What was the proposed rule on SBA WOSB certification in 2019?

 In the wake of criticism of the SBA's oversight of the program, a proposed rule on SBA WOSB certification was released.

The Small Business Administration (SBA) has finally released its long-awaited proposed regulation on the certification of women-owned small businesses (WOSBs). The proposed rule has been in the works at the SBA since 2016, when Congress, as part of the 2015 National Defense Authorization Act (NDAA), Public Law 113-291, removed the ability for businesses to self-certify their eligibility for the WOSB program. The SBA has been chastised for failing to properly oversee business self-certification and third-party certifier performance, resulting in a large number of ineligible firms winning WOSB contract awards.

WOSB Certification 

In February 2011, the WOSB contracting scheme went into action. Since then, businesses interested in participating in the WOSB program have had two options: self-certify their eligibility to the SBA or be certified by a third-party certifier permitted by the SBA. The more popular option, self-certification, has proven problematic for the WOSB program. Many of the contracts awarded to putative women-owned businesses under the SBA WOSB certification program, as well as contract awards counted by agencies to fulfill small business targets, were going to ineligible enterprises, according to many GAO and agency Office of Inspector General reports.

Congress authorized the SBA to discontinue the self-certification option for the WOSB program and implement a certification process as part of the 2015 National Defense Authorization Act. The Act stipulated that SBA, a federal agency, a state agency, or third-party certifiers designated by the SBA must certify a firm's eligibility.

Shortly after the Operate was signed into law, the SBA issued an advance notice of proposed rulemaking to collect public input on a proposed rule to develop a new SBA WOSB certification program, which included the option for the SBA to act as a certifier itself. The National Women Business Owners Corporation (NWBOC), the Women's Business Enterprise National Council (WBENC), the United States Women's Chamber of Commerce (USWCC), and the El Paso Hispanic Chamber of Commerce were all authorized by the SBA as third-party certifiers at the time the Act was passed (EPHCC). Third-party certifiers opposed SBA becoming a WOSB certifier in comments made in response to the advance notice of proposed rulemaking. Self-certification is still in effect pending the SBA's proposed rule's finalization.

Criticism of SBA's Lack of Oversight

GAO produced a second report, GAO-19-563T Actions Needed to Address Continued Oversight Issues, five years later, in March 2019. The GAO chastised the SBA in this report for failing to address the oversight flaws and suggestions noted by the GAO in its 2014 report. SBA was singled out by GAO for failing to review third-party certifier reports regularly and for failing to undertake compliance reviews of the third-party certifiers. The GAO also chastised the SBA for taking so long to publish a proposed rule for the SBA WOSB certification program, as Congress had mandated.

The Proposed Rule

SBA finally issued the proposed rule on WOSB certification two months after the GAO report in March 2019 reprimanded the agency for not doing so.

Firms will have many alternatives for obtaining SBA WOSB certification under the proposed rule. Firms would be able to obtain certification directly from the SBA through a free online application process, which is likely to be the most popular alternative. 

According to the proposed regulation, applicants will get a determination on WOSB certification within 90 days of submitting a complete application to the SBA. In addition, the SBA intends to accept certifications achieved by women-owned businesses under the SBA's 8(a) business development and HubZone programs.

SBA will also accept certifications provided to women-owned businesses by federal agencies, such as the Department of Veteran Affairs, and by state certifying authorities under the Department of Transportation's Disadvantaged Business Enterprise (DBE) program. DOT/DBE applications are evaluated and decided by one of the various local certifying organizations recognized by the California Department of Transportation in California, for example.

Third-party certifiers are also addressed in the proposed rule. All third-party certifiers must be recognized by SBA, can be a non-profit or for-profit business, and can charge a fee for the certification service, according to the proposed rule. Importantly, the SBA intends to establish minimum eligibility standards to ensure consistency in eligibility decisions among third-party certifiers. 

Furthermore, the proposed rule would require the SBA WOSB certification designation to be recertified every three years. Under the proposed regulation, the mechanisms for protesting WOSB eligibility in the context of a contract award would be preserved.