Women-Owned Small Business Program: Actions Needed to Address Continued Oversight Issues
Released: 2019-05-16T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented. To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier. However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program, and (3) allowing SBA to implement a new certification process.

This testimony is based on a report GAO issued in March 2019 ( GAO-19-168 ). For that report, GAO examined (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program. GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and the three (out of four) private third-party certifiers that agreed to meet with GAO.

section_title: What GAO Found
paragraphs: The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). In September 2015 SBA published a final rule to implement sole-source authority (to award contracts without competition), effective October 2015. As of early May 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by the 2015 NDAA. SBA officials stated that the agency intended to address the third change made by the 2015 NDAA (meaning implement a new certification process for the WOSB program).

SBA has not addressed WOSB program oversight deficiencies and recommendations in GAO's 2014 report ( GAO-15-54 ). For example, GAO recommended that SBA establish procedures to assess the performance of four third-party certifiers—private entities approved by SBA to certify the eligibility of WOSB firms. While SBA generally agreed with GAO's recommendations and conducted a compliance review of the certifiers in 2016, it has no plans to regularly monitor their performance. By not improving its oversight, SBA is limiting its ability to ensure third-party certifiers are following program requirements. Further, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk. GAO maintains that its recommendations aimed at improving oversight should be addressed. In addition, GAO's March 2019 ( GAO-19-168 ) report found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018. At that time, SBA was not reviewing contracting data that could identify which agencies may need targeted training. GAO recommended that SBA review such data to help address identified issues. In early May 2019, SBA said it had initiated such efforts.

While federal contract obligations to all women-owned small businesses and WOSB program set-asides have increased since fiscal year 2012, WOSB program set-asides remain a small percentage (see figure).

Note: Obligations to women-owned small businesses represent contract obligations to women-owned small businesses under WOSB-program-eligible North American Industry Classification System codes. FPDS-NG obligation amounts have been adjusted for inflation.

section_title: What GAO Recommends
paragraphs: GAO recommended in March 2019 that SBA develop a process for periodically reviewing the extent to which WOSB program set-asides are awarded for ineligible goods or services and use the results to address identified issues, such as through targeted outreach or training on the WOSB program. SBA agreed with the recommendation.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our recent work on the Woman- Owned Small Business Program (WOSB program). Congress authorized  the WOSB program in 2000, allowing contracting officers to set aside  procurements to women-owned small businesses in industries in which  they are substantially underrepresented. On October 7, 2010, the Small  Business Administration (SBA) issued a final rule to implement the WOSB  program, and the program began operating in 2011. To be eligible to  participate in the WOSB program, firms have the option to self-certify or  be certified by a third-party certifier. However, the 2015 National Defense  Authorization Act (2015 NDAA) changed the WOSB program by (1)  authorizing SBA to implement sole-source authority, (2) eliminating the  option for firms to self-certify as being eligible for the program, and (3)  allowing SBA to implement a new certification process.

Today I will discuss (1) the extent to which SBA has implemented  changes to the WOSB program made by the 2015 NDAA; (2) the extent  to which SBA has implemented changes to address previously identified  oversight deficiencies, including those we identified in October 2014; and  (3) changes in WOSB program use since 2011, including since the 2015  implementation of sole-source authority. My statement is based on our  March 2019 report. For that report, we reviewed relevant laws,  regulations, and program documents; analyzed federal contracting data  from April 2011 through June 2018; and interviewed SBA officials,  officials from contracting agencies selected to obtain a range of  experience with the WOSB program, and three of the four private third- party certifiers.

The work on which this statement is based was performed in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Background
paragraphs: Federal agencies conduct a variety of procurements that are reserved for  small business participation through small business set-asides. These  set-asides can be for small businesses in general, or they can be specific  to small businesses that meet additional eligibility requirements in the  Service-Disabled Veteran-Owned Small Business, Historically  Underutilized Business Zone (HUBZone), 8(a) Business Development  (8(a)), and WOSB programs. The WOSB program enables federal  contracting officers to identify and establish a sheltered market, or set- aside, for competition among women-owned small businesses (WOSB)  and economically disadvantaged women-owned small businesses  (EDWOSB) in certain industries. WOSBs can receive set-asides in  industries in which SBA has determined that women-owned small  businesses are substantially underrepresented. To determine these  industries, SBA is required to conduct a study to determine which North  American Industry Classification System (NAICS) codes are eligible  under the program and to report on such studies every 5 years.

Additionally, businesses must be at least 51 percent owned and  controlled by one or more women who are U.S. citizens to participate in  the WOSB program. The owner must provide documents demonstrating  that the business meets program requirements, including a document in  which the owner attests to the business’s status as a WOSB or  EDWOSB. According to SBA, as of early October 2018, there were  13,224 WOSBs and 4,488 EDWOSBs registered in SBA’s online  certification database. SBA’s Office of Government Contracting  administers the WOSB program by, among other things, promulgating  regulations and conducting eligibility examinations of businesses that  receive contracts under a WOSB or EDWOSB set-aside. According to  SBA, as of October 2018, there were two full-time staff within the Office of  Government Contracting whose primary responsibility was the WOSB  program.

Initially, the program’s statutory authority allowed WOSBs to be self- certified by the business owner or certified by an approved third-party  national certifying entity as eligible for the program. Self-certification is  free, but some third-party certification options require businesses to pay a  fee. Each certification process requires businesses to provide signed  representations attesting to their WOSB or EDWOSB eligibility.  Businesses must provide documents supporting their status before  submitting an offer to perform the requirements of a WOSB set-aside  contract. In August 2016, SBA launched certify.sba.gov, which is an  online portal that allows firms participating in the program to upload  required documents and track their submission and also enables  contracting officers to review firms’ eligibility documentation. According  to the Federal Acquisition Regulation, contracting officers are required to  verify that all required documentation is present in the online portal when  selecting a business for an award. In addition, businesses must register  and attest to being a WOSB in the System for Award Management, the  primary database of vendors doing business with the federal government.

In 2011, SBA approved four organizations to act as third-party certifiers.  According to SBA data, these four third-party certifiers completed a total  of about 3,400 certifications in fiscal year 2017.

In 2014 we reviewed the WOSB program and found a number of  deficiencies in SBA’s oversight of the four SBA-approved third-party  certifiers and in SBA’s eligibility examination processes, and we made  related recommendations for SBA. In addition, in 2015 and 2018 the  SBA Office of Inspector General (OIG) reviewed the WOSB program and  also found oversight deficiencies, including evidence of WOSB contracts  set aside for ineligible firms. In both reports, the SBA OIG also made  recommendations for SBA. Further, in July 2015, we issued GAO’s fraud  risk framework, which provides a comprehensive set of key components  and leading practices that serve as a guide for agency managers to use  when developing efforts to combat fraud in a strategic, risk-based way.

section_title: SBA Has Implemented One of the Three Changes Made by the 2015 NDAA
paragraphs: As of early May 2019, SBA had implemented one of the three changes  that the 2015 NDAA made to the WOSB program—sole-source authority.  The two other changes—authorizing SBA to implement its own  certification process for WOSBs and requiring SBA to eliminate the  WOSB self-certification option—had not been implemented. The 2015  NDAA did not require a specific time frame for SBA to update its  regulations. SBA officials have stated that the agency will not eliminate  self-certification until the new certification process for the WOSB program  is in place, which they expect to be completed by January 1, 2020.

In September 2015, SBA published a final rule to implement sole-source  authority for the WOSB program (effective October 2015). Among other  things, the rule authorized contracting officers to award a contract to a  WOSB or EDWOSB without competition, provided that the contracting  officer’s market research cannot identify two or more WOSBs or  EDWOSBs in eligible industries that can perform the requirements of the  contract at a fair and reasonable price. In the final rule, SBA explained  that it promulgated the sole-source rule before the WOSB certification  requirements for two reasons. First, the sole-source rule could be  accomplished by simply incorporating the statutory language into the  regulations, whereas the WOSB certification requirements would instead  require a prolonged rulemaking process. Second, SBA said that  addressing all three regulatory changes at the same time would delay the  implementation of sole-source authority.

As of early May 2019, SBA had not published a proposed rule for public  comment to establish a new certification process for the WOSB program.  Previously, in October 2017, an SBA official stated that SBA was about  1–2 months away from publishing a proposed rule. However, in June  2018, SBA officials stated that a cost analysis would be necessary before  the draft rule could be sent to the Office of Management and Budget for  review. In response to the SBA OIG recommendation that SBA implement  the new certification process, SBA stated that it would implement a new  certification process by January 1, 2020. Further, in June 2018, SBA  officials told us that they were evaluating the potential costs of a new  certification program as part of their development of the new certification  rule. On May 3, 2019, SBA officials explained that they expected to  publish the proposed rule within a few days.

In December 2015, SBA published an advance notice of proposed  rulemaking to solicit public comments to assist the agency with drafting a  proposed rule to implement a new WOSB certification program. In the  notice, SBA stated that it intends to address the 2015 NDAA changes,  including eliminating the self-certification option, through drafting  regulations to implement a new certification process. The advance notice  requested comments on various topics, such as how well the current  certification processes were working, which of the certification options  were feasible and should be pursued, whether there should be a grace  period for self-certified WOSB firms to complete the new certification  process, and what documentation should be required.

Three third-party certifiers submitted comments in response to the  advance notice of proposed rulemaking, and none supported the option of  SBA acting as a WOSB certifier. One third-party certifier commented that  such an arrangement is a conflict of interest given that SBA is also  responsible for oversight of the WOSB program, and two certifiers  commented that SBA lacked the required resources. The three third-party  certifiers also asserted in their comments that no other federal agency  should be allowed to become an authorized WOSB certifier, with one  commenting that federal agencies should instead focus on providing  contracting opportunities for women-owned businesses. All three certifiers  also proposed ways to improve the current system of third-party  certification—for example, by strengthening oversight of certifiers or  expanding their number. The three certifiers also suggested that SBA  move to a process that better leverages existing programs with  certification requirements similar to those of the WOSB program, such as  the 8(a) program. In the advance notice, SBA asked for comments on  alternative certification options, such as SBA acting as a certifier or  limiting WOSB program certifications to the 8(a) program and otherwise  relying on state or third-party certifiers.

section_title: SBA Has Not Fully Addressed Deficiencies in Oversight and Program Implementation
paragraphs: SBA has not fully addressed deficiencies we identified in our October  2014 report, and these recommendations remain open. First, we  reported that SBA did not have formal policies for reviewing the  performance of its four approved third-party certifiers, including their  compliance with their agreements with SBA. Further, we found that SBA  had not developed formal policies and procedures for, among other  things, reviewing the monthly reports that certifiers submit to SBA. As a  result, we recommended that SBA establish comprehensive procedures  to monitor and assess the performance of the third-party certifiers in  accordance with their agreements with SBA and program regulations.

In response to our October 2014 recommendation, in 2016 SBA  conducted compliance reviews of the four SBA-approved third-party  certifiers. The compliance reviews included an assessment of the third- party certifiers’ internal certification procedures and processes, an  examination of a sample of applications from businesses that the  certifiers deemed eligible and ineligible for certification, and an interview  with management staff. SBA officials said that SBA’s review team did not  identify significant deficiencies in any of the four certifiers’ processes and  found that all were generally complying with their agreements. However,  one compliance review report described “grave concerns” that a third- party certifier had arbitrarily established eligibility requirements that did  not align with WOSB program regulations and used them to decline firms’  applications. SBA noted in the report that if the third-party certifier failed  to correct this practice, SBA could terminate the agreement. As directed  by SBA, the third-party certifier submitted a letter to SBA outlining actions  it had taken to address this issue, among others.

In January 2017, SBA’s Office of Government Contracting updated its  written Standard Operating Procedures (SOP) to include policies and  procedures for the WOSB program, in part to address our October 2014  recommendation. The 2017 SOP discusses what a third-party-certifier  compliance review entails, how often the reviews are to be conducted,  and how findings are to be reported. The 2017 SOP notes that SBA may  initiate a compliance review “at any time and as frequently as the agency  determines is necessary.” In March 2019, SBA provided an updated SOP,  which includes more detailed information on third-party compliance  reviews, such as how SBA program analysts should prepare for the  review. However, the updated SOP does not provide specific time frames  for how frequently the compliance reviews are to be conducted.

In addition, in April 2018, SBA finalized a WOSB Program Desk Guide  that discusses how staff should prepare for a compliance review of a third-party certifier, review certification documents, and prepare a final  report. In March 2019, SBA provided GAO with an updated WOSB  Program Desk Guide that contains information comparable to that in the  2018 version. Both Desk Guides do not describe specific activities  designed to oversee third-party certifiers on an ongoing basis.

Per written agreements with SBA, third-party certifiers are required to  submit monthly reports that include  the number of WOSB and EDWOSB applications received, approved,  and denied;  identifying information for each certified business, such as the  business name;  concerns about fraud, waste, and abuse; and a description of any changes to the procedures the organizations  used to certify businesses as WOSBs or EDWOSBs.

In our October 2014 report, we noted that SBA had not followed up on  issues raised in the monthly reports and had not developed written  procedures for reviewing them. At that time, SBA officials said that they  were unaware of the issues identified in the certifiers’ reports and that the  agency was developing procedures for reviewing the monthly reports but  could not estimate a completion date. In interviews for our March 2019  report, SBA officials stated that SBA still does not use the third-party  certifiers’ monthly reports to regularly monitor the program. Specifically,  SBA does not review the reports to identify any trends in certification  deficiencies that could inform program oversight. Officials said the reports  generally do not contain information that SBA considers helpful for  overseeing the WOSB program, but staff sometimes use the reports to  obtain firms’ contact information. SBA’s updated 2019 SOP includes  information on reviews of third-party certifier monthly reports, but it does  not contain information on how staff would analyze the reports or how  these reports would inform SBA’s oversight of third-party certifiers and  related compliance activities, such as eligibility examinations. On May 3,  2019, SBA officials stated that, earlier in the week, they had initiated  monthly meetings with the third-party certifiers. SBA officials explained  that they intended to continue holding these monthly meetings to discuss  best practices and potential issues related to the approval and  disapproval of firms and to improve collaboration.

Although SBA has taken steps to enhance its written policies and  procedures for oversight of third-party certifiers, it does not have plans to  conduct further compliance reviews of the certifiers and does not intend to  review certifiers’ monthly reports on a regular basis in a way that would  inform its oversight activities. SBA officials said that third-party certifier  oversight procedures would be updated, if necessary, after certification  options have been clarified in the final WOSB certification rule. However,  ongoing oversight activities, such as regular compliance reviews, could  help SBA better understand the steps certifiers have taken in response to  previous compliance review findings and whether those steps have been  effective. In addition, leading fraud risk management practices include  identifying specific tools, methods, and sources for gathering information  about fraud risks, including data on trends from monitoring and detection  activities, as well as involving relevant stakeholders in the risk  assessment process. Without procedures to regularly monitor and  oversee third-party certifiers, SBA cannot provide reasonable assurance  that certifiers are complying with program requirements and cannot  improve its efforts to identify ineligible firms or potential fraud. Further, it is  unclear when SBA’s final rule will be implemented. As a result, we  maintain that our previous recommendation should be addressed—that  is, that the Administrator of SBA should establish and implement  comprehensive procedures to monitor and assess the performance of  certifiers in accordance with the requirements of the third-party certifier  agreement and program regulations.

SBA also has not fully addressed deficiencies we identified in our October  2014 report related to eligibility examinations. We found that SBA  lacked formalized guidance for its eligibility examination processes and  that the examinations identified high rates of potentially ineligible  businesses. As a result, we recommended that SBA enhance its  examination of businesses that register for the WOSB program to ensure  that only eligible businesses obtain WOSB set-asides. Specifically, we  suggested that SBA should take actions such as (1) completing the  development of procedures to conduct annual eligibility examinations and  implementing such procedures; (2) analyzing examination results and individual businesses found to be ineligible to better understand the  cause of the high rate of ineligibility in annual reviews and determine what  actions are needed to address the causes, and (3) implementing ongoing  reviews of a sample of all businesses that have represented their  eligibility to participate in the program.

SBA has taken some steps to implement our recommendation, such as  including written policies and procedures for WOSB program eligibility  examinations in an SOP and a Desk Guide. However, SBA does not  collect reliable information on the results of its annual eligibility  examinations. According to SBA officials, SBA has conducted eligibility  examinations of a sample of businesses that received WOSB program  set-aside contracts each year since fiscal year 2012. However, SBA  officials told us that the results of annual eligibility examinations—such as  the number of businesses found eligible or ineligible—are generally not  documented. As a result, we obtained conflicting data from SBA on the  number of examinations completed and the percentage of businesses  found to be ineligible in fiscal years 2012 through 2018. For example,  based on previous information provided by SBA, we reported in October  2014 that in fiscal year 2012, 113 eligibility examinations were conducted  and 42 percent of businesses were found to be ineligible for the WOSB  program. However, during our more recent review, we received  information from SBA indicating that 78 eligibility examinations were  conducted and 37 percent of businesses were found ineligible in fiscal  year 2012. In addition, SBA continues to have no mechanism to look  across examinations for common eligibility issues to inform the WOSB  program. As we noted in 2014, by not analyzing examination results  broadly, the agency is missing opportunities to obtain meaningful insights  into the program, such as the reasons many businesses are deemed  ineligible.

Further, SBA still conducts eligibility examinations only of firms that have  already received a WOSB award. In our October 2014 report, we  concluded that this sampling practice restricts SBA’s ability to identify  potentially ineligible businesses prior to a contract award. SBA officials  said that while some aspects of the sample characteristics have changed  since 2012, the samples still generally consist only of firms that have  been awarded a WOSB set-aside. Restricting the samples in this way  limits SBA’s ability to better understand the eligibility of businesses before  they apply for and are awarded contracts, as well as its ability to detect  and prevent potential fraud.

We recognize that SBA has made some effort to address our previous  recommendation by documenting procedures for conducting annual  eligibility examinations of WOSB firms. However, leading fraud risk  management practices state that federal program managers should  design control activities that focus on fraud prevention over detection and  response, to the extent possible. Without maintaining reliable  information on the results of eligibility examinations, developing  procedures for analyzing results, and expanding the sample of  businesses to be examined to include those that did not receive  contracts, SBA limits the value of its eligibility examinations and its ability  to reduce ineligibility among businesses registered to participate in the  WOSB program. These deficiencies also limit SBA’s ability to identify  potential fraud risks and develop any additional control activities needed  to address these risks. As a result, the program may continue to be  exposed to the risk of ineligible businesses receiving set-aside contracts.  In addition, in light of these continued deficiencies, the implementation of  sole-source authority without addressing the other changes made by the  2015 NDAA could increase program risk. For these reasons, we maintain  that our previous recommendation that SBA enhance its WOSB eligibility  examination procedures should be addressed.

SBA has also not addressed previously identified issues with WOSB set- asides awarded under ineligible industry codes. In 2015 and 2018, the  SBA OIG reported instances in which WOSB set-asides were awarded  using NAICS codes that were not eligible under the WOSB program, and  our analysis indicates that this problem persists. Specifically, our  analysis of data from the Federal Procurement Data System–Next  Generation (FPDS–NG) on all obligations to WOSB program set-asides  from the third quarter of fiscal year 2011 through the third quarter of fiscal  year 2018 found the following:

3.5 percent (or about $76 million) of WOSB program obligations were  awarded under NAICS codes that were never eligible for the WOSB  program;

10.5 percent (or about $232 million) of WOSB program obligations  made under an EDWOSB NAICS code went to women-owned  businesses that were not eligible to receive awards in EDWOSB- eligible industries; and

17 of the 47 federal agencies that obligated dollars to WOSB program  set-asides during the period used inaccurate NAICS codes in at least  5 percent of their WOSB set-asides (representing about $25 million).

According to SBA officials we spoke with, WOSB program set-asides may  be awarded under ineligible NAICS codes because of human error when  contracting officers are inputting data in FPDS–NG or because a small  business contract was misclassified as a WOSB program set-aside.  Rather than review FPDS–NG data that are inputted after the contract is  awarded, SBA officials said that they have discussed options for working  with the General Services Administration to add controls defining eligible  NAICS codes for WOSB program set-aside opportunities on  FedBizOpps.gov—the website that contracting officers use to post  announcements about available federal contracting opportunities.  However, SBA officials said that the feasibility of this option was still being  discussed and that the issue was not a high priority. Additionally, as of  November 2018, the WOSB program did not have targeted outreach or  training that focused on specific agencies’ use of NAICS codes, and SBA  officials did not identify any targeted outreach or training provided to  specific agencies to improve understanding of WOSB NAICS code  requirements (or other issues related to the WOSB program). On May 6,  2019, an SBA official provided information that SBA has initiated a review  to determine federal agencies’ use of ineligible NAICS codes and that  SBA plans to share the findings with agencies and also provide training to  procurement center representatives.

Congress authorized SBA to develop a contract set-aside program  specifically for WOSBs and EDWOSBs to address the  underrepresentation of such businesses in specific industries. In addition,  federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, and  that management should establish and operate monitoring activities to  monitor and evaluate the results. Because SBA does not review  whether contracts are being awarded under the appropriate NAICS  codes, it cannot provide reasonable assurance that WOSB program  requirements are being met or identify agencies that may require targeted  outreach or additional training on eligible NAICS codes. As a result,  WOSB contracts may continue to be awarded to groups other than those  intended, which can undermine the goals of and confidence in the  program.

section_title: Federal Contracts to WOSB Set-Asides Remain Relatively Small
paragraphs: While federal contract obligations to all women-owned small businesses  and WOSB program set-asides have increased since fiscal year 2012,  WOSB program set-asides remain a small percentage. Specifically,  federal dollars obligated for contracts to all women-owned small  businesses increased from $18.2 billion in fiscal year 2012 to $21.4 billion  in fiscal year 2017. Contracts awarded to all women-owned small  businesses within WOSB-program-eligible industries also increased  during this period—from about $15 billion to $18.8 billion, as shown in  figure 1. However, obligations under the WOSB program represented  only a small share of this increase. In fiscal year 2012, WOSB program  contract obligations were 0.5 percent of contract obligations to all women- owned small businesses for WOSB-program-eligible goods or services  (about $73.5 million), and in fiscal year 2017 this percentage had grown  to 3.8 percent (about $713.3 million) (see fig. 1).

In summary, the WOSB program aims to enhance federal contracting  opportunities for women-owned small businesses. However, as of early  May 2019, SBA had not fully implemented comprehensive procedures to  monitor the performance of the WOSB program’s third-party certifiers and  had not taken steps to provide reasonable assurance that only eligible  businesses obtain WOSB set-aside contracts, as recommended in our  2014 report. Without ongoing monitoring and reviews of third-party  certifier reports, SBA cannot ensure that certifiers are fulfilling their  requirements, and it is missing opportunities to gain information that could  help improve the program’s processes. Further, limitations in SBA’s  procedures for conducting and analyzing eligibility examinations inhibit its  ability to better understand the eligibility of businesses before they apply  for and potentially receive contracts, which exposes the program to  unnecessary risk of fraud. Also, since SBA does not expect to finish  implementing the changes in the 2015 NDAA until January 1, 2020, these  continued oversight deficiencies increase program risk. As a result, we  maintain that our previous recommendations should be addressed.

In addition, SBA has not addressed deficiencies related to WOSB  program set-asides being awarded under ineligible industry codes.  Although SBA has updated its training and outreach materials for the  WOSB program to address NAICS code requirements, it has not  developed a process for periodically reviewing FPDS–NG data, and has  yet to provide targeted outreach or training to agencies that may be using  ineligible codes. As a result, SBA is not aware of the extent to which  individual agencies are following program requirements and which  agencies may require targeted outreach or additional training. Reviewing  FPDS–NG data would allow SBA to identify those agencies (and  contracting offices within them) that could benefit from such training.  Without taking these additional steps, SBA cannot provide reasonable  assurance that WOSB program requirements are being met.

As such, we made one recommendation in our March 2019 report to  SBA. We recommended that SBA develop a process for periodically  reviewing FPDS–NG data to determine the extent to which agencies are  awarding WOSB program set-asides under ineligible NAICS codes, and  take steps to address any issues identified, such as providing targeted  outreach or training to agencies making awards under ineligible codes. As  of May 2019, this recommendation remains open.

Chairman Golden, Ranking Member Stauber, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.

section_title: GAO Contact and Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact William Shear, Director, Financial Markets and Community  Investment at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this testimony are Andrew Pauline (Assistant Director), Tarek  Mahmassani (Analyst in Charge), and Jennifer Schwartz.

Other staff who made key contributions to the report cited in the testimony  were Allison Abrams, Pamela Davidson, Jonathan Harmatz, Tiffani  Humble, Julia Kennon, Rebecca Shea, Jena Sinkfield, Tyler Spunaugle,  and Tatiana Winger.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

Fast facts: The Woman-Owned Small Business Program has sought to bolster women's participation in industries in which women are substantially underrepresented. It sets aside a portion of government contracts for women-owned small businesses.

This testimony discusses, among other things, the Small Business Administration's progress in changing the process for certifying program eligibility, and addressing oversight deficiencies.

SBA has not implemented our recommendations related to strengthening the eligibility certification process

About 3.5% of contracts awarded through the program from 2011-2018 were for ineligible goods and services

Question-summary annotations: questions: question: What changes were made to the Women-Owned Small Business Program?
answer: The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). In September 2015 SBA published a final rule to implement sole-source authority (to award contracts without competition), effective October 2015.
child_questions: question: What aspects of the WOSB remain unchanged?
answer: As of early May 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by the 2015 NDAA.

question: What was the third change in the NDAA?
answer: SBA officials stated that the agency intended to address the third change made by the 2015 NDAA (meaning implement a new certification process for the WOSB program).

questions: question: Why was the WOSB program created?
answer: In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented.

question: What criteria must a firm meet in order to participate in the WOSB program?
answer: To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier.

question: What changes have been made to the WOSB program?
answer: However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program, and (3) allowing SBA to implement a new certification process.

questions: question: What did GAO examine in their March 2019 report?
answer: For that report, GAO examined (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program.
child_questions: question: How did GAO collect information for this report?
answer: GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and the three (out of four) private third-party certifiers that agreed to meet with GAO.