False or incorrect women-owned small business self-certifications may be a significant government-wide problem, according to a recent audit report issued by the NASA Office of Inspector General.

The NASA OIG report states that in a study of sampled awards to self-certified WOSBs, 7 out of 20 awardees, or 35 percent, “may not have met the criteria for a woman-owned small business.”  Noting that these firms won nearly $75 million in government business in 2010 alone, the NASA OIG has referred its report to the SBA and GAO, concerned about a “potential Government-wide effect of this condition.”

At the outset, it is important to note that the NASA OIG report apparently did not involve any WOSB set-asides.  In order to be awarded a WOSB set-aside, a firm must either be certified as a WOSB by a third party provider, or provide documents to the government demonstrating its WOSB status.  Thus, for WOSB set-asides, self-certification is permitted, but only if the WOSB provides documents supporting the self-certification.

For small business set-asides, WOSB status is not required.  However, contractors must still self-certify whether or not they qualify as WOSBs.  If they check “yes,” the government typically relies on the self-certification and reports an award to that business as a WOSB award for purpose of pursuing the agency’s WOSB goals.

The NASA OIG report examined 20 small business set-aside contracts made to self-certified WOSBs.  In seven cases, “our review found evidence that daily business operations were actually controlled and managed by the male spouse of the purported business owner.”

The NASA OIG report stated that the audit discovered, among other indicators of ineligibility:

• The male spouse listed on the company website as President
• The company name included the male spouse, not the woman owner
• For a research and development company, only the male spouse had the educational background and expertise necessary to effectively manage and control the company
• Biographical information, company websites and other publicly available records indicated that daily business operations were managed and controlled by the male spouse

The NASA OIG pointed out that the firms in question had received approximately $74.5 million in federal contract obligations in 2010 alone, from 54 unique federal procurement organizations.  For this reason, the NASA OIG wrote, “we believe that the level of false self-certification as a woman-owned business is troubling and may exist Government-wide.”  The NASA OIG referred the matter to the SBA and the GAO for further investigation.

Although the NASA OIG report does not involve cases of ineligible firms winning WOSB set-asides, it is troubling nonetheless.  If false or incorrect WOSB self-certifications are a problem government-wide, procuring agencies may be overstating (perhaps significantly so) their progress toward meeting their WOSB goals.  This, in turn, might prevent agencies from issuing WOSB set-asides, or even prevent the government from considering WOSBs to be underrepresented for a particular NAICS code.  It will be interesting to see what (if anything) the SBA and GAO do going forward.