GAO to SBA: Please Address “Ongoing Oversight Issues” for the WOSB Program

GAO recently issued a report on several ongoing issues with SBA’s management of the Woman-Owned Small Business program. Because of the number of issues in the report, we’ll summarize it in a few posts.

In this post, we’ll provide some background on GAO’s review of the WOSB program and address how (and whether) SBA has implemented the changes required in the WOSB program by the 2015 National Defense Authorization Act. Long story short, SBA has still not done all Congress has asked of it in the 2015 NDAA, particularly with regard to eliminating WOSB self-certification.

GAO conducted this study based on a request from members of Congress to “evaluate SBA’s WOSB program, including any actions SBA has taken in response to the 2015 NDAA and to previously identified deficiencies, as well as usage of the program.” This study reports on “(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; and (3) changes in WOSB program use since 2011 and stakeholder views on its use, including since the 2015 implementation of sole-source authority.”

To conduct this evaluation, GAO reviewed the 2015 NDAA, implementing regulations, SBA policies and procedures, and SBA inspector general (OIG) reports. GAO also interviewed (1) SBA officials, (2) third-party certifiers, and (3) selected contracting offices. To review WOSB usage, GAO reviewed EPDS data.

In order to answer its questions, GAO also provided some background on the WOSB program.

WOSB Background

The WOSB program is unique compared to other socioeconomic programs in that only certain industries are eligible. “SBA is required to conduct a study to determine which NAICS codes are eligible under the program and to report on such studies every 5 years.” WOSBs can receive set-asides in certain industries where women-owned businesses are substantially underrepresented and EDWOSBs can receive set-asides in other industries where “women-owned small businesses are underrepresented but not substantially so.” “As of February 2019, there were a total of 113 four-digit NAICS codes (representing NAICS industry groups) eligible under the WOSB program—92 eligible NAICS codes for WOSBs and 21 for EDWOSBs.”

The WOSB program originally allowed for self-certification or certification by third parties. In August 2016, SBA launched its online document portal certify.sba.gov as a place to track required documents, and under the FAR contracting officers must check the portal to verify the documents.

Four third-party certifiers have been approved since 2011. Of the four, the Women’s Business Enterprise National Council was the most active third-party certifier in fiscal year 2017, with 2,638 certification examinations, with the rest conducting a lot less.

In 2014, 2015, and 2018, GAO and SBA OIG reviewed SBA’s oversight of the WOSB certification program and found deficiencies. GAO and OMB have recently issued guidelines to assist agencies in combating fraud, and GAO looked to those guidelines in creating this report.

Here is what GAO found.

SBA Has not Complied with all WOSB Changes in the 2015 NDAA

The 2015 NDAA made three changes to the WOSB program, but as of 2019, SBA had only implemented one–sole-source authority for WOSB set-asides. But two related changes have not been made–“authorizing SBA to implement its own certification process for WOSBs and requiring SBA to eliminate the WOSB self-certification option.” Interestingly, the GAO report notes that the “2015 NDAA did not require a specific time frame for SBA to update its regulations. SBA officials have stated that they 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.”

According to SBA, then, be on the lookout for the WOSB certification procedure around the first of next year. And GAO, itself part of Congress, has in this report interpreted the NDAA as not requiring SBA to act with any set timeframe. That is a little odd because Congressional laws generally take effect when enacted.

The report notes that SBA did implement sole-source authority for WOSB set-asides. You can read more about the details of that authority in our earlier post and the issues with improper sole-source awards here.

This GAO report recounts SBA’s delays in adopting a WOSB certification program. In October 2017, SBA estimated it “was about 1–2 months away from publishing a proposed rule.” The estimate was a little off (this is the downside of estimating when a project will be finished). Because, “in June 2018, SBA officials stated that a cost analysis would be necessary before the draft could be sent to the Office of Management and Budget for review.”

In response to an SBA OIG report, SBA has now set January 1, 2020, as its date for implementing the certification process. Presumably, self-certification would be officially eliminated once the SBA sets up its certification program, leaving SBA and (potentially) third-party certification as the only options.

The GAO report echoes the findings of prior GAO and SBA OIG reports. SBA has implemented WOSB sole-source authority but has failed to implement its certification program or eliminate self-certification. We’ll keep you updated on the SBA certification program as we get closer to the New Year.

We’ll discuss SBA’s oversight issues in a separate post.