According to information contained in the mandate for this report, the number of WOSBs in the United States increased by 78 percent between 1987 and 1996, almost twice the rate of growth of all U.S. businesses. Also, approximately 8 million WOSBs in the United States provide jobs for over 15 million individuals and generate almost $1.4 trillion in sales each year. The administration and the Congress have long been concerned about the disparity between WOSBs’ prevalence in the economy and the level of government procurements of their products and services. In 1979, when an executive order first made SBA responsible for negotiating WOSB contracting goals with federal agencies, WOSBs received only 0.2 percent of all federal procurements. By 1988, this percentage had grown to only 1 percent, and although legislation was enacted to provide a program of assistance and support to WOSBs, no statutory goal for their participation in federal procurements was established until 1994. Section 7106 of the Federal Acquisition Streamlining Act of 1994 (FASA) amended the Small Business Act to require establishment of a governmentwide goal for participation by WOSBs in procurement contracts of not less than 5 percent of the total value of all prime contract and subcontract awards for each fiscal year. The goal was implemented by procurement regulations effective in fiscal year 1996. The FASA conference report indicated that the 5-percent goal was not intended to create a new set-aside or program of restricted competition for WOSBs, but rather to establish a target that would result in greater opportunity for WOSBs to compete for federal contracts. The report recognized that, given the slow progress toward increasing contracting with WOSBs, it could take some time before the goal would be reached. Through FASA, the governmentwide goal of 5 percent for WOSBs joined the existing governmentwide contracting goals in the Small Business Act for small business concerns (then no less than 20 percent of the total value of all prime contract awards for each fiscal year) and small disadvantaged businesses (SDB) (no less than 5 percent of the total value of all prime contract and subcontract awards each year). Under the Small Business Act, all small business goals are to represent for each procuring agency, the “maximum practicable opportunity” for small businesses’ participation in that agency’s contracts. In addition, an agency’s goals are to “realistically reflect the potential of small business concerns” to perform such contracts and subcontracts. At the same time, the cumulative annual goals for all agencies are to meet or exceed the annual governmentwide goal. Also, agencies are to make a consistent effort to annually expand participation by small business concerns in their contracts. Agencies are to report each year to SBA on the extent of participation by small businesses, including WOSBs, as well as any justifications for failure to meet the goals. SBA, in turn, is required to report this information to the President. FASA added WOSBs to the existing policy that small businesses and small disadvantaged businesses have the maximum practicable opportunity to become subcontractors for federal contracts exceeding $100,000 and to receive timely payment from prime contractors. FASA also included WOSBs in the requirement that for contracts exceeding $500,000 (or $1 million for construction contracts) prime contractors prepare subcontracting plans that provide the maximum practicable opportunity for small businesses to participate in the performance of the prime contract. FASA also required agencies to report contracts over a certain dollar threshold with WOSBs to the Federal Procurement Data Center (FPDC). Quarterly, approximately 70 executive branch agencies report contracting data either by individual contract for acquisitions above $25,000 or as summary data for acquisitions at or below $25,000 to FPDC. Twenty of these agencies account for over 99 percent of federal contract expenditures, 4 account for over 85 percent, and 1—the Department of Defense—accounts for over 64 percent. If a business submitting an offer for a federal procurement represents that it is a small business concern, and meets the definition of a WOSB, it can “self-certify” as a WOSB when it completes the small business program representations required in solicitations for procurements above $2,500. In doing so, the business represents (by checking the appropriate box) that it is, or is not, a WOSB. Generally, a contracting agency will accept the self- representation to be accurate. The federal government does not currently require that WOSBs submitting offers as prime contractors on federal procurements receive certification (from SBA or an outside entity) of their status as WOSBs. However, if a WOSB submits an offer for a federal subcontract, the prime contractor may, according to SBA, require certification that the business is in fact woman-owned. Furthermore, a WOSB submitting an offer as an SDB, 8(a) firm, or HUBZone small business will be required to meet the certification requirements for those programs. Both the Congress and the Administration have recently reiterated concern about the continued disparity between the number of WOSBs in the economy and the extent of the government’s contracting with them. As of fiscal year 1999, when women-owned businesses made up 38 percent of all businesses in the United States, WOSBs received 2.5 percent of the approximately $189 billion in federal prime contracts awarded that year. This discrepancy led the Senate to adopt Resolution 311 on May 23, 2000, which urged the President to adopt a policy supporting the 5-percent WOSB contracting goal, encouraged agencies to make concerted efforts to meet the goal before the end of fiscal year 2000, and holds agencies accountable for achieving the goal. Also on May 23, President Clinton, in culmination of work by the Interagency Committee on Women’s Business Enterprise, issued Executive Order 13157 to reaffirm the government’s commitment to increasing opportunities for WOSBs in the federal procurement market. The order reiterated executive branch policy to take the steps necessary to meet or exceed the 5-percent governmentwide WOSB contracting goal and to implement this policy by establishing separate 5-percent governmentwide goals for both prime contract awards and subcontract awards each fiscal year. The order requires each agency with procurement authority to develop a long-term comprehensive strategy to expand opportunities for WOSBs. The order lists methods and programs these agency strategies should include, such as designating a senior acquisition official who will work with SBA to identify and promote contracting with WOSBs; requiring contracting officers, to the maximum extent practicable, to include WOSBs in competitive acquisitions; implementing procedures for acquisition planners to structure acquisitions (including multiple award contracts) and provide guidance to facilitate competition among small businesses, HUBZone small businesses, SDBs, and WOSBs; implementing mentor-protégé programs that include WOSBs; and offering outreach, training and technical assistance programs to assist WOSBs in developing their products, skills, business planning practices, and marketing techniques. The order further directs agencies, when feasible and consistent with the effective and efficient performance of their missions, to establish 5-percent WOSB goals for both prime and subcontract awards each fiscal year. SBA informs us that as a result of this executive order, it is moving from a negotiated agency goal process to an assigned process whereby SBA will set goals with possible input from the agencies. SBA may start setting all agencies’ goals at 5 percent, although officials believe the 5-percent goal is unattainable for some agencies, which means that other agencies will have goals set at a higher point for the federal government to meet the 5- percent governmentwide goal. The executive order further establishes certain responsibilities for SBA and instructs SBA to establish an Assistant Administrator for Women’s Procurement (within SBA’s Office of Government Contracting). This official will head the Office of Federal Contract Assistance for Women Business Owners and coordinate agencies’ efforts to achieve the WOSB goals. Specifically, this office will be responsible for working with each agency to develop and implement policies to achieve WOSB contracting goals and advising agencies on how to increase WOSB contracting; evaluating whether agencies are meeting their WOSB contracting goals on a semiannual basis and preparing a report to the President (through the SBA Administrator, the Interagency Committee on Women’s Business Enterprise, and OFPP) on findings regarding contract awards to WOSBs; making recommendations and working with agencies to increase WOSB contracting and taking corrective actions with those agencies not meeting the 5-percent goal; providing a program of training and development seminars and conferences to instruct WOSBs on participation in SBA’s 8(a), SDB, and HUBZone programs, and other small business contracting programs for which WOSBs might be eligible; and developing and implementing a single uniform federal governmentwide Web site that is linked to other acquisition, small business, and women- owned business sites and provides current procurement information to WOSBs and other small businesses. A recent change to the government’s procurement program for WOSBs emerged from the Small Business Reauthorization Act of 2000, which amended the Small Business Act to give federal agencies authority to restrict competition for certain contracts to certified WOSBs that are economically disadvantaged. The authority, which is permissive, not mandatory, is limited to contracts not exceeding $3 million ($5 million for manufacturing) in those industries SBA identifies as underrepresented by WOSBs in federal procurement. The act requires SBA to conduct a study to pinpoint such industries. Federal contracting officers must also have a reasonable expectation that two or more WOSBs will submit offers and that the contract can be awarded at a fair and reasonable price before the officers may exercise their new authority. SBA may waive the requirement for businesses owned by women who are economically disadvantaged if the business is in an industry in which small businesses owned and controlled by women are “substantially” underrepresented. The new legislation will require WOSBs participating in the program to be certified as such by a government or outside entity and requires SBA to establish procedures to verify the WOSBs’ eligibility and the accuracy of any certifications. SBA currently has several initiatives under way in coordination with federal agencies and departments to work towards meeting the WOSB goals. For example, SBA offers training workshops for women business owners and designates agency liaisons (Federal Agency Advocates for Women) who are to strive to expand the pool of WOSBs receiving federal contracts. In addition, according to SBA, its Office of Federal Contract Assistance to Women Business Owners has been working with the newly appointed senior acquisition officials in each agency who have been selected to help their respective agencies increase federal procurement opportunities for WOSBs. We examined a number of trends pertaining to government contracting with WOSBs since fiscal year 1996 to determine changes, patterns, and progress towards increasing federal contracting and meeting both the governmentwide and agency-specific goals for both prime and subcontracting with WOSBs. We compared the government’s overall expenditures for prime and subcontracts with its expenditures for prime and subcontracts with WOSBs. From SBA data, we examined governmentwide and agency trends toward meeting the goals for prime and subcontracts with WOSBs. We also reviewed the performance of the 20 largest government procurement agencies in meeting their annual negotiated goals and analyzed how this effort relates to their share of prime and subcontracts awarded to WOSBs. Finally, we examined the variation in the dollar amounts represented by agency-specific WOSB contracting goals and WOSBs’ access to government contracts through other small business programs. Over the last several years, contracting with WOSBs grew more rapidly than government contracting with all businesses. From fiscal year 1996 through fiscal year 1999, federal expenditures for prime contracts awarded by the approximately 70 executive branch agencies that report procurement contract obligations to FPDC increased by 7.5 percent in real terms, from $184.9 billion to $198.8 billion, while these agencies’ expenditures for prime contracts with WOSBs increased by over 31 percent, from $3.2 billion to $4.2 billion. In addition, these agencies’ expenditures on all subcontracts increased by more than 15 percent, from $63.9 billion in 1996 to $73.8 billion in 1999, while their expenditures for subcontracts awarded to WOSBs increased by nearly 48 percent, from $2.3 billion to $3.4 billion. Thus, these agencies’ expenditures for WOSB prime contracts grew over 4 times more rapidly than their expenditures for all prime contracts and over 3 times more rapidly for WOSB subcontracts than for all subcontracts. Table 1 shows trends in both total contract expenditures and expenditures for prime and subcontracts awarded to WOSBs since fiscal year 1996. Since fiscal year 1996, when the 5-percent governmentwide WOSB contracting goal was implemented, the share of the government’s expenditures for prime contracts awarded to WOSBs has changed very little. The share of expenditures for subcontracts awarded to WOSBs has only modestly increased. Moreover, the separate 5-percent governmentwide WOSB goals for prime contracts and subcontracts were not met in any of the 4 years. WOSBs’ share of prime contract expenditures in 1999 was 2.5 percent, the highest for any of the 4 years, but only one-half of the 5-percent goal. Although greater progress was made over this period in meeting the governmentwide WOSB goal for subcontracts, that goal was not met during the 4 years. The share of subcontract expenditures for WOSBs increased from fiscal year 1996 to its highest point in fiscal year 1998, but decreased slightly the next year. Figure 1 shows the trends in the government’s share of prime contract and subcontract expenditures for WOSBs since fiscal year 1996. From a historical perspective, WOSBs’ share of total federal procurement grew from 0.2 percent in 1979 to 2.5 percent in 1999. Of the 20 federal agencies that account for about 99 percent of annual federal contract expenditures, none has met its annual WOSB goals for both prime and subcontracting each year since fiscal year 1996. More of these agencies had success meeting their WOSB subcontracting goal than their prime contracting goal over this period—each year at least one-half of the agencies met their subcontracting goal while only about one-third met their prime contracting goal. VA, State, and NASA were most successful, meeting or exceeding both goals 3 of the 4 years. For prime contracts, 7 or fewer of the 20 largest agencies met their WOSB goal in each of the 4 years. As illustrated in figure 2, 7 of the 20 agencies met their prime goal in fiscal years 1996 and 1997; the following year, only 3 agencies met their prime goal. In fiscal year 1999, six agencies reached their prime goal. Only VA met or exceeded its WOSB prime goal each year; State and NASA met or exceeded their prime goal in 3 of the 4 years. For subcontracts, more of these agencies met their WOSB goals. As shown in figure 2, at least 10 of the 20 largest agencies met their subcontracting goal each year from fiscal year 1996 through fiscal year 1999. The greatest success came in fiscal year 1998, when 13 agencies met their subcontracting goal. Five agencies—the U.S. Agency for International Development (AID), NASA, Interior, State, and Treasury—met their subcontracting goal each year. Further detailed information on each of these 20 agencies’ share of prime and subcontracts with WOSBs and their WOSB goals is shown in appendix II. In terms of meeting their individual WOSB contracting goals, it did not always matter whether these 20 agencies increased or decreased their share of expenditures for contracts with WOSBs. Some increased their share of prime or subcontract expenditures for WOSBs from fiscal year 1996 through fiscal year 1999 but never reached their goals, whereas others decreased their share each year and still met or exceeded their WOSB goals. For example, EPA increased its share of expenditures for prime contracts with WOSBs by about 50 percent between fiscal year 1996 and fiscal year 1999, yet it never met its WOSB prime contracting goal (which doubled over the period). On the other hand, VA’s share of prime contract expenditures for WOSBs decreased from 5.8 percent in fiscal year 1996 to 5.6 percent in fiscal year 1999, yet VA met its goal each year, as its goal increased from 4 percent to 5 percent over the period. The same inconsistency emerged in these agencies’ shares of subcontracts with WOSBs. Sixteen agencies maintained or increased their share of subcontract expenditures for WOSBs between fiscal year 1996 and fiscal year 1999, but only four of these agencies—State, NASA, Interior, and Treasury—met their WOSB subcontracting goal each year. AID reduced its share of subcontract expenditures for WOSBs between fiscal year 1996 and fiscal year 1999 yet reached its WOSB subcontracting goal each year. Correlating agencies’ success in meeting their WOSB goals to their success in increasing shares of prime and subcontract expenditures for WOSBs is complicated by the fact that individual agencies’ goals can and sometimes do move up or down each year. Moreover, there was not always a correlation between an agency’s level of procurement from WOSBs and its goals. For example, some agencies with relatively low shares of prime contracts awarded to WOSBs appear to have been able to negotiate lower goals with SBA. NASA, with a historically low level of procurements from WOSBs, had a WOSB prime contracting goal of 1.4 percent in fiscal year 1999 (and exceeded its goal by awarding 1.64 percent of prime contracts to WOSBs). In the same year, Justice had a goal of 3 percent and exceeded its goal by awarding 3.27 percent to WOSBs. Others, like DOD and the Department of Education, had rates of prime contract awards consistently under 2 percent over the period, yet both had goals of 5 percent in fiscal year 1999. Government contract expenditures are concentrated in just a few agencies and dominated by DOD. Table 2 shows the share of total prime contract expenditures and WOSB prime contract expenditures by the top 20 agencies (as well as all others combined) in fiscal year 1999. As shown in the table, the four largest procuring agencies—DOD, DOE, NASA, and GSA—together accounted for over 82 percent of all federal prime contracts. The same four agencies accounted for about 71 percent of the contracts with WOSBs. In fiscal year 1999, DOD alone accounted for over 64 percent, or nearly $120 billion, of all federal prime contract expenditures. DOD awarded 1.9 percent of its prime contracts to WOSBs, representing approximately $2.3 billion or about 50 percent of all federal prime contract expenditures with WOSBs in 1999. For two of the top four agencies, their share of the total procurement from WOSBs is smaller than their share of total federal procurement. For example, DOD buys 50.2 percent of the total amount the government purchases from WOSBs but it accounts for 64.4 percent of the value of all federal procurements. Similarly, NASA, with its 4-percent share of total procurements from WOSBs, accounts for 5.9 percent of total federal procurements. The two other largest procuring agencies accumulated a larger share of total procurements from WOSBs than their share of total federal procurements. DOE accounts for 8.7 percent of federal purchases from WOSBs while accounting for 8.4 percent of total procurement, and GSA accounts for 7.7 percent of federal procurements from WOSBs while accounting for 4 percent of federal procurements. Without benchmarks of realistic WOSB contracting goals for individual agencies, it is unclear whether the level of an agency’s contracting with WOSBs represents successful outreach efforts or a better match between what the agency buys and what WOSBs produce in these industries. Nevertheless, the dominance of DOD in both total contracts and contracts with WOSBs justifies special attention. The government’s success or failure in meeting the annual 5-percent governmentwide goals for prime and subcontracting with WOSBs depends to a large extent on DOD’s ability to meet its WOSB goals. Because DOD achieved less than half of its 5-percent goal for prime contracts with WOSBs in fiscal year 1999, the governmentwide goal for prime contracting with WOSBs could not have been met even if every other federal agency had reached its WOSB prime contracting goal. Only by substantially exceeding their cummulative WOSB goals for prime contracts could other federal agencies have compensated for DOD’s shortfall. In fiscal years 1996 through 1999, WOSBs received a large majority of new federal prime contract awards on the basis of their status as another type of small business rather than as a WOSB. Our analysis of FPDS data on new prime contract awards for each of these years showed that WOSBs received the majority of their federal contract dollar awards as SDBs or 8(a) firms. In fiscal year 1996, about 57 percent of the new federal contract dollars awarded to WOSBs were awarded to WOSBs that qualified for the contracts as another type of small business. In fiscal years 1997, 1998, and 1999, the figure was about 70 percent. Table 3 illustrates the expenditures for new contracts with WOSBs and the expenditures for WOSBs that qualified for the contracts under other small business programs since fiscal year 1996. We found wide consensus among the government contracting officials we contacted about obstacles to increasing government contracting with WOSBs. In fulfilling the mandate for this review, we interviewed officials throughout the federal government—chief procurement officers, line contracting officers, and small business advocacy officials at agencywide and program-specific levels—and solicited their views based on their direct experiences and responsibilities for federal contracting and meeting socioeconomic goals. These officials most frequently cited two obstacles to increasing federal contracting with WOSBs: the numerous and complex federal contracting programs for small the absence of a specific contracting program targeting WOSBs. Other obstacles cited by officials but with less consensus included the practice of contract consolidation (including bundling), which they believe can deny a reasonable opportunity for WOSBs and other small businesses to compete for some procurements; a lack of commitment or accountability of agency executives, contracting officials, and/or program managers to increasing contracting with WOSBs and meeting the WOSB goals; a lack of sufficient WOSB access to working capital; a lack of qualified WOSBs competing in some areas; and resource constraints that limit federal agencies’ efforts to monitor and enforce the plans submitted by prime contractors for subcontracting with small businesses, including WOSBs. While recognizing the value and public policy purpose of meeting socioeconomic goals for small businesses, government contracting officials at all levels told us that they were generally overwhelmed by the number and complexity of the requirements of small business contracting programs and their related goals. More specifically, these officials believe that the programs tend to crowd out WOSBs. They stated that, for some procurements, federal agencies are required by law to consider and give preference to certain categories of small businesses other than WOSBs when awarding contracts and that each of these programs has different rules, regulations, and eligibility criteria. Also, they said that the type of program for each small business category varies. For example, depending on the small business program involved, some procurements may be set aside for exclusive small business participation, some procurements may use price evaluation adjustments, and others may be conducted on a sole- source basis. Table 4 shows the different statutory governmentwide small business contracting goals. The following small business contracting programs are used, as applicable, to reach the small business goals set forth in table 4. Small business reservation ($2,500 to $100,000) Small business set-asides (total or partial) 8(a) Business Development Program (sole-source or competitive) Emerging small business set-asides of the Small Business Competitive Very small business set-asides of the Very Small Business Pilot Program HUBZone small business set-asides (competitive or noncompetitive) HUBZone price evaluation preference SDB price evaluation adjustment SDB participation program (sole selection factor or monetary incentive for actual SDB subcontracting) Subcontracting plans for small businesses, SDBs, HUBZone small businesses, WOSBs, and veteran-owned small businesses The officials said that these small business programs both potentially reduce the number of contracts available to WOSBs and cause contracting officers to spend significant amounts of time administering the programs’ often complex implementation requirements. Thus, they said that the time available for them to reach out to WOSBs for contracting purposes is significantly reduced. Officials noted that the situation has been exacerbated by reductions in the acquisition workforce and the addition of new small business contracting programs and requirements. It was also noted that before using sources such as small businesses, contracting officials are required to consider using certain other sources of supply, such as Federal Prison Industries and the Committee for Purchase from People Who Are Blind or Severely Disabled, and this potentially reduces contracts available to WOSBs. As the list following table 4 indicates, WOSBs had no vehicle that helped contracting officials target prime contract awards to them before the Small Business Reauthorization Act of 2000 was enacted. According to the contracting officials we contacted, unless a WOSB also meets the requirements of one of these other small business programs, the WOSB will usually have to compete with other businesses in these targeted groups and other businesses for federal contracts. Furthermore, they said that, depending on the procurement, government agencies might be required to provide targeted contracting opportunities to these other groups. An OFPP official also said that this could result in other small businesses receiving preference over WOSBs. Thus, officials generally agreed that without a specific vehicle or targeted contracting program, agencies cannot as effectively award contracts to WOSBs as they can to some other small business and meet their WOSB contracting goals. According to government procurement officials, reductions in the acquisition workforce have increased the practice of contract consolidation by agencies, which reduces the opportunities for WOSBs to obtain some government contracts. They said that, to streamline and reduce contract administration costs, federal agencies sometimes combine a number of smaller contracts, which individually might be sought by and awarded to small businesses, including WOSBs, into fewer contracts. According to these officials, after the consolidation, the contract requirements sometimes become too large, complex, or geographically dispersed to be managed by a small business, thus making it more difficult to award these contracts to a WOSB or any small business. A subset of consolidated contracts has been defined by the Small Business Reauthorization Act of 1997 (P. L. 105-135) as “bundled contracts.” Specifically, the act defines bundling of contract requirements as the consolidation of two or more procurement requirements for goods or services previously provided or performed under separate, smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business concern because of specified factors. The act requires federal agencies to avoid unnecessary and unjustified bundling of contract requirements that precludes small businesses from participating in procurements as prime contractors. It also requires each federal agency to promote small businesses’ participation by structuring its contracting requirements to facilitate competition by and among small businesses. Representatives of WOSBs generally regard contract bundling as an obstacle to increasing their contracting with the federal government. However, we have been unable to confirm this. In conducting a review of contract bundling earlier this year, we reported that data were not currently available to determine its impact on small businesses. We recommended that SBA develop a strategy setting forth how the agency can best achieve the results desired from oversight of contract bundling by considering the staffing resources and training needed, the timely resolution of potential bundling cases, and constraints the agency faces in implementing the strategy. We also reported that the only study concluding that contract bundling negatively affected small businesses provided no convincing evidence that contract bundling had adversely affected small businesses. According to some of the government procurement officials with whom we spoke, some federal agency officials are not committed to increasing contracts with WOSBs and meeting the WOSB contracting goals. They said that some agencies do not hold their procurement officials accountable for meeting the goals, so contracting personnel there are not fully committed to using the tools available to them for increasing procurement opportunities for small businesses, including WOSBs, and meeting agency WOSB contracting goals. Several contracting officials said that support for and commitment to the goals at the highest organizational levels within agencies were needed for contracting personnel to be committed to increasing contract awards to WOSBs and meeting the related goals. They said that this support and commitment are lacking; frequently, no individual within an agency is responsible and held accountable for meeting WOSB goals. A contracting officer at DOE told us he believes that an important reason DOE does as well as it does in meeting its WOSB goals is the strong support throughout the agency for awarding contracts to WOSBs. DOE officials further noted that the performance expectations and pay considerations of its contracting officials are linked to DOE’s achievement of the goals. Similarly, procurement officials from NASA told us that the performance expectations for NASA’s contracting officers include meeting small business contracting goals, including those for WOSBs. They believe that this expectation is partially responsible for NASA’s meeting many of its small business contracting goals. A study by the National Women’s Business Council (NWBC) also emphasized the importance of accountability. It concluded that a key element to any successful supplier diversity program is commitment from the top. The study said that supplier diversity programs are successful only when an organization’s senior officials promote women as suppliers and vendors and include them as part of the acquisition strategy. Representatives from the Women’s Business Center (WBC) Washington, D. C. Metropolitan Area, and from the Dallas-Ft. Worth Chapter of National Association of Women Business Owners (NAWBO) told us that the limited support and accountability for increasing contracting with WOSBs from officials within federal agencies has hindered the growth of contracting with WOSBs. A representative from the Women’s Business Enterprise National Council (WBENC) also told us that she believes some agencies do not reach their contracting goals because federal contracting officials do not look hard enough for available WOSBs. A procurement official and representatives of some of the women business- owners associations told us that a lack of sufficient access to working capital discourages some WOSBs from competing for government contracts. To meet the needs of ongoing capital expenses, contractors sometimes receive contract financing, such as progress payments based upon costs incurred in certain large fixed-price contracts and subcontracts in which the first delivery occurs several months after the award has been made. Under the Federal Acquisition Regulation, the customary progress payment rate is 85 percent of the total costs incurred under a contract with a small business. However, some believe that such provisions do not always provide WOSBs with the amount of working capital necessary to compete for government contracts. Some agencies have instituted higher customary progress payment rates for small businesses and SDBs. For example, DOD has customary progress payment rates of 90 percent for small businesses and 95 percent for SDBs. According to some contracting officials, some agencies have difficulty meeting their WOSB contracting goals because few qualified WOSBs compete for government contracts in the fields in which those agencies are procuring goods or services. They said that this obstacle remains, even though many agencies have developed outreach efforts to find and encourage WOSBs to compete for government contracts. Some of these officials said that WOSBs do not always compete for government contracts because they perceive the federal procurement process as too complex, they lack the expertise to meet many of the procedural requirements, or both. One senior procurement executive with 15 years of experience stated that even though women business-owners associations and others generally say that women-owned businesses, including WOSBs, are not given opportunities to participate in the procurement process, he believes that the problem often is that these businesses do not seek contracting opportunities with the federal government. A representative from an association of women business owners we contacted agreed that some WOSBs view the federal procurement process as complex and costly. She conjectured that this complexity, combined with an anticipation of limited success in winning awards, might keep many WOSBs from submitting offers for government contracts. According to federal procurement officials with whom we spoke, reductions in the federal acquisition workforce mean that fewer agency contracting personnel must meet an increasing workload. They said that they often lack the resources to effectively oversee and administer contractors’ performance. Thus, according to these officials, agencies’ contracting personnel do not always monitor and enforce plans submitted by prime contractors for subcontracting with small businesses, including WOSBs. Without appropriate monitoring and enforcement, these officials said, prime contractors do not always follow through with their plans to award small business subcontracts. Similarly, an official of GSA’s Office of Enterprise Development stated that often little oversight or enforcement occurs after a prime contractor’s plan for subcontracting with small businesses is approved. The official said that her office is constantly asked by small business representatives to request changes to legislation that would provide for greater enforcement of subcontracting plans and make government contracting officers accountable if prime contractors did not honor these plans. Finally, she said that because prime contractors have such an uneven record of using WOSBs and other small businesses, some WOSBs (as well as other small businesses in general) become frustrated and discouraged from pursuing federal subcontracting opportunities. An opportunity for improving the enforcement of subcontracting plans is presented by the recent executive order for increasing opportunities for WOSBs. The order requires each agency to work closely with SBA, OFPP, and others to develop procedures to increase compliance by prime contractors with subcontracting plans, including subcontracting plans involving WOSBs. Among the government contracting officials with whom we spoke, there was general agreement on several suggestions for improving the environment for contracting with WOSBs and increasing federal contracting with WOSBs. They suggested creating a contract program targeting WOSBs, focusing and coordinating federal agencies’ WOSB outreach activities, promoting contracting with WOSBs through agency incentive and including WOSBs in agency mentor-protégé programs, providing more information to WOSBs about participation in teaming providing expanded contract financing. Simultaneously, officials cautioned that some of these suggestions could lead to some unintended consequences (notably a possible reduction in procurements from other small business groups) and that even if the suggestions were implemented, the 5-percent governmentwide goals might still not be achievable. Federal contracting officials, particularly those in PEC and the OSDBU Council, generally agreed that a targeted contracting program, such as one that would grant authority to restrict competition for contracts specifically to WOSBs, could help increase the number of contracts awarded to WOSBs. In addition, 22 of the 30 contracting officers we contacted from four federal agencies awarding large numbers of contracts each year stated that such a program could be a valuable tool in their efforts to increase contracting with WOSBs and help them achieve their WOSB contracting goals. Despite the broad consensus on the need for a formalized vehicle to target qualified WOSBs for federal contracts, many of these same officials expressed concern that creating such a program would add to the already large and complex universe of federal contract programs for small businesses. Also, some of these officials said they recognize that such a program would not guarantee that the 5-percent governmentwide goals for prime and subcontracts would be achieved. For example, not enough qualified WOSBs might exist in those industries in which much federal procurement occurs, meaning that a new contracting program might not be sufficiently effective in increasing contracting with WOSBs to achieve the governmentwide goals. In addition, officials said that because a number of small business groups already must be considered for government contracts, they would have to make choices between competing small business groups and, ultimately, there might not be enough contracts to go around. Thus, while WOSBs might benefit from a new targeted contracting program, such a program might compete with existing programs for other small business groups. To combat this problem, some officials suggested broadening or combining existing programs to incorporate WOSBs (such as broadening the definition of a small disadvantaged business to encompass all WOSBs). Several of the representatives from the women’s groups we contacted believed that a targeted contracting program would help to accelerate progress toward achieving the WOSB goals. The Small Business Reauthorization Act of 2000 authorized a targeted contracting program for certain WOSBs. Contracting officers are authorized to restrict competition for contracts for supplies or services in certain industries when specific conditions are met (the contract is for goods or services in an industry identified by SBA where WOSBs are underrepresented in federal procurement, two or more WOSBs who are economically disadvantaged are expected to compete, the award price does not exceed $3 million—or $5 million for manufacturing—and the award can be made at a fair and reasonable price). The program’s implementation, however, will require several actions by SBA, including (1) the completion of a study to identify industries in which WOSBs are underrepresented and substantially underrepresented in federal procurement; (2) the establishment of a process for approving federal, state, or national certifying entities to complete certifications of WOSBs; (3) the establishment of standards for documentation to be required by contracting officers to support certifications of WOSBs; (4) the development of criteria for determining industries where WOSBs are “substantially” underrepresented and therefore eligible for a waiver of the requirement that WOSB firms be economically disadvantaged to benefit from the program; and (5) the establishment of procedures to challenge firms’ eligibility and a program to verify firms’ eligibility. Contracting officials from the Air Force, NASA, DOE, and GSA said that their respective agencies have active and focused WOSB outreach programs. They said that these programs attempt to attract WOSBs to contracting opportunities and that they teach these businesses how to compete for federal contracts, navigate through the federal procurement process, and complete necessary paperwork. For example, Air Force small business advocates told us they had effective outreach efforts educating WOSBs on technical requirements and encouraging WOSBs to gain needed skills. Other officials with whom we spoke said that giving greater effort and focus to some federal agencies’ outreach activities could increase the number of contracts with WOSBs. In particular, PEC officials agreed that agencies needed to be more collaborative in their outreach efforts to WOSBs. PEC and other officials said that greater emphasis by federal agencies on the development of training programs and seminars for WOSBs could help increase their participation in the federal procurement process. Specifically, they said that with more focused outreach programs, agencies could (1) better identify qualified WOSBs in specific industries and (2) encourage WOSBs to participate in the federal contracting arena (by teaching them about the federal procurement process and strategies for preparing more competitive contract offers). While some officials suggested more focused outreach programs, PEC and DOD officials viewed greater coordination and consolidation of agencies’ outreach efforts as necessary to make the most of government and WOSB resources. Specifically, these officials believed such coordination would reduce overlap and duplication of outreach efforts by agencies, reduce the multiplicity of outreach conferences faced by individual WOSBs, and provide more comprehensive and relevant sources of procurement information and networking opportunities to WOSBs. Officials stated that proper coordination would allow WOSBs to be more selective in the outreach conferences they attend and enable government officials to provide them with greater access to key program and contracting personnel. The recent executive order on increasing opportunities for WOSBs requires federal agencies to work with SBA in making outreach efforts and preparing plans to target WOSBs for greater participation in the procurement process. Implementation of the executive order could provide an appropriate opportunity to address the suggestion for greater coordination and consolidation of the government’s outreach efforts. A number of the procurement officials we contacted said that recognition and incentive programs should be developed or improved to increase federal contracts with WOSBs. They said that such programs increase awareness of the importance the agency places on the WOSB goals and recognize the accomplishments of agency procurement officials, as well as those of prime contractors who successfully meet their plans for subcontracting with WOSBs. They cited a Treasury program that annually rewards staff and prime contractors who have significantly contributed to the agency’s efforts to contract with small businesses, including WOSBs. The establishment of such rewards and programs at other agencies may be a simple method for agencies to increase incentives for agency officials to utilize WOSBs in their agency’s procurements. Although in 1999 SBA established a governmentwide recognition effort, the Frances Perkins Vanguard Award, to recognize federal agencies and prime contractors for their efforts in contracting and subcontracting with WOSBs, some officials said that agency-level recognition awards may provide a more immediate incentive for agency outreach to WOSBs. Some officials suggested that WOSBs could benefit by participating to a greater extent in agency mentor-protégé programs. For example, an OSDBU at NASA was very enthusiastic about NASA’s achievements using the mentor-protégé program for assisting WOSBs. Furthermore, the NWBC study on best practices mentioned earlier describes how some agencies have established mentor-protégé programs to develop and increase the number of WOSBs as subcontractors. The study points out that under these programs, both mentors and protégés benefit when agencies provide financial incentives to prime contractors to help small businesses, including eligible WOSBs, and enhance their technical capabilities for participation as subcontractors and suppliers for government and commercial contracts. According to the study, at some agencies the mentor-protégé program provides incentives for mentors to establish and implement a developmental assistance plan to enable the protégé company to compete more successfully for prime and subcontract awards. The study stated that potential benefits to protégé companies include technical advice, market access, credibility, financial support, and the possibility of partnering with other businesses to enable them to better compete for federal contracts. The recent executive order on increasing opportunities for WOSBs lists the implementation of mentor-protégé programs that include WOSBs among the steps agencies should take to maximize WOSBs’ participation in the procurement process. Recently, section 807 of the National Defense Authorization Act for Fiscal Year 2001 made WOSBs eligible for participation as protégé firms under DOD’s statutory mentor-protégé program. The suggested inclusion of WOSBs in agencies’ mentor-protégé programs thus appears to be under way. Some officials suggested that WOSBs could benefit from being made aware that teaming with other small businesses (and in some cases, large firms) could enhance their competitiveness for certain procurements. For example, DOD officials said that teaming was an excellent tool that DOD uses to increase contracting with WOSBs. In addition, under the recent executive order, SBA is required to offer a program of training development seminars and conferences to instruct women business owners on how to participate in SBA’s 8(a) program, the SDB program, the HUBZone program, and other small business contracting programs for which they may be eligible. Since these programs allow teaming arrangements, the training development seminars and conferences the executive order requires SBA to provide to WOSBs could include information or instruction on such teaming arrangements. For example, a qualified WOSB may enter into a joint venture with a qualified HUBZone small business for the purpose of performing a specific HUBZone contract so long as each business is small under the applicable size standard and the procurement exceeds a certain value. For competitive 8(a) program procurements, a WOSB may enter into a joint venture or teaming arrangement with at least one 8(a) participant without regard to small business size standards if certain conditions are met. Clearly, WOSBs could benefit from outreach efforts that include information or instruction on participation by WOSBs in teaming arrangements or joint ventures for procurements where such arrangements are permitted. To address the problem of limited access to working capital experienced by many WOSBs (and other small businesses), contracting officials suggested that expanded contract financing could be helpful, such as through advance payments and higher rates of progress payments under government contracts. This idea is consistent with NWBC’s recommendations. NWBC has suggested that by increasing the customary progress payment rate for WOSBs to 95-percent and lowering the threshold for inclusion of customary progress payments in contracts with WOSBs to the lower threshold ($50,000) that DOD uses for SDBs, more working capital might flow to WOSBs. Federal procurement officials frequently mentioned that the WOSB contracting goals established for individual agencies are unrealistic: that is, they are established without regard to the capability and availability of WOSBs in specific industries from which federal agencies procure their goods and services. Officials in contracting agencies and SBA agreed that the goals are not based on an analysis of the presence, capability, or interest of WOSBs in the business sectors or industries in which government agencies make most of their purchases. According to a number of contracting officials, it makes no difference how hard contracting officers try to meet a goal if WOSBs are not in a specific location or industry where an agency procurement is to be made. If the WOSBs in the industry are not capable of performance, do not want the contract, or do not respond to contract solicitations, the agency cannot award the contract to a WOSB. Ten of the 30 contracting officers with whom we spoke stated they specifically had experienced difficulties identifying WOSBs for certain contract solicitations. They said this was particularly a problem for those contracts with specialized requirements, such as those for weapons systems or highly technical services. Contracting officers at NASA and DOE told us that for many of their procurements for highly technical research and development projects, they often have difficulty identifying qualified WOSBs. These contracting officials further said that they believe the credibility of the WOSB contracting program could be enhanced if the individual agency goals better reflected the number of WOSBs in locations and industries where government agencies purchase goods and services. SBA officials have recognized the absence, but also the potential usefulness, of information on the presence of WOSBs in various industries when establishing individual agency goals. In our discussions with SBA officials, they expressed an interest in analyzing new data just becoming available from the 1997 business census. However, they said that they have lacked sufficient resources to perform the breadth of analysis needed. They cited the complexity of the effort undertaken by experienced census staff who had completed a similar analysis for the Department of Commerce; that study sought to identify industries in which disadvantaged businesses were underrepresented in federal procurement. In commenting on a draft of this report, SBA said that it agreed that a disciplined study of WOSBs in different industries must be performed and, in accordance with Executive Order 13157 and applicable laws, this study will be done. PEC officials told us that included in PEC’s strategic plan for fiscal years 2001 through 2005 is an objective to improve those goal-setting processes and achievement measures for contracting with small businesses that align agency missions with procurement and socioeconomic goals. They believe such an effort, which would yield greater consensus in the federal community on the purpose and intended outcome of small business contracting programs, could improve the effectiveness of these measures. A representative from NAWBO with whom we spoke questioned whether federal agency officials always make concerted efforts to find WOSBs to help meet their goals or whether they find it easier to go with previous suppliers. A representative from the WBENC told us that she believes some agencies fail to reach their contracting goals for WOSBs because of a lack of effort on the part of federal contracting officials—not because qualified WOSBs are unavailable. A representative from WBC told us that she agrees with these views and added that there may not be enough WOSBs in certain locations and industries where some agencies have specialized requirements. On the other hand, representatives of several of these organizations indicated they view proposals to reexamine the validity of WOSB contracting goals as largely an effort to lower goals rather than to increase contract awards to WOSBs. As the FASA conference report recognized, reaching the 5-percent governmentwide goals for WOSBs will take time: Even though federal contracting with WOSBs increased at a faster rate than overall federal contracting during the past 4 years, limited progress has been made in achieving these governmentwide goals. Furthermore, the apparent lack of correlation between individual federal agencies’ success in increasing their contracting with WOSBs and in meeting their WOSB contracting goals makes it difficult to tell which agencies are making progress and which strategies are most effective. Moreover, even if a number of agencies reach their goals, there appears to be little likelihood that the 5-percent governmentwide goals can be met until DOD—with nearly two-thirds of all federal procurements—comes closer to reaching its goals. Many of the initiatives suggested by contracting officials for increasing contracting with WOSBs merit further examination−such as mentor- protégé programs, teaming, expanded contract financing, and more focused and coordinated outreach activities. Important issues have also been raised about how reductions in the acquisition workforce may be affecting the oversight of subcontracting plans or affecting contracting strategies—by, for example, increasing agencies’ use of consolidated contracts or other vehicles, that may be disadvantageous to all small businesses. However, analyzing the benefits and effects of the various suggestions we received from federal contracting officials or women business-owner organizations for increasing the number of federal contracts awarded to WOSBs was beyond the scope of our review. At the same time, a number of these suggestions are covered by the recent executive order assigning a leadership role to the head of SBA’s Office of Federal Contract Assistance for Women Business Owners to expand contracting opportunities for WOSBs. As a result, while the congressional mandate for this study called for us to make recommendations we consider appropriate for actions that might increase federal contract awards to WOSBs, we conclude that further analysis is required before any particular strategies can be endorsed. There was wide consensus among contracting officials about the value of developing an analytical foundation for agency goals, even though this was not directly a strategy to increase contracting with WOSBs. They noted that more realistic goals could improve the credibility of the program and improve the feasibility of developing stricter accountability for achieving the goals. PEC officials report a related effort under way to develop more complex and meaningful indicators of the success of socioeconomic procurement programs. They believe such an effort, which would yield greater consensus in the federal community of the underlying purpose and intended outcome of small business contracting programs, could improve the effectiveness of these measures. The Small Business Reauthorization Act of 2000 requires SBA to conduct a study to identify industries in which WOSBs are underrepresented in federal contracting. While such a study is essential for identifying industries eligible for the newly authorized WOSB contracting program, its analysis could also be more broadly useful for improving the realism of and then improving the accountability for agency WOSB contracting goals. Without information on the representation of WOSBs in the industries in which federal agencies procure goods and services, SBA has not been able to ensure that its agency goals represent “the maximum practicable opportunity” for participation in agencies’ contracts or “realistically reflect the potential of small business to perform such contracts,” as called for in the Small Business Act, while at the same time ensuring that the cumulative goals for all agencies meet or exceed the governmentwide goal. The analysis of the representation of WOSBs in various industries required by the new legislation could provide a foundation for SBA to establish more realistic agency WOSB contracting goals and thus provide a solid basis for holding agencies accountable for achieving those goals. Determining more realistic goals for DOD, in particular, would provide an objective basis for reconciling the conflicting claims of contracting officials and women business-owner organizations over whether WOSBs are unavailable in various sectors or federal contracting officials are not trying hard enough to identify and work effectively with WOSBs. Before the new contracting program for WOSBs was authorized, SBA officials had questioned their capacity to perform the breadth of analysis needed to determine the representation of WOSBs in various sectors. Given that the implementation of the new WOSB contracting program depends on a wide range of actions by SBA and that SBA has concerns about its capacity to complete the required steps, the Congress may benefit from being kept informed as SBA develops its strategy for responding to the new legislative requirements. We recommend that the Administrator, SBA, direct the new Office of Federal Contracting Assistance for Women Business Owners to evaluate the benefits and effects of the suggestions for increasing federal contracting with WOSBs that surfaced in this review. These include the implementation of agency mentor-protégé programs that include WOSBs, of measures to facilitate teaming arrangements and expand contract financing, as well as the exploration of initiatives to consolidate and improve the efficiency and effectiveness of outreach efforts. Another issue worthy of further study is the extent to which pressures on the acquisition workforce may be contributing to contracting practices that reduce opportunities for small businesses. These actions are consistent with the broad authority as well as specific direction given to SBA under the recent executive order. Any of the suggestions deemed feasible should be considered for implementation. In addition, we recommend that the Administrator, SBA, include in SBA’s mandated study of industries in which WOSBs are underrepresented sufficient analysis to establish more realistic agency-specific annual goals for prime and subcontracts with WOSBs. Given DOD’s predominance in government contracting, we believe that SBA would benefit from the active collaboration and support of DOD in performing the study. SBA should also keep the Congress informed as it develops a strategy for implementing the new provisions designed to expand federal contracting with WOSBs. In particular, SBA should notify its authorizing and appropriations committees if it determines that its capacity to implement the key provisions of the legislation will be impaired by insurmountable resource constraints. We requested comments on a draft of this report from the Administrator, SBA, and officials from OMB/OFPP, as well as from PEC and the Council of Offices of Small and Disadvantaged Business Utilization. We also requested comments from the four major contracting agencies from which we surveyed contracting officials—DOD, NASA, DOE and GSA. Furthermore, we requested comments from representatives of the four women’s business organizations that we had discussions with during the course of our review. We received responses from both PEC and the OSDBU Council and each of the government agencies except DOE. Each agency, except GSA, which had no general comments, said it generally agreed with our report and supported our recommendation. Each of the four women’s business organizations provided us with comments. Three generally agreed with the report and said that it provided a generally accurate overview of the federal procurement environment facing WOSBs. One—NWBC—raised a number of concerns about the methodology of our study and our recommendation in the draft report. We received written comments from the SBA Administrator. She stated that SBA appreciated our thorough investigation and the care we had taken in framing the issues and possible solutions involved in reaching higher percentages of federal contract and subcontract dollars for WOSBs. Furthermore, she stated that SBA generally agrees with the recommendation in the report that SBA complete a disciplined study of the percentages and numbers of WOSBs in different industries. She said that in accordance with Executive Order 13157 and the applicable laws, this would be done by the new Office of Federal Contract Assistance for Women Business Owners in SBA’s Office of Government Contracting. Additionally, she stated that, as suggested in our report, SBA is currently assessing its capacity to implement the WOSB provisions of the recently passed Small Business Reauthorization Act and will notify appropriate congressional committees if additional resources are required. The head of SBA’s Office of Government Contracting said that the agency generally agreed with our recommendation for further analysis of the benefits and effects of the suggestions we received from federal contracting officials for increasing contracting with WOSBs. However, she reiterated a concern about whether resources would be available. The SBA Administrator additionally provided us with several technical comments that we incorporated into the final report as appropriate. Appendix III contains the written comments we received from the SBA Administrator. We received oral comments from the Associate Administrator for Procurement Law, Legislation and Implementation, at OMB/OFPP. She said that OFPP generally concurred with the report and provided us with several technical comments, which we incorporated into the final report as appropriate. We received oral comments from the co-chair and several members of the PEC socioeconomic committee, reflecting comments collected from additional members of that committee. They indicated that the report did a very good job reflecting the contracting environment in agencies. They strongly supported the recommendation to improve the analytical foundation for annual agency goals but noted that more complex measures of success besides contracting “share” were needed. They noted their efforts to form an interagency group to better capture the success of various agencies’ efforts. PEC officials also noted that while the report captured the complexity of the diverse small business contracting programs, the draft did not reflect several required sources of government supply and services, such as Federal Prison Industries and the Committee for Purchase from People Who Are Severely Blind or Severely Disabled, that must be considered before awarding contracts to small businesses. We added a reference to these programs. PEC officials also indicated that there were opportunities to reduce the overlap and improve the efficiency of agencies’ outreach efforts. They believed agencies could collaborate and reduce the multiplicity of outreach conferences, thereby saving costs and time for both government agencies and targeted small businesses. We incorporated these observations into the discussion of both barriers and suggestions for increasing contracting with WOSBs. Finally, PEC officials emphasized that, notwithstanding the potential noted above for some improvements in the efficiency of outreach efforts, attempts to increase contracting within various small business contracting programs is largely a zero-sum problem—that is, increased efforts in one area are likely to adversely affect other programs. They noted that the workload pressures on contracting officers are contributing further to the use of contracting practices that some have alleged limit opportunities for small businesses to compete for federal contracts. We expanded our discussion of these issues and added an observation about the value of overseeing this trend and its possible adverse effects on WOSBs and other small business groups. We also received oral comments from the co-chair of the OSDBU Council, who represented the views of a number of their members. The Council members were generally positive about the report and supported the recommendation but expressed concern that the significant efforts and successes of various agencies were not reflected in the report. They believed the draft overemphasized the achievement of goals, particularly noting that we described how no agency had met both its prime and subcontract goals over the 4-year period examined. They stated that this focus failed to recognize that some agencies set “stretch” goals and that some agencies have continually achieved or exceeded procurement levels for WOSBs above the 5-percent governmentwide goal. We retained our observations about the achievement of agency goals since individual agency goals (whether above or below 5 percent) are key to the achievement of the governmentwide goal. However, we did incorporate a reference to the one agency that has continually achieved or exceeded the 5-percent governmentwide goal. OSDBU Council members also provided technical comments that we incorporated into the report as appropriate. We received written comments from DOD and NASA. DOD’s Under Secretary of Acquisition Technology and Logistics provided written comments stating that DOD generally agreed with the facts in the report and supports our recommendation to SBA, including that SBA officials seek the active collaboration and support of DOD officials in the study. Separately, DOD provided us with several technical comments, which we incorporated into the final report as appropriate. DOD’s letter to us appears in appendix IV. A NASA Associate Deputy Administrator provided us with written comments stating that NASA agreed with our recommendation to SBA. He noted that when establishing the 5-percent goal for WOSBs, FASA specified that the goal be no less than 5 percent of the total value of all prime and subcontract awards for each fiscal year and it was not until November 1999 that OFPP interpreted the requirement to mean that there were separate 5- percent goals for prime and subcontracts. He recommended that we clarify our report on this point. We agree and clarified our report accordingly. NASA’s letter to us appears in appendix V. We received oral comments from the executive director of WBC, the president of WBENC, and both the current and immediate past president of the Dallas-Ft. Worth Chapter of NAWBO. Each of these officials had positive comments about the report and had no substantive or technical disagreements with its content. We received written comments from the deputy director, NWBC. She said that she did not believe the draft report was responsive to the mandate and did not support our recommendation to SBA. She also provided a number of general and technical comments on the draft report. She was particularly concerned about our interpretation of certain requirements of the legislative mandate for this report. She commented that our methodology of focusing on the views of federal officials to discern the obstacles to, and suggestions for, increasing contract awards to WOSBs was flawed and indiscriminately repeated unverified assertions by federal officials. She said that we should have talked with women-owned businesses in the contracting arena and incorporated those discussions into the report together with the comments we received from federal employees involved in the federal procurement system. We disagree and believe the mandate clearly specifies that we solicit views from federal employees involved in the federal procurement system about their experiences pertaining to obstacles and suggestions for increasing the number of contracts awarded to WOSBs. In addition, we did contact representatives of four women- owned business organizations and solicited their views on any obstacles to and suggestions for increasing federal contracts with WOSBs, although this effort was not called for in the mandate. The deputy director of NWBC specifically said she disagreed with our recommendation that SBA conduct a study to improve the analytical basis of agency WOSB contracting goals and believes it is inconsistent with the mandate calling for GAO recommendations to “increase contract awards” to WOSBs. We agree that this recommendation is not strictly a means to increase awards to WOSBs. However, we found the evidence persuasive that establishing an analytical foundation for the goals was relevant to the credibility and performance of the program. Accordingly, we retained this recommendation. We believe more realistic agency-specific WOSB contracting goals can improve the integrity of this program, can provide a solid basis for holding agencies accountable for achieving those goals, and over time could contribute to increases in agency contracts with WOSBs. In her view, the mandate required us to make recommendations to increase such awards. The mandate does state that we are to make recommendations we consider appropriate after taking into consideration any suggestions we received during our discussions with federal contracting officials. However, an analysis of the benefits and effects of the various suggestions put forth was not within the scope of our review, so we cannot endorse any particular strategy. Nonetheless, considering the breadth of consensus on the potential merit of various measures, we added a discussion of some of the promising suggestions for increasing awards to WOSBs and included a recommendation for SBA to further study their potential. Finally, we incorporated as appropriate some of her general and technical comments. Her complete written comments are included in appendix VI. We performed our work from May 2000 through January 2001 in accordance with generally accepted government auditing standards. For details about our scope and methodology for this study, see appendix I. We are sending copies of this report to the Honorable Ted Stevens, Chairman, and the Honorable Robert C. Byrd, Ranking Member, Senate Committee on Appropriations; the Honorable C. W. Bill Young, Chairman, and the Honorable David R. Obey, Ranking Minority Member, House Committee on Appropriations; the Honorable Donald H. Rumsfeld, Secretary of Defense; the Honorable Spencer Abraham, Secretary of Energy; the Honorable Fred P. Hochberg, Acting Administrator of SBA; the Honorable Thurman M. Davis, Sr., Acting Administrator of GSA; the Honorable Daniel S. Goldin, Administrator of NASA; and the Honorable Mitchell Daniels, Director of OMB. We will also make copies available to others on request. If you have any questions about this report, please call me on (202) 512- 2834. Key contributors to this report are acknowledged in appendix VII. Our objectives were to (1) review the federal procurement system for the 3 preceding fiscal years (1997 through 1999) to identify any trends in federal contracting with respect to women-owned small businesses (WOSBs), (2) solicit from federal employees involved in the federal procurement system any suggestions for increasing the number of federal contracts awarded to WOSBs, (3) report to the Congress on (a) any suggestions for increasing the number of federal contracts awarded to WOSBs that we consider appropriate after considering suggestions we received from the federal employees solicited per requirement 2 above, including any such means that incorporate the concepts of teaming and partnering, and (b) any barriers to the receipt of federal contracts by WOSBs and other small businesses that are created by legal or regulatory procurement requirements or practices, and (4) identify concerns of federal contracting officials about agencies’ ability to meet their WOSB contracting goals. To meet our first objective, we interviewed staff from the Federal Procurement Data Center (FPDC) and the Small Business Administration (SBA) to determine the availability of federal procurement data pertaining specifically to WOSBs. We acquired data from FPDC on overall federal procurement expenditures and procurement expenditures on small businesses, small disadvantaged businesses (SDBs), 8(a) businesses, and WOSBs for fiscal years 1996 (the first year the implementation of the 5- percent WOSB governmentwide goal was in effect) through 1999. We acquired data from SBA on federal agencies’ prime contracting and subcontracting WOSB goals and the agencies’ related annual contract awards for fiscal years 1996 through 1999. We analyzed the FPDC data to determine the overall trends of federal procurement expenditures and the trends of federal contracting with WOSBs for the 4 fiscal years. We analyzed the SBA data to determine the percentage of agencies’ contracts awarded to WOSBs each year, the number of agencies meeting their WOSB goal, and the small business programs that WOSBs used to receive their contract awards. To meet our other three objectives, we selected four agencies that accounted for over 80 percent of all federal contracting expenditures for fiscal years 1997 through1999: Department of Defense (DOD), Department of Energy (DOE), National Aeronautics and Space Administration (NASA), and General Services Administration (GSA). We contacted procurement officials, agency Small Business Office representatives, and 30 contracting officers from these agencies to discuss any obstacles (legal or regulatory) they encountered in awarding contracts to WOSBs and their suggestions for increasing the number of contracts awarded to WOSBs, and meeting agencies’ annual WOSB contracting goals. We conducted focused interviews and group discussions with officials from the Procurement Executive Council (PEC) and numerous agencies’ Office of Small and Disadvantaged Business Utilization (OSDBU). We contacted officials from the Office of Federal Procurement Policy (OFPP), Office of Management and Budget (OMB), and SBA to discuss policy and regulations governing federal contracting with WOSBs and their suggestions for increasing contracts awarded to WOSBs and meeting WOSB contracting goals. We contacted representatives from the Office of Small Disadvantaged Business Utilization of 20 major agencies to determine why the agencies’ WOSB goals were or were not met for the fiscal years 1996 through 1999 and any obstacles to and suggestions for awarding contracts to WOSBs and meeting WOSB contracting goals. These officials were selected for the most part based on their substantial experience in the field of federal contracting. In addition, we contacted representatives of four women business-owner organizations to gain their perspective on obstacles to and suggestions for increasing federal contract awards to WOSBs. We did not validate the obstacles identified nor assess the benefits and effects of the suggestions we received from the federal contracting officials and others we interviewed. In addition, we analyzed the information gathered and applied insights from a body of related work we previously performed. Our work was performed between May 2000 through January 2001 in accordance with generally accepted government auditing standards. In addition, William R. Chatlos, Elizabeth R. Eisenstadt, Colin J. Fallon, Sherrill H. Johnson, Frederick Lyles, Dorothy M. Tejada, and Adam Vodraska made key contributions to this report. The first copy of each GAO report is free. Additional copies of reports are $2 each. A check or money order should be made out to the Superintendent of Documents. 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Summary: Procurement regulations implemented in 1996 mandated that women-owned small businesses (WOSB) receive five percent of governmentwide contracts. Although the number of contracts awarded to WOSBs has risen more than four times as fast as other federal contracting efforts since 1996, the goal of awarding five percent of federal contracts to WOSBs has not been met. More agencies succeeded in meeting the WOSB subcontracting goal than their prime contracting goal. GAO found that three federal agencies--the Department of Veterans Affairs, the Department of State, and the National Aeronautics and Space Administration--met or exceeded both goals in three of the four years it studied. Because the Department of Defense, which accounted for 64 percent of federal procurement in 1999, did not come close to achieving its five-percent goal, the governmentwide goal for prime contracting with WOSBs could not have been met even if all other federal agencies reached their prime contracting goals. Government officials cited many obstacles to increasing federal contracting with WOSBs, including a reduced contracting personnel force and the absense of a targeted WOSB government program. These contracting officers offered suggestions for increasing WOSB participation in federal contracting, including a strengthened outreach program and expanded excess to contract financing.