. 14
 

4.2 SAMPLING FRAME AND THE SAMPLE ......................................................................... 15
 

4.3 QUESTIONNAIRE DESIGN........................................................................................... 19
 

5. Appendix .................................................................................................................. 20
 

5.1 THE DATA COLLECTION FORM – VERSION 1 .............................................................. 20
 

5.2. THE DATA COLLECTION FORM – VERSION 2............................................................. 22
 
Executive Summary 

This report contains the results of a research and data development effort on womenowned small businesses (WOSBs) in federal subcontracting. It consists of three core 

sections. Section 1 presents a conceptual level discussion of disparity measurement and 

develops the basic measure and a set of approximations. Section 2 provides summary 

information on two important datasets for disparity measurement and analysis. It also 

presents some new findings from the data analysis. Section 3 proposes a data collection 

plan including the selection of sampling frame, determination of the sample size, and 

stratification. The two versions of a proposed data collection form are in the appendix. 

Our discussion in section 1 puts much emphasis on clear definitions of key concepts and 

variables and precise expressions of the hidden technical relations among those concepts 

and variables. As a result, the many underlying issues and assumptions are uncovered for 

the first time as we know but the presentation may appear overly abstract at times. 

Our investigation of the key dataset on federal subcontracting from the Federal 

Procurement Data Center resulted in two main findings. 

1.	 The WOSBs’ share in the total subcontracting of all small businesses was around 

12% in 1999 and 2000. This share is much higher than the WOSBs’ share of less 

than 5% in total subcontracting. 

2.	 The prime contractors with larger amounts of total subcontracting tend to have 

smaller shares of that total for WOSBs. 

We conducted an extensive data search and analysis on WOSB capacities. Using the 

1998 Survey of Small Business Finance conducted by the Federal Reserve, we were able 

to develop the data for a set of nine measures that we argue are closely correlated with 

the true capacity of any business concerns. We use both quantitative and qualitative 

measures and provide a very sensible argument in support of what we discovered for the 

first time as far as we know. Major findings for 1998 are: 

1.	 WOSBs accounted for about 20% of the total capacity of all small businesses. 

2.	 WOSBs were in a relatively stronger position in the sense that a smaller 

percentage of WOSB firms experienced problems in labor, cash flow, and 

technology than other small business firms. 

With 12% of the total subcontracting to all small businesses going to WOSBs and 

assuming no significant changes in WOSB capacity between 1998 and 1999, the purely 

gender-based disparity ratio for WOSBs is about 0.6. In other words, WOSBs are 

underrepresented in federal subcontracting according to 1999 and 2000 data. 

Data do not allow us to say more. One important dimension, for example, would be 

detail at an industry level; however, no existing data provide such detail. To overcome 

the shortcomings, we developed a data collection plan that is ready for implementation. 

i 
1. Introduction 

Federal subcontracting is a potentially lucrative arena for small businesses, including 

women-owned small businesses (WOSBs). For example, both the Federal Acquisition 

Streamlining Act of 1994 and Executive Order 13157 provide that it shall be the policy of 

the executive branch to establish a participation goal for WOSBs of not less than five 

percent of the total value of all prime contract awards for each fiscal year and of not less 

than five percent of the total value of all subcontract awards for each fiscal year. Further, 

as more prime contracts are consolidated or bundled, WOSBs may find more 

opportunities with subcontracting. In addition, the subcontracting arena may be a more 

favorable one for WOSB concerns just starting in federal contracting. 

It is of course a different issue whether WOSBs are actually benefiting from such 

subcontracting opportunities. Many questions need to be answered to get a clear idea 

about the issue. For example, what are the federal subcontracting opportunities for 

WOSBs? What are the capacities of WOSBs for the federal subcontracting? Are WOSBs 

actively pursuing these opportunities? Are executive agencies meeting the subcontracting 

goals with WOSBs? Often-used summary measures are disparity ratios. A disparity ratio 

is a ratio between the WOSB share in a well-defined total of subcontracting and the 

WOSB share in a similarly defined total of capacity. Disparity ratios combine 

information on utilization and capacity in one number, but both utilization and capacity 

have to be carefully defined and measured for a disparity ratio to be meaningful. For 

example, the capacity should be that part of the corporate capability that is ready and 

willingly offered for government use. In other words, to be counted as part of the 

available capacity, a business concern should be technically capable, ready for 

government use, and willing to be used by government. 

Extensive data with many details are needed to calculate a reliable disparity measure. 

With such data rarely available, analysts have often had to rely on assumptions and 

approximations. This report summarizes a special research and data development effort 

concerning WOSBs in federal subcontracting. Section 1 discusses the conceptual issues 

in measuring disparity ratios and derives approximations in consideration of data 

limitations. Section 2 presents the summary results from two relevant data sources, one 

concerning the WOSB utilization and the other the WOSB capacity. Limited by the 

original data, we were unable to extract information more detailed than system-level and 

nationwide aggregates. In consideration of the data limitations, section 3 proposes a data 

collection plan that can be implemented to gather data with industry level details. 

2. The Disparity Ratio and Its Approximations 

2.1 Definition 

1 
 

 

 

 

A disparity ratio summarizes the relative utilization of WOSBs in federal subcontracting 

in comparison with the relative WOSB capacity. 

x 

X 

x 

y D 1 ” = ” D y X 2 

Y Y

(1)	 

where 

(1) y is the total available capacity of WOSBs for federal subcontracting; 

(2) Y is the total available capacity of all businesses for federal subcontracting; 

(3) x is the actual utilization of WOSBs in federal subcontracting; and 

(4) X is the total federal subcontracting opportunities. 

D1 is a ratio between the subcontracting of WOSBs relative to the total subcontracting 

( x X ) and the available capacity of WOSBs relative to the total available capacity 

( y Y ). D1 > 1 indicates that WOSB share in the federal subcontracting is larger than 

their share in the total available capacity. D2 is a ratio between the WOSB 

subcontracting as a share of their available capacity ( x y) and the total subcontracting as 

a share of the total available capacity ( X Y ). D2 > 1 indicates that a larger percentage of 

WOSB capacity is utilized for the federal subcontracting than the business sector as a 

whole. Obviously, D1 and D2 imply each other and take exactly the same values. 

Therefore, the following interpretations apply to both. 

 D , D < 1, WOSBs underrepresented ; 1 2 

 D1 , D2 = 1, WOSBs equallyrepresented ; 

 

 D 1, D 2 > 1, WOSBs overrepresented .

(2)	 

Data on x, X, y, and Y rarely exist with the needed level of details or timeliness. For 

example, some information for y may be developed on the basis of the Census data, but 

the latest Census data are for 1997. The Federal Procurement Data Center (FPDC) 

collects summary data on subcontracting activities, hence x and X, through standard form 

295, but the FPDC data do not provide sufficient characteristics for the subcontractors. 

Particularly difficult are the data on the available capacity, y and Y. Determining the total 

capacity is difficult enough. In this case, the total capacity must be further limited by its 

availability (ready and willingly offered for government utilization). A General 

Accounting Office (GAO) study1

 found that many disparity studies under- or overestimated the representation of disadvantaged businesses in the federal procurement due 

1

 GAO-01-586, Disadvantaged Business Enterprise: Critical Information Is Needed to Understand Program 

Impact, June 2001. 

2 
 

 

 

to data limitations on available capacities. There is a problem on the utilization side, too. 

Because the capacity must be qualified by its readiness, the total contracting or 

subcontracting opportunities have to be similarly qualified. Specifically, those 

opportunities outside of the available capacity must be excluded. 

Such qualifications may make significant differences. For example, the Small Business 

Administration (SBA) reported that small businesses received 23 percent of total federal 

procurement in fiscal year 1998 while SBA’s Office of Advocacy reported 21 percent for 

a similar measure. The difference was caused by the exclusion of several categories of 

procurements based on the belief that small businesses do not have a reasonable 

opportunity to compete for them. Specifically, SBA excludes foreign military sales, 

overseas procurements, procurements from mandatory sources of supplies such as 

purchases from Federal Prison Industries, Inc., and purchases for specific programs from 

the Departments of State, Transportation, and the Treasury because (1) foreign 

government purchases are not subject to SBA requirements, (2) U.S. small businesses are 

not likely to bid for overseas contracts, and (3) acquisitions from mandatory sources 

and/or for specific programs are to be awarded non-competitively in accordance with 

legal requirements.2

 GAO considers SBA’s approach as within its discretion under the 

statute, although it does not challenge the Office of Advocacy’s position that there should 

not be such exclusions.3

 What needs to be pointed out is that the exclusion based on the 

criteria of capability, readiness, and willingness may not overlap with that carried out by 

SBA but is likely to be more extensive. 

2.2 Approximations 

A survey of all businesses, including WOSBs, is needed to determine the available 

capacity for the overall business sector (Y), particularly with those qualifications. So far 

nobody has conducted such a survey. Information on the WOSB capacity (y) and the 

overall capacity (Y) may be used for goal setting by SBA and other federal agencies, but 

it is largely the information on the WOSB subcontracting amount (x) and the total 

subcontracting opportunities (X) that is used to evaluate the program and determine the 

achievement of goals. Assuming the subcontracting goals set for WOSBs by the federal 

agencies are in rough correspondence with WOSB relative capacity, or 

(3) @ y 

Y 

where a is the goal, then D1 can be approximated as 

~ x

(4) D1 @ D1 ” 

aX 

2

 GAO-01-119, Small Business: Trends in Federal Procurement in the 1990s, January 2001. 

3

 GAO/GGD-00-82, Small Businesses: Limited Information Available on Contract Bundling’s Extent and 

Effects, March 2000. 

3 
 

 

 

~ where X is assumed to have embodied the necessary exclusions. The interpretation of D1 

remains the same as in equation (2), but the key data requirement is reduced to x and X. 

As mentioned above, data on x and X are available at an aggregate level from FPDC. The 

FPDC uses GSA Standard Form 295 to collect subcontract award data from prime 

contractors or subcontractors that (a) hold one or more contracts over $500,000 (over 

$1,000,000 for construction of a public facility) and (b) are required to report 

subcontracts awarded to Small Business, Small Disadvantaged Business (SDB), WomenOwned Small Business, and HUBZone Small Business concerns under a subcontracting 

plan. For the Department of Defense, the National Aeronautics and Space 

Administration, and the Coast Guard, this form also collects subcontract award data for 

Historically Black Colleges and Universities (HBCUs) and Minority Institutions (MIs). 

Selected data items in this form are in table 1. 

Table 1. Major Data Items in Standard Form 295 

Item 

Number 

Item Description Preset Values for 

Selection 

1a Reporting company’s name 

4 Reporting period 

6 Government agencies Army, Navy, ... 

7 Reporting company’s contractual status Prime, sub, or both 

9 Reporting company’s major products or service 

10a Cumulative subcontract awards to all small business concerns 

10b Cumulative subcontract awards to all large business concerns 

11 Cumulative subcontract awards to SDB concerns 

12 Cumulative subcontract awards to WOSB concerns 

13 Cumulative subcontract awards to HBCU/MI 

14 Cumulative subcontract awards to HUBZone SB concerns 

Limitations of these data are obvious. First, they cover only those contractors and 

subcontractors with contracts above $500,000. Second, they cover only the contracts with 

a subcontracting plan. Third, they do not provide any details about a WOSB concern such 

as its industry classification. How much these data under-represent the actual size of 

subcontracting is hard to know because there is very little information about the 

subcontracting activities in relation to contract size. However, it seems unlikely that no 

subcontracting happens for those contracts under $500,000. Likewise, it is unclear how 

much of the subcontracting is conducted through formal subcontracting plans even for 

those contracts above $500,000, making the possibility of under-coverage even more 

serious. Therefore, data collected through Standard Form 295 are not ideal for ~ constructing D1 approximation as in equation (4). 

With these limitations in mind, a limited version ofD

~

1 may still be constructed using data 

in table 1. Let Xi be the combined value of items 10a and 10b for a reporting company i 

4 
 

and xi the value of item 12 for the same reporting company i ; then the limited version of 

~ ~ D1 (call it D1 

l ) for WOSBs is as follows. 

~ x l � i D1 ” 

a � Xi 

(5) 

where i = 1,L,n and n is the number of reporting companies in the FPDC database. 

Depending on the information available, some or parts of some Xi s may be excluded 

based on the previous discussions. A large portion of the SBA’s exclusion is already done 

since, according to instructions of the GSA Standard Form 295, only subcontracts 

involving performance within the United States, its possessions, Puerto Rico, and the 

Trust Territory of the Pacific Islands should be included in the report. 

~ D1

l shows the extent to which the WOSB subcontracting goals were achieved by the 

reporting companies as a whole. As long as a closely approximates the participating ~ WOSBs’ share in the total available capacity for subcontracting, D1

l can also be used as a 

disparity ratio for the reporting companies and the participating WOSBs as a whole. ~ Whether or not D1

l represents the magnitude of the general disparity ratio for the overall 

federal subcontracting depends on the representativeness of the group of WOSBs and the 

representativeness of the group of reporting companies in the FPDC database in relation 

to their respective populations. Since neither of the two groups is selected according to 

any statistical procedures, the statistical property ofD

~

1

l is impossible to determine. Table 

2 summarizes the discussions so far. 

Table 2. Three Measures of WOSB Utilization in Federal Subcontracting 

D1 Share in subcontracting to share in available 

capacity for all WOSBs 

Measures disparity; comprehensive 

~ D1 

Share in subcontracting to WOSB 

subcontracting goals for all WOSBs 

Measures goal achievement and maybe 

disparity*; comprehensive ~ Dl 

1 

Share in subcontracting to WOSB 

subcontracting goals for some WOSBs 

Measures goal achievement and maybe 

disparity*; not comprehensive 

* Depending on whether the WOSB goal reflects the relative WOSB capacity. 

All the above-presented measures are defined with all business enterprises as the 

reference group. For example, y is the total available capacity of WOSBs for federal 

subcontracting, and Y is the total available capacity of all businesses for federal 

subcontracting. Likewise, x is the federal subcontracting opportunities that went to 

WOSBs, and X is the total federal subcontracting opportunities that went to all 

businesses. WOSBs are members of small businesses that are in turn members of all 

businesses. D1 can be decomposed to show this connection. Let y

s be the total available 

capacity of all small businesses for federal subcontracting and xs the federal 

5 
 

 

subcontracting opportunities that went to all small businesses; then D1 can be expressed 

as the product of two ratios, i.e., 

x s x x 

X x s X f s D = = ” D D 1 s 1 1 y y y 

Y s y Y 

(6) 

where Df s s

1 ” (x x )/( y y ) is a more purely gender-based disparity ratio and 

Ds 

1 ” (xs X )/ ( y

s Y) is a more purely size-based disparity ratio.4 These two ratios are 

independently useful indicators. Actually, the more purely gender-based disparity ratio is 

more appropriate for measuring the possible underlying gender-based disparities. The 

more purely size-based disparity ratio is nothing but the frequently measured one in many 

small business disparity studies. Clearly, the ratio for WOSBs with all firms as the 

reference ( D1 ) may change because of changes in the ratio for WOSBs with all small 

firms as the reference ( D f 

1 ) or changes in the ratio for small firms with all firms as the 

reference ( Ds 

1 ) or both. Since changes in Ds f 1 may have nothing to do with gender, D1 is

more informative about the true extent of gender disparity. This is so because we limited 

our domain of analysis to the women-owned small businesses. Additionally, equation (6) 

indicates other possibilities for using existing data to conduct the estimation. Knowing 

any two among D1 , D f 

1 , and Ds 1 , the other can be determined. Since small businesses are 

more frequently studied, findings in other studies may be utilized. 

 

3. Some Data and Results 

As briefly mentioned before, data that satisfy the exact requirements for implementing 

measures developed above are not readily available. Data at an industry level, with more 

or less detail, are even harder to obtain. There are two major datasets that provide 

aggregate information on WOSB subcontracting and capacity. The FPDC data, presented 

earlier, is the only source for subcontracting data distinguished by type of businesses. 

The other dataset is from the Federal Reserve’s Survey of Small Business Finance 

(SSBF). The SSBF data provide some details that facilitate a reasonable approximation 

of WOSB capacities. The Census Bureau conducts a Survey of Women-Owned 

Businesses (SWOB) as a part of the economic census but the SWOB data do not provide 

details for sorting out WOSBs. 

3.1 FPDC: Subcontracting 

4

 Obviously, this is not the only way possible to do the decomposition. For example, if we distinguish 

between small and socially disadvantaged businesses and other small businesses and consider WOSBs 

belong to the former, a three-way decomposition will be useful. Next section will indeed present such a 

decomposition with subcontracting data. 

6 
Chart 1. Subcontracting to Small and Large 

Business Concerns 

Small Businesses Large Businesses 

50000 

40000 

Million $ 30000 

20000 

10000 

0 

1999 2000 

Year 

 

Two years of data were obtained from FPDC for this project. The 1999 dataset contains 

3,651 records with information on individual prime contractors’ business names, key 

products, and dollar values of subcontracting with large and small and disadvantaged 

businesses (SDBs) and with different types of SDBs. The 2000 dataset contains 3,682 

records with the same set of information on prime contractors and their subcontracting 

activities. 

The 3,651 prime contractors contracted out $73,804 million of their federal business in 

1999 and $76,998 million in 2000. Sixty percent of the total subcontracting dollars went 

to large business concerns in both years. Less than a third of the remaining 40% went to 

all types of small and socially disadvantaged businesses (SSDBs) including all 8(a) 

businesses or small and disadvantaged businesses (SDBs), WOSBs, black colleges, and 

HUBZone businesses.5 Charts 1 and 2 provide the summary information. 

5

 For the ease of exposition, we group under small and socially disadvantaged businesses (SSDBs) all 8(a) 

businesses or small and disadvantaged businesses (SDBs), WOSBs, black colleges, and HUBZone 

businesses. It should be noted that a WOSB firm is not necessarily certified in any of the officially 

designated disadvantaged status. Excluding WOSBs from SSDBs will result in a much lower share for 

SSDBs in chart 2. In the following discussion, we look at both cases where WOSBs are treated as part of 

SSDBs and as part of SBs. 

7 
Chart 2. Subcontracting to SSDBs and Other SBs 

SSDBs Other SBs 

0 

5000 

10000 

15000 

20000 

25000 

Million $ 

1999 2000 

Year 

Among SSDBs, SDBs or 8(a) businesses received more than half and WOSBs received 

about 40% in both 1999 and 2000. The remaining amount, about 1% in 1999 and 3% in 

2000, went to black colleges and HUBZone businesses. While black colleges received 

3% less in 2000 than they did in 1999, HUBZone businesses enjoyed a phenomenal 

increase of more than 400%. Overall, the total subcontracting amount increased 4.3% 

from 1999 to 2000 and the totals for small and large business concerns went up, 

respectively, by 1.6% and 6.2%. Charts 3 and 4 provide the summary information. 

Chart 3. 

Distribution of Total SSDB Subcontracting, 1999 

0.4% 0.5%

40.0% 

59.2% 

8(a) WOSBs Black College HUBZone 

8 
Chart 4. Distribution of Total SSDB Subcontracting, 

2000 

40.1% 57.4% 

0.3% 2.2% 

8(a) WOSBs Black College HUBZone 

 

As previously noted, a WOSB is not necessarily formally designated as socially 

disadvantaged. Therefore, it is useful to present WOSBs as part of the entire universe of 

SBs. Not surprisingly, WOSBs accounted for a far smaller share of the total SBs in both 

1999 and 2000 (11.3% and 11.8% respectively). 

It is straightforward to apply these data to the measures developed in the previous section 

at the aggregate level. For example, � xi �Xi in equation (5) is a ratio between the 

total subcontracting with WOSBs and the overall total subcontracting. This ratio and its 

decomposition similar to that in equation (6) for 1999 and 2000 are in table 3. 

Table 3. WOSB Share in Subcontracting and Its Decomposition (%) 

Year 

WOSBs in 

Total 

WOSBs in 

SBs SBs in Total 

SSDBs in 

SBs 

WOSBs in 

SSDBs 

1999 4.61 11.30 40.79 28.28 39.95 

2000 4.68 11.77 39.74 29.38 40.06 

To repeat what has been discussed the in previous section, there are several WOSB 

disparity ratios, depending on which group firms is used as a reference. One ratio with its 

numerator equal to the value for “WOSBs in Total” in table 3 uses the entire business 

world as the reference. The second one with its numerator equal to the value for 

“WOSBs in SBs” uses the universe of small businesses as the reference. The third one 

with its numerator equal to the value for “WOSBs in SSDBs” uses all small and socially 

disadvantaged businesses, as previously defined, as the reference. The first is D1 , while 

the second and third, as we argued earlier, are more purely gender-based disparity ratios. 

Although we cannot draw any conclusions about the level of these three disparity ratios 

because we do not have the corresponding capacity ratios, the decomposition as 

presented in equation (6) and table 3 is useful in itself. For example, SSDBs accounted 

9 
 

 

 

for a smaller share in total subcontracting for SBs than SBs in total and WOSBs in 

SSDBs. If SSDB’s share had been at a level comparable to that of the other two, WOSBs 

would have accounted for over 6% of the total subcontracting, other things being equal. 

From the public policy’s point of view, the decomposition clearly shows that efforts in 

promoting WOSBs do not necessarily have to be spent in areas directly related to 

WOSBs. Promoting the small businesses’ role in federal subcontracting and raising the 

presence of SSDBs in the small business community will all indirectly contribute to the 

presence of WOSBs in the federal subcontracting. 

Table 4. WOSB Subcontracting Distribution 

Range of Subcontracting Amount 

1999 2000 

Grand 

Total 

(Million $) 

WOSB 

Total 

(Million $) 

WOSB 

Share (%) 

Grand 

Total 

(Million $) 

WOSB 

Total 

(Million $) 

WOSB 

Share (%) 

Below $1 million 

At least $1 million but below $10 million 

At least $10 million but below $100 million 

At least $100 million 

Overall 

440 

4,522 

21,701 

47,141 

73,804 

37 

304 

1,174 

1,887 

3,402 

8.4 

6.7 

5.4 

4.0 

4.6 

421 

4,659 

22,276 

49,642 

76,998 

36 

344 

1,376 

1,846 

3,601 

8.6 

7.4 

6.2 

3.7 

4.7 

The overall share of WOSBs in the total subcontracting hides the underlying variations 

that may be of interest. As table 4 shows, those prime contractors with smaller amounts 

of federal subcontracting as a whole tend to have a larger share for WOSBs. For 1999, 

the firms with the smallest amount of subcontracting as a whole had the largest share of 

the total going to WOSBs (8.4%), while those with the largest subcontracting amount had 

the smallest share for WOSBs (4.0%). For 2000, it was 8.6% versus 3.7%. The 

difference between these two extremes was close to the overall WOSB share of 4.6% in 

1999 and was larger than the overall share of 4.7% in 2000. Similar differential patterns 

hold for intermediate groups for both years. 

It is hard to determine what may have contributed to these differences without more 

detailed data on prime contractors, subcontractors, and the nature of work under each 

specific contract. One possible factor that has nothing to do with a business concern’s 

social status is the WOSB capacity to handle large subcontracts. Another such factor 

could be the nature of contract work. If the size of subcontracts has a particular 

correlation with the nature of the contract work that happens to put WOSBs in a 

disadvantaged position, what appears to be a negative relationship between the 

subcontract size and the WOSB share is really a reflection of this underlying mismatch. 

There again seem to be useful policy implications in these findings. Specifically, if the 

negative relationship identified above is due to the difficulty in handling large contracts, 

WOSBs and their advocates may have to pay more attention to increase WOSB capacity 

10 
 

in this area. If the technical mismatch is the major factor, WOSBs will have to decide 

whether and how to expand their technical capability to better take advantage of more 

and larger subcontracting opportunities. If unfavorable treatment is at the root, more 

attention should then be paid to those firms with larger amounts of subcontracting. No 

matter which of these factors or their combinations are at work, it is clear that targeting 

those firms with large amounts of subcontracting will be more likely to increase the 

WOSB presence in federal subcontracting.6 

3.2 SSBF: Capacity 

Data on WOSB capacity, even at the aggregate level, is not as readily available as the 

FPDC data on WOSB subcontracting. This is not only due to the fact that the concept 

and measure of capacity as used here are highly qualified. Qualifications such as 

“readiness” and “willingness” are indeed hard to control but are secondary in a situation 

where basic data are not available. Several alternatives were investigated without much 

attention paid to these qualifications. We believe that the data from the Federal 

Reserve’s Survey of Small Business Finance (SSBF) is more appropriate than others such 

as those from the Census Bureau’s Survey of Women-Owned Businesses (SWOB) and 

Business Research Services Inc.’s National Directory of Woman-Owned Business Firms 

(NDWOB). 

The SSBF data is better than the SWOB data because the former relates directly to 

WOSBs rather than the larger universe of women-owned businesses. Also, the SWOB 

data of the latest census year 1997 are not consistent with the data from the most recent 

previous survey because the Census Bureau redefined the WOBs to include only those 

with at least 51% ownership belonging to women while the previous definition used 50% 

as the cut-off. The NDWOB data use 51% in the definition of WOBs. Additionally, it 

associates each WOB with a four-digit SIC code. For most firms included, data on sales, 

employment, or both are provided so that the size of a WOB can be determined according 

to the Small Business Administration’s size standards. The biggest disadvantage for 

BDWOB data is that there is no basis to assess the data coverage and representativeness 

because the dataset is to be developed from a membership directory that is compiled on a 

basis of voluntary participation. Since the SSBF data is developed from a statistically 

determined random sample, it overcomes this problem. The SSBF data provide a large 

set of variables that make a multidimensional picture possible. Furthermore, the rich 

dataset offers some possibility to control for qualifications such “readiness” and 

“willingness” for federal subcontracting. 

The 1998 SSBF data, the latest available, provide information about a nationally 

representative sample of small businesses in the United States. The target population is 

the population of all for-profit, non-financial, non-farm, and non-subsidiary business 

6

 It is worth noting that collecting more detailed micro datasets and conducting a behavioral analysis of 

subcontracting decisions by prime contractors will prove extremely useful to confirm or refute some of the 

conjectures that were spelt out in our discussion. Findings from such analysis should be valuable inputs for 

related public discussion and policy making. 

11 
 

 

enterprises that had fewer than 500 employees and were in operation as of year-end 1998. 

For the 1998 survey, employment was defined as the number of employees and owners 

working in the firm (whether or not the employees were full or part time). The public use 

dataset contains 3,561 firms. These firms represent 5.3 million small businesses. The 

public dataset contains weights that are required to estimate population statistics for the 

types of businesses included in the survey. The sampling procedures used for the 1998 

SSBF satisfy the requirement for relative capacity measurement because what is needed 

for this purpose is exactly a representative sample of all small businesses. Since the 

SSBF data only cover small businesses, the relative WOSB capacity based on this dataset 

is a more purely gender-based measure. As discussed in section 1, this measure is not 

only useful for disparity measurement within the universe of small businesses but also 

easy to be composed with other disparity measures to derive a WOSB disparity ratio with 

the entire business sector as the reference. Actually, a single measure of relative capacity 

for small businesses with the whole business sector as the reference is sufficient. 

The remaining problem is what should be used to measure the capacity of a business 

concern. Based on a careful examination of the SSBF questionnaire and dataset, we 

developed a set of measures so that a relatively comprehensive picture can be presented. 

Usual candidates such as the numbers of firms and employees should always be included. 

They do not exactly measure the true capacity but do provide some general idea of how 

large the whole sector is. Annual sales measure capacity more accurately, particularly 

when data for multiple years exist. Larger and growing sales generally indicate larger 

and growing capacity. A common problem with these measures, however, is that they 

largely show the capacity in existence or in the past, which is even worse. An ideal 

measure is one that measures the potential capacity. Such a measure, if it exists, also 

provides a better control for “readiness” and “willingness.” 

The SSBF data provide some useful information that can be used to approximate such an 

ideal measure. Specifically, we identified a set of variables that directly bear on the 

efficient operation of all business concerns and their general health. Cash on hand is such 

a variable. These variables and the ones discussed in the previous paragraph are in table 

5. 

Table 5. Measures of Relative WOSB Capacity 

WOSBs Other SBs All SBs 

WOSBs in 

Total (%) 

Number of Firms 

Number of Employees 

FY 1998 Sales (Million $) 

FY 1997 Sales (Million $) 

Cash on Hand (Million $) 

No. of Firms with Nationwide Sales 

No. of Firms with Financing Problem 

No. of Firms with Labor Problem 

No. of Firms with Cash Flow Problem 

No. of Firms with Technology Problem 

1,286,596 

7,907,527 

705,963 

724,157 

43,590 

101,403 

91,768 

169,867 

47,268 

17,405 

4,004,650 

37,463,974 

4,501,145 

4,012,786 

175,751 

400,840 

266,426 

701,449 

197,389 

59,475 

5,291,246 

45,371,501 

5,207,108 

4,736,943 

219,341 

502,244 

358,194 

871,316 

244,657 

76,880 

24 

17 

14 

15 

20 

20 

26 

19 

19 

23 

12 
The data in table 5 are national aggregates developed from the 1998 SSBF sample data, 

using the final sample weights in the 1998 SSBF public use dataset. The first six 

measures indicate that the WOSB capacity is 14% to 24% of the total small business 

capacity in 1998. It can be argued that the true value is probably closer to 20% than 14% 

or 24%. While the number of firms does not reflect any firm’s capacity and annual sales 

may decline due to demand rather than capacity, the number of employees (17%) and 

cash on hand (20%) both directly influence what a firm can do. Furthermore, the WOSB 

firms with nationwide sales account for 20% of all small business firms with such sales. 

This last measure is particularly indicative since a firm active in the national market may 

have (1) better information and expertise in the area of federal procurement; (2) more 

frequent contacts with large federal prime contractors; and (3) wider name recognition for 

its services, quality, and prices. Although it takes far more to have a capable business, it 

seems intuitively very clear that a large proportion of any business success must have a 

lot to do with cash, people, and the market. 

The next four measures show how many of those firms facing the four identified business 

problems are WOSBs. For example, WOSBs account for 23% of the small business 

firms that experienced technology difficulties in 1998. Other problems are in areas of 

financing and interest rate, cost, availability, and quality of labor, and cash flow. These 

variables again represent crucial aspects of any business operations. A firm that has 

sufficient cash flow and has no difficulties in technologies or in obtaining additional 

financing and hiring more quality employees at a competitive salary should be considered 

qualified for federal contract work. Except for financing problems, WOSBs as a group 

were in a relatively better situation than other small business firms. To show this more 

clearly, we express the number of firms with a problem as a share of the total number of 

firms for both WOSBs and other small businesses. Results are in chart 5. 

13 
Chart 5. Relative Experience in Business Difficulties 

WOSBs Other SBs 

0.0% 

2.0% 

4.0% 

6.0% 

8.0% 

10.0% 

12.0% 

14.0% 

16.0% 

18.0% 

20.0% 

Financing Labor Cash Flow Technology 

Problem Area 

 

In words, a smaller percentage of WOSB firms experienced problems in labor, cash flow, 

and technology than other small business firms. 

4. A Proposal for Data Collection 

4.1 Data Collection Strategy 

Since a comprehensive survey needed for implementing D is beyond the limit of the 1

available resources7, data collection efforts are targeted at ~ D1 and ~ Dl 

1 . As already ~ discussed, data for D1

l already exist. Therefore, the following discussion focuses on the ~ data for D1 , the WOSB share in subcontracting. In other words, data on total 

subcontracting and on WOSB subcontracting are to be collected. As discussed above, the 

FPDC data provide such information at an aggregate level. This proposed data collection 

plan aims at collecting similar data at the two-digit SIC major industry group level. 

Based on investigations, it is almost certain that government procurement agencies do not 

have the data on how much of their procurement dollars are spent by their prime 

contractors for subcontracting with different types of businesses including WOSBs. On 

the other hand, it seems likely that prime contractors keep records of how much and to 

whom they have awarded subcontracts. It should be relatively easy for them to pull out of 

their records such information on a contract-by-contract basis. Existing data show that 

large prime contractors with a large amount of subcontracting activities accounted for a 

predominant portion of the total subcontracting. By regulation, such subcontracting 

7

 Some approximations may still be possible using data from other sources such as the Census Bureau. 

Further discussions will be in the analytical sections. 

14 
 

activities must have been conducted through detailed subcontracting plans or at least have 

been well documented through subcontracting agreements. As a rule, subcontracting 

plans and subcontracting agreements record subcontractor identities, business types, SIC 

or NAICS codes relevant to the subcontracted work, the subcontracting amount, etc. 

Therefore, prime contractor-based data collection seems to be the most promising 

solution.8 

Two immediate difficulties must be faced. First, who are the prime contractors? How 

many of them exist? In other words, a complete list of prime contractors is needed. 

Second, how will the prime contractors respond to the data collection effort? If it is 

perceived as part of the program assessment effort, as it is most likely to be so perceived, 

will a prime contractor respond to a private entity’s request for information? It appears 

unlikely. These two difficulties may be overcome with a data collection strategy that 

consists of the following components. 

1.	 MacroSys Research and Technology (MacroSys) develops a sample of prime 

contractors for data collection;
 

2.	 With assistance from NWBC in coordination with SBA, MacroSys contacts 

procurement offices and associates each sampled prime contractor with a 

government agency;
 

3.	 MacroSys designs a questionnaire for data collection and drafts a cover letter for 

each procurement office; 

4.	 MacroSys obtains the signatures of the procurement officers from all procurement 

offices for the cover letter and mails the signed cover letter with the questionnaire 

to the prime contractors; 

5.	 MacroSys handles all data entry, processing, analysis, and reporting; 

6.	 MacroSys produces a micro dataset for each procurement office containing the 

data collected from prime contractors of that office; 

7.	 NWBC in coordination with SBA distributes the report and the micro dataset to 

the procurement offices. 

To increase the willingness of the procurement offices to participate in this effort, they 

should be assured that the extent of their involvement is really negligible. It would also 

be useful to emphasize that the questionnaire will be limited to questions about the nature 

and the amount of subcontracting work awarded to WOSBs. The following discussion 

focuses on sample generation and questionnaire design. 

4.2 Sampling Frame and the Sample 

We decided to use the list of prime contractors reporting to the FPDC as the sampling 

frame. The number and identity of prime contractors in the FPDC frame vary from year 

to year. Therefore, the number and identity of firms in a sample varies from year to year, 

8

 There is one complication. Subcontracts for WOSBs may not always come from prime contractors. A 

prime contractor may subcontract with a large business concern that in turn subcontracts with a WOSB. A 

prime contractor-based data collection effort will not cover such subcontracting activities. FPDC data may 

provide an indication of how extensive this type of subcontracting is. 

15 
 

 

 

 

too. For 1999, a total of 3,651 firms reported to FPDC. That number for 2000 was 

3,682. All prime contractors do not utilize subcontractors to the same extent. For 

example, there were 126 firms (3.5 % of the total) that reported zero amount of 

subcontracting in 1999. The number increased to 174 in 2000, accounting for almost 5% 

of the total. Our sampling frames for 1999 and 2000 exclude the firms without any 

reported amount of subcontracting. 

Among firms with reported subcontracting, the subcontracting amount is very unevenly 

distributed. Most of the firms have very small amounts of subcontracting, while larger 

subcontracting tends to be concentrated. In 1999, 77% of firms that reported a non-zero 

subcontracting amount accounted for about 7% of the total subcontracting amount, while 

4% of the firms accounted for 64% of that total. Table 6 provides more details. 

Table 6. Prime Contractors and Subcontracting Amount, 1999 

Range of Subcontracting Amount 

1999 

Firms Subcontracting Amount 

Number Share (%) Total ($) Share (%) 

Below $1 million 

At least $1 million but below $10 million 

At least $10 million but below $100 million 

At least $100 million 

Overall 

1,482 

1,210 

696 

137 

3,525 

44 

33 

20 

4 

100 

440,243,538 

4,521,980,911 

21,700,559,535 

47,141,029,292 

73,803,813,276 

1 

6 

29 

64 

100 

The overall situation remained unchanged in 2000, although slightly fewer firms reported 

with non-zero amount of subcontracting. See table 7 for more details. 

Table 7. Prime Contractors and Subcontracting Amount, 2000 

Range of Subcontracting Amount 

2000 

Firms Subcontracting Amount 

Number Share (%) Total ($) Share (%) 

Below $1 million 

At least $1 million but below $10 million 

At least $10 million but below $100 million 

At least $100 million 

Overall 

1,433 

1,201 

732 

142 

3,508 

44 

33 

19 

4 

100 

420,927,148 

4,659,360,366 

22,275,499,457 

49,641,800,742 

76,997,587,713 

1 

6 

29 

64 

100 

Table 6 and table 7 show that a large majority of prime contractors had a very small 

amount of total subcontracting. This and other considerations led to our choice of a 

16 
 

 

 

 

 

 

 

 

 

 

 

stratified sampling approach for sample generation. There are three steps in this 

approach. 

Step 1. Sample Size Determination 

We use the standard method for determining the sample size for estimating a population 

mean with adjustment. If we let N be the size of population, n¢ the unadjusted sample 

size, n the adjusted sample size, the sample size is determined as follows. 

Ø t s ø 2 

n¢ = a

Œ

o D ß

œ 

(7) n¢ 

n = ( n¢ ) 1 + Ł

 N ł

 

where s is the population standard deviation, D the tolerable error of estimation or 

margin of error, and ta the t-value at the significance level a. 

The 1999 and 2000 FPDC data allow us to calculate s for both years. Applying these 

data to equation (7) with D set to .02 units and a to .05, we obtain a sample size of 182 

firms for 1999 and 171 firms for 2000. See the following for details. 

Year N s D t.05 n¢ n 

1999 3525 .1412 .02 1.96 192 182 

2000 3508 .1369 .02 1.96 180 171 

Step 2. Sample Allocation 

The sample firms are allocated to different strata. We stratify the population by the size 

of subcontracting amount. Under this design, firms with larger amounts of 

subcontracting are more likely to be selected for the survey while those with very small 

subcontracting amounts may not be selected at all. Although this approach of 

stratification may not be appropriate for purposes such as studying behavioral differences 

in subcontracting, because our purpose is to collect data for constructing the WOSB share 

in total subcontracting, it is entirely appropriate. 

If we let ni be the number of firms allocated to stratum i , xi the total subcontracting 

amount of stratum i , s i the standard deviation for stratum i , and n the size of the total 

sample, as defined before, the optimal allocation rule following the variance 

minimization is given by equation (8). 

17 
 

 

 

 

 

 

 

 

pi i s

n i = n

� ps 

(8) i i 

x 

p = i 

i �xi 

where pi , measured in relative subcontracting amounts, is used as the relative stratum 

size or weight. Therefore, the strata with larger subcontracting amounts and larger 

variances get larger allocations. 

We divided all firms with positive amounts of subcontracting into four strata according to 

the level of their subcontracting amounts. We then calculated standard deviations and 

relative sizes for all strata. Applying to equation (8) these results and the total sample 

sizes for 1999 and 2000, we derived earlier results in optimal sample allocations for 1999 

and 2000 as follows. 

The 182 sample firms for 1999 should all go to the strata of firms with their individual 

subcontracting amounts at least equal to $10 million. There were 833 such firms in 1999, 

accounting for 24% of the total number of firms in the year. In other words, 76% of the 

population does not even get one sample. Although at first glance this seems very 

extreme, because these firms did not have much subcontracting, the sample result will 

remain representative without counting them. For 2000, the 171 sample firms again all 

go to the strata of firms with their individual subcontracting amounts at least equal to $10 

million. There are 874 such firms in 2000, accounting for 25% of the total number of 

firms in the year. 

Step 3. Sample Generation 

It is straightforward to select the firms from the corresponding strata. For both years, 

firms in the stratum with at least $100 million of subcontracting are completely selected. 

The remaining sample firms are selected from the second largest stratum. Since the 

sample size is larger than the stratum size in this case, some kind of random sampling 

procedure should be followed. 

Note that as discussed above, we use the subcontracting amount rather than the number 

of firms of a stratum to measure the relative size of the stratum. The number of firms is 

not a good choice since the strata with most firms do not have much subcontracting. 

Sampling from these strata will not result in a very representative dataset since the 

sample misses about 75% of the total subcontracting activities. Sampling more firms 

where there is more subcontracting will generate more representative and informative 

results. The problem is that the subcontracting amount and the number of firms diverge 

so much for both 1999 and 2000 that the optimal allocation of sample firms results in 

more sample firms for the largest stratum than total number of firms within that stratum. 

18 
This explains why no random sampling is needed for the largest strata for both 1999 and 

2000. This strategy of sample generation will not exactly minimize the sample variance 

but is still more preferable than its alternative. If sample firms are allocated according to 

strata sizes measured in the number of firms, all sample firms will go to the strata with a 

combined subcontracting amount under 10% of the total subcontracting amount. 

4.3 Questionnaire Design 

Questionnaire design is generally a lengthy process but is relatively straightforward in 

this case. The data to be collected are well defined and the original sources are also 

relatively well identified. There are no complicated interrelationships among the targeted 

data items. No extensive interpretative efforts are required for what exactly are to be 

reported. Almost no qualitative data are collected. No open-ended questions need to be 

asked. Unlike the questionnaire for a typical survey, contingency and filter questions are 

completely unnecessary here, and question sequencing is not a concern. The challenge is 

not what questions to ask or how to ask them to obtain the data you need, but rather to 

decide who may have the subcontracting data and the kind of detail available in those 

data. However, these are questions that must be answered before selecting a sampling 

frame. 

We designed two versions of the questionnaire in the format of a regular data collection 

form. The two versions differ in the level of detail at which data are collected. Version 1 

requires contract-by-contract information on subcontract number, subcontractor name, 

nature of work in terms of SIC code, subcontractor’s small and disadvantaged business 

status, and subcontracting amount. Version 2 allows the respondents to aggregate the 

subcontracts by SIC code and indicate the number of subcontract awards and 

subcontracting amount in total and for WOSBs by SIC groups. 

Version 1 has the advantage of providing more detail but requires more data entry. 

Version 2 collects the necessary information with less data entry but requires respondents 

to regroup data, which may be difficult and result in more errors. Since the extra data 

entry for version 1 is relatively easier than the data regrouping necessary for version 2, 

version 1 seems preferable. Government and industry reviewers’ comments on the two 

versions of the form show a similar preference. The two versions of the form and their 

associated instructions are attached as appendices. 

19 
 

 

5. Appendix 

5.1 The Data Collection Form – Version 1 

SURVEY OF WOMEN-OWNED SMALL BUSINESSES IN FEDERAL SUBCONTRACTING OMB No.: 

(See instructions on reverse) Expires: 

Public reporting burden for this collection of information is estimated to average 45 minutes per response, including the time for reviewing instructions, 

searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send 

comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, 

to the National Women's Business Council, 409 3rd Street, SW, Suite 210, Washington, DC 20024. 

1. PRIME CONTRACTOR 

a. Company Name b. P.O.C. 

c. City d. State e. Zip Code f. Phone 

FISCAL YEAR SUBCONTRACT AWARDS - FY 1999 

3b. Check if the 

Subcontractor Is a 

H 

B 2b. SIC Code 2c. Dollar Amount C 

for the Work W U H 

S 

of the Subcontract O / U 2a. Subcontract under the (Round off to the L S D S M B 

Number Subcontract nearest dollar) 3a. Name of Subcontractor B B B B I Z 

(Attach if more space is needed) 

20 
 

General Instructions 

1. This form collects subcontract award data from prime contractors/subcontractors that are required to 

submit Form 295, Summary Subcontract Report. 

2. Only subcontracts involving performance within the U.S., its possessions, Puerto Rico, and the Trust 

Territory of the Pacific Islands should be included in this report. 

3. Subcontracts awarded by affiliates of the prime/sub contractor should be excluded in this report. 

Special Instructions 

Block 2a: Enter subcontract number. 

Block 2b: Enter the standard industry classification (SIC) code for the work performed under the 

subcontract. This code should be specified in the subcontract. 

Block 2c: Report the dollar amount of the subcontract rounded off to the nearest dollar. 

Block 3a: Enter the name of the subcontractor that performed the work under the subcontract. 

Block 3b: Check all that are applicable, where

 LB = Large Business

 SB = Small Business

 SDB = Small Disadvantaged Business including 8(a)'s

 WOSB = Women Owned Small Business

 HBCU/MI = Historically Black Colleges and Universities/Minority Institutions

 HUBZ = HUBZone Small Business 

21 
 

 

5.2. The Data Collection Form – Version 2 

SUBCONTRACT REPORT (FY 1999) OMB No.: 

(See instructions on reverse ) Expires: 

Public reporting burden for this collection of information is estimated to average 45 minutes per response, including the time for reviewing instructions, 

searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send 

comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, 

to the National Women's Business Council, 409 3rd Street, SW, Suite 210, Washington, DC 20024. 

1. PRIME CONTRACTOR 

a. Company Name b. P.O.C. 

c. City d. State e. Zip Code f. Phone 

FISCAL YEAR SUBCONTRACT AWARDS - FY 1999 

2. SIC Code for 

Major Industry 

Group 

3a. Total Number of 

Subcontracts Awarded 

in FY 1999 

3b. Total Dollar 

Amount of Subcontracts 

Awarded in FY 1999 

4a. Number of 

Subcontracts Awarded 

to WOSB's in FY 1999 

4b. Dollar Amount of 

Subcontracts Awarded 

to WOSB's in FY 1999 

22 
General Instructions 

1. This form collects subcontract award data from prime contractors/subcontractors that are required to 

submit Form 295, Summary Subcontract Report. 

2. Only subcontracts involving performance within the U.S., its possessions, Puerto Rico, and the Trust 

Territory of the Pacific Islands should be included in this report. 

3. Subcontracts awarded by affiliates of the prime/sub contractor should be excluded in this report. 

4. Report all subcontracts that have the same first two digits in their standard industry classification 

codes as one entry. 

Special Instructions 

Block 2: Enter the standard industry classification (SIC) code for the work performed under the 

subcontracts. Take the first two digits of the SIC code specified in the subcontract. If more than one 

subcontract has this SIC code, enter only once and report the related combined totals in the following 

blocks. 

Block 3a: Enter the total number of subcontracts with SIC codes that have the same numbers for the 

first two digits as entered in Block 2. 

Block 3b: Report the total dollar amount of all the subcontracts specified in Block 3a. 

Block 4a: Enter the total number of subcontracts specified in Block 3a that are awarded to WomenOwned Small Business (WOSB) concerns. 

Block 4b: Report the total dollar amount of all the subcontracts specified in Block 4a. 

23