A big fight over small business

The administration and Congress are locked in a big fight over how to direct billions of dollars in federal contracts to small businesses owned by women.

Seven Democratic senators wrote a letter last week that criticizes the Small Business Administration’s (SBA) plan to boost female-owned small businesses, which currently account for only 3.4 percent of the federal contracts awarded annually.

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The longtime goal has been to increase that figure to 5 percent of the total, a difference that could potentially bring an additional $6 billion each year to companies owned by women. Women own around 30 percent of the country’s businesses.

“We cannot emphasize enough the depth of our disappointment with this rule,” the senators wrote.

One chief complaint is that the draft rule characterizes only four out of 313 business categories eligible for federal contracts as under-represented by female-owned businesses.

“We find it hard to believe that cabinetmaking, engraving, other motor vehicles dealers and national security and international affairs are the only industries in which the SBA has determined that women-owned small businesses are under-represented or substantially under-represented in government-wide federal procurement,” the Democrats wrote last week.

Democrats also contend that the SBA’s proposal to require federal agencies to show discrimination in procurement practices before establishing a set-aside program “would substantially limit” the money targeted at female-owned businesses.

The SBA expects to release the final rule later this month. At a Senate Small Business and Entrepreneurship Committee hearing last week, SBA Administrator Steven Preston defended the rule but also indicated a willingness to continue to work with Congress to address complaints about it.

The battle has been brewing for years, largely behind the scenes, ever since Congress passed a bill in December 2000 to establish a set-aside program for federal contracts for women.

Since then, members of Congress have accused the administration of slow-walking implementation language. Part of the time was spent waiting for a RAND study that examined where female-owned businesses seemed at an unfair disadvantage to their male-run counterparts.

Critics of the rule say SBA officials accepted RAND’s narrowest interpretation of under-represented businesses. Sens. John Kerry (D-Mass.) and Olympia Snowe (R-Maine), the chairman and ranking member of the Small Business and Entrepreneurship Committee, respectively, urged a broad definition in a May letter.

SBA officials have said they took pains to grow the number of contracts to female-owned businesses in a way that is fair to everyone.

Writing in The Hill two weeks ago, Preston called the relationship between the number of such businesses in the country and the percentage of federal contracts they actually receive an “apples to oranges comparison.”

Female-owned businesses may be more than one-fourth of all businesses, but their gross receipts were only 4.2 percent of the economy, Preston noted.

Under the Bush administration, federal contracts to female-owned small businesses grew from $4.6 billion in 2000 to $11.6 billion in 2006.

Preston also noted other SBA efforts to direct more federal money to historically disadvantaged segments of the economy. For example, it has developed a scorecard for federal agencies to rate their contracting efforts.

But women’s groups have joined Congress in criticizing the SBA rule. Women Impacting Public Policy called the proposed rule “abysmal” and said it would “drastically limit the number of federal contracts for women-owned small businesses.”