One of the key considerations in starting any business is determining your potential sources of income. That is, who you will you sell your products or services to? If you plan to rely heavily on Federal government contracts, it pays to do your research in advance.
Recently proposed changes in the Small Business Administration’s (SBAs) policies could make it even harder for women business owners to get Federal contracts.
In 2000, Congress passed The Equity in Contracting for Women Act of 2000 (Act). The Act would allow federal contracting officers to award up to 5% of all contracts to women-owned businesses.
But because women own approximately 41% of all privately-owned businesses registered with the IRS, the SBA believes women are no longer under represented, and therefore do not need special consideration. Yet, despite fast approaching owning nearly half of all privately owned businesses, women currently only receive less 3.3% of all Federal contracts.
In other words, the Act would only increase contracts being awarded to women by a mere 1.7%, still allowing for 95% of all contracts being awarded to non-women-owned businesses. And the SBA considers this fair?
According to Linda Denny, President and CEO of the Women’s Business Enterprise National Council (WBENC):
The difference in Federal spend between 5 percent and 3.3 percent was $7.5-billion based on 2006 numbers,” Denny said. “This will negatively impact communities where 10.4-million women-owned firms employ more than 12.8 million people and generate $1.9 trillion in revenues.
At a time when the economy is foundering, this proposed ruling is effectively strangling a golden goose of growth,” Denny declared. For the past two decades, women-owned firms have grown at around two times the rate of all firms (42 percent vs. 24 percent).
While many professional organizations are protesting these changes, you need to know your industry better than ever in order to compete. Never assume that simply because you are a woman you will receive preferential treatment.
In What Industries Are Federal Contracts Being Award to Women?
The Center for Women’s Business Research estimates that as of 2006, there were 7.7 million businesses majority owned by women, generating more than $1 trillion in annual revenues, and providing employment for 7.1 million people. These statistics show that women are starting businesses at twice the rate of all businesses, yet they still receive the smallest share of government contracts.
According to Margaret Smith (2007-2008 Chair of the Board of Directors Center for Women’s Business Research) in her January 22, 2008 statement to the House Small Business Committee, women-owned businesses now represent more than half of all health care (53.7) and educational (50.2%) service businesses.
But these same women-owned businesses are only awarded a fraction of contracts available -- about 7% in health care and even less in educational services (2%). The highest number of Federal contracts are awarded to women business owners is in the accommodation and food industry – 11%).
In What Industries Would New Rulings “Favor” Women?
The proposed SBA ruling excludes helping women in all but four industries. The industries where the SBA considers women-owned businesses as being under-represented are:
- Cabinet Making
- Coating and Engraving
- National Security and International Affairs; and
- “Other Motor Vehicle Dealers” (all terrain vehicles)
Does this mean you should not apply for, and expect to be granted Federal contracts? Absolutely not. But it does mean is that, unless you own a business in one of the four “under represented” industries, being a woman will no longer afford you any bidding advantages.
Sources:
”Center for Women’s Business Research Urges SBA to Revise Its Federal Contracting Plan for Women Business Owners.” January 22, 2008
"Women’s Business Enterprise National Council Opposes SBA Proposed Rule on Federal Contract Procedures." January 18, 2008
