Women-Owned Small Business Federal Contract Assistance Procedures, 73285-73304 [E7-25056]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 72, Number 247 (Thursday, December 27, 2007)]
[Proposed Rules]
[Pages 73285-73304]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25056]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 125, 127, and 134

RIN 3245-AF40


Women-Owned Small Business Federal Contract Assistance Procedures

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to amend 
its regulations governing small business contracting procedures. This 
proposed rule would add a new part that would implement procedures to 
increase procurement opportunities for

[[Page 73286]]

Women-Owned Small Business Concerns, as authorized under the Small 
Business Act. It would also make the relevant conforming amendments to 
SBA's current procurement regulations.

DATES: Comments must be received on or before February 25, 2008.

ADDRESSES: You may submit comments, identified by 3245-AF40, by any of 
the following methods:
     Federal eRulemaking Portal: https://www.reglations.gov. 
Follow the instructions for submitting comments.
     Mail, Hand Delivery/Courier: Robert C. Taylor, Office of 
Contract Assistance, Office of Government Contracting, U.S. Small 
Business Administration, 409 3rd Street, SW., Washington, DC 20416.
    All comments will be posted on https://www.reglations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.reglations.gov, please submit the 
comments to Robert C. Taylor and highlight the information that you 
consider to be CBI and explain why you believe this information should 
be held confidential. SBA will make a final determination as to whether 
the comments will be published or not.

FOR FURTHER INFORMATION CONTACT: Robert C. Taylor, Office of Contract 
Assistance, Office of Government Contracting, 
WOSBProposedRegulation@sba.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    Women-owned businesses have been regarded as the fastest growing 
segment of the business community in the United States. Although 
between 1997 and 2002 the growth rate in the number of women-owned 
small businesses (WOSBs) was almost twice that of all firms, WOSBs have 
not generally received a commensurate increase in their share of 
Federal contracting dollars.
    Several congressional and executive efforts over the years to 
increase Federal contracting with WOSBs have not enhanced the WOSB 
share of Federal contracting dollars as much as anticipated. For 
example, in 1979, when Executive Order 12138 charged Federal agencies 
with responsibility for providing procurement assistance to women-owned 
businesses, WOSBs received only 0.2 percent of all Federal 
procurements. More than 9 years later, the percentage of WOSB Federal 
procurements had grown to only one percent. Similarly, in 1988, the 
Women's Business Ownership Act, Public Law 100-588 (Oct. 25, 1988), was 
enacted to assist women in starting, managing and growing small 
businesses. This program has been successful in assisting thousands of 
women in obtaining business financing and in business formation, but 
has enjoyed less success in the Federal procurement arena.
    Section 7106 of the Federal Acquisition Streamlining Act (FASA), 
Public Law 103-355 (Oct. 13, 1994), amended the Small Business Act (the 
Act) by establishing a target that would result in greater 
opportunities for women to compete for Federal contracts. FASA, among 
other things, established a government-wide goal for participation by 
WOSBs in procurement contracts of not less than 5 percent of the total 
value of all prime contract and subcontract awards for each fiscal 
year. FASA also directed that WOSBs, like other small businesses and 
small disadvantaged businesses (SDBs), have the maximum practicable 
opportunity to become subcontractors for Federal contracts exceeding 
$100,000, and it mandated that WOSBs be included in subcontracting 
plans required under Section 8(d) of the Act, 15 U.S.C. 637(d).
    Federal Procurement Data System (FPDS) data indicates that since 
fiscal year (FY) 1996, Federal agencies have not met the separate 5 
percent government-wide WOSB goal for prime contracts and subcontracts. 
However, the share of Federal prime contracting dollars to WOSBs has 
increased over the years. For example, in FY 2000, WOSBs received 2.3 
percent of the approximately $200 billion in Federal prime contract 
awards. The share of WOSB prime contract awards increased to 2.49 
percent in FY 2001, and again to 2.90, 2.98, and 3.03 percent in FYs 
2002, 2003 and 2004, respectively. In FY 2005, WOSB prime contract 
awards increased to 3.18 percent and in FY 2006, increased again to 
3.41 percent of prime contract awards. Nonetheless, the total percent 
of WOSB prime contract awards stills falls short of the statutory goal 
of 5 percent.
    The Government Accountability Office (GAO) published a report in 
February 2001 discussing the trends and obstacles in Federal 
contracting with WOSBs since FY 1996. See Trends and Challenges in 
Contracting With Women-Owned Small Businesses, GAO-01-346. In that 
report, GAO noted that contracting officials complain that one of the 
primary obstacles in achieving the statutory five percent WOSB goal was 
the absence of a ``targeted government program for contracting with 
WOSBs.''
    Section 811 of the Small Business Reauthorization Act of 2000, 
Public Law 106-554, provided such a mechanism. Section 811, enacted on 
December 21, 2000, amended the Act by adding a new section 8(m), 15 
U.S.C. 637(m), authorizing contracting officers to restrict competition 
to eligible WOSBs for certain Federal contracts in certain industries. 
Due to an apparent drafting error in the cross-reference and the inter-
relationships between subparagraphs (2)(C), (3) and (4) of 15 U.S.C. 
637(m), subparagraph (2)(C) literally appears to authorize set-asides 
for Federal contracts only in industries in which WOSBs are determined 
to be substantially underrepresented. However, if the statute were 
construed by SBA not to authorize set-asides in industries in which 
WOSBs were underrepresented, the provision in the statute requiring SBA 
to conduct a study to determine industries in which WOSBs are 
underrepresented, as well as the section's waiver provision, would 
arguably be rendered inoperative or contradictory. Accordingly, SBA has 
drafted the proposed rule to account for this apparent drafting error 
based on its best understanding of the meaning and intent of section 
8(m) read as a whole and has interpreted the statute to authorize set 
asides for industries in which WOSBs are determined to be 
underrepresented or substantially underrepresented in Federal 
procurement. In the absence of corrective legislation clarifying the 
confusing cross-references among these provisions, however, some degree 
of uncertainty will remain with respect to the question of whether 
section 8(m) effectively authorizes appropriate set-asides in 
industries where WOSBs are merely underrepresented rather than 
substantially underrepresented.
    The new section 8(m) of the Act explicitly limits the contracting 
officer's authority to restrict competition to contracts not exceeding 
$3 million ($5 million for manufacturing). Furthermore, to be eligible 
as a WOSB under section 8(m) of the Act, the firm must be a ``small 
business concern owned and controlled by women'' as defined in section 
3(n) of the Act, 15 U.S.C. 632(n). Section 8(m) also requires that such 
concerns be at least 51 percent owned by one or more women who are 
economically disadvantaged, except with respect to procurements in 
industries in which SBA has determined that WOSBs are substantially 
underrepresented in Federal contracting and has waived the economically 
disadvantaged requirement.
    Moreover, section 8(m) of the Act requires SBA to establish 
standards for determining the eligibility of a concern as a WOSB or 
economically disadvantaged WOSB (EDWOSB). It also

[[Page 73287]]

charges SBA with responsibility for verifying a concern's eligibility 
and provides the penalties for a concern's misrepresentation of its 
status as an EDWOSB or WOSB.
    Lastly, section 8(m) requires SBA to conduct a study to identify 
the industries in which WOSBs are underrepresented and substantially 
underrepresented in Federal procurement and requires the head of any 
department or agency to provide SBA with any information that SBA deems 
necessary to conduct the study. SBA initially completed the 
legislatively mandated study in September 2001. However, in March 2005, 
the National Academy of Science (NAS) issued an independent evaluation 
determining that SBA's original study was ``fatally flawed.'' In 
response to the NAS's findings, SBA issued a solicitation in October 
2005 seeking a contractor to perform a revised study in accordance with 
the NAS report. In February 2006, SBA awarded a contract to the 
Kauffman-RAND Institute for Entrepreneurship Public Policy (RAND) to 
complete a revised study of the availability and utilization of WOSBs 
in prime contracts. The RAND report was published in April 2007 and is 
available to the public at https://www.RAND.org/pubs/technical--reports/
TR442.
    On June 15, 2006, the SBA published in the Federal Register, 71 FR 
34550, a proposed rule, with request for comments, to amend its 
regulations in accordance with Sec.  8(m) of the Small Business Act. 
Based on SBA's evaluation of the public and inter-agency comments 
received, discussions with the Department of Justice (DOJ) and the 
Office of Federal Procurement Policy (OFPP), and further examination of 
Section 8(m), it has been determined that the June 15, 2006, proposed 
rule requires significant changes that warrant further public comment 
and consideration. In addition, rather than propose a separate 
rulemaking, SBA believes it would be expeditious to include in this 
proposed rule implementation of the RAND study results which identified 
the industries in which WOSBs are underrepresented and substantially 
underrepresented in Federal procurement.
    Whether SBA went forward with a final rule on WOSB status and 
procedures and simultaneously proposed a rule to implement the RAND 
Study results or combined the two rules into one comprehensive rule, 
any potential set-asides under the procedures could not be made until 
the RAND report rule had been finalized. Therefore, SBA's action of 
combining the RAND report rule with this re-proposed June 15, 2006 rule 
not only obviates the need for a separate rulemaking but significantly, 
will not delay the implementation of the WOSB procedures.

II. RAND Report Results

    The RAND report outlined several approaches to identify 
underrepresentation of WOSBs in Federal procurement, each of which 
yields a different result. SBA has preliminarily adopted the approach 
set forth below.
    RAND's report identifies 28 different approaches to determine 
underrepresentation and substantial underrepresentation. Twenty of 
these approaches compare FY 2006 Central Contractor Registration (CCR) 
registration data to FY 2005 Federal Procurement Data System/Next 
Generation (FPDS/NG) procurement data, while eight (8) compare the 2002 
Survey of Business Owners (SBO) from the five-year Economic Census to 
FYs 2002/2003 FPDS/NG procurement data.
    SBA eliminated the eight approaches based on a comparison of the 
2002 SBO data to FYs 2002/2003 FPDS/NG procurement data for the 
following reasons: (1) The SBO does not distinguish between WOSBs and 
women-owned businesses (large and small), while the procedures 
authorized by Congress are specifically targeted towards WOSBs (only 
small businesses); (2) since the SBO is generally not available for two 
years after the survey is completed, the SBO is never current; and 
lastly (3) the SBO cannot fine-tune the industry groupings beyond the 
two-digit NAICS level.
    In its 2005 report examining SBA's 2001 methodology, the NAS 
criticized SBA's use of the two-digit Major Group Standard Industrial 
Classification (SIC) industry classification as inadequate. The two-
digit Major Group SIC designation corresponds to the current three-
digit Subsector NAICS designation. Thus, while the NAS criticized SBA's 
use of two-digit SIC information, the SBO two-digit NAICS data is even 
less precise than the two-digit SIC data. Both the CCR and FPDS-NG, on 
the other hand, provide the capability to use four-digit NAICS 
classifications. For this reason, SBA also eliminated 16 approaches 
based on CCR comparisons to FPDS/NG 2005 procurement data which used 
two and three-digit NAICS codes.
    As a result, four approaches were left as possibly viable, all 
based on 2004 CCR and 2005 procurement data and four-digit NAICS codes. 
Two of the four approaches were based on the dollar value of contracts 
awarded and the other two were based on the number of contracts 
awarded. SBA eliminated the two approaches based on the number of the 
contracts awarded. When discussing whether to use dollars or numbers as 
the measure of underrepresentation, it was necessary to evaluate the 
benefits and limitations of either choice. After careful analysis, it 
was decided to adopt an approach consistent with Congressional 
measures, which use dollars. Congress appropriates Federal funding in 
dollars, the Federal budget is divided in dollars, all Federal 
government contracts are awarded in dollars, and the accounting and 
auditing processes focus on how these dollars are spent. Dollar amounts 
can easily be compared across agencies, programs and NAICS codes. 
Tracking dollar amounts also avoids problems that arise from the 
contracting nuances of the individual agencies. Contract actions do not 
allow for an accurate accounting of the financial benefits and business 
development that occur when small businesses receive a Federal 
contract.
    Finally and perhaps most importantly, Congress, through the Small 
Business Act, has given direction only in dollars. Section 15(g)(1) is 
the section in the Act that provides direction on counting small 
business goals. All of those goals are aimed at achieving a dollar 
amount (total value) relative to all dollars expended in Federal 
procurement. In particular, the goal for small business concerns owned 
and controlled by women states that: ``The Government-wide goal for 
participation by small business concerns owned and controlled by women 
shall be established at not less than 5 percent of the total value of 
all prime contract and subcontract awards for each fiscal year.'' 
Congress authorized the contracting assistance procedures in Section 
8(m) as a result of the Federal Government's persistent deficiencies in 
achieving this goal. Thus, the disparity measure based on contract 
dollars is consistent with the five percent goal, which is also based 
on contract dollars.
    Accordingly, two approaches remained available for SBA to use to 
determine underrepresentation. Of these two approaches, one was based 
on a full sample, and the other was based on a trimmed sample 
(eliminating the top and bottom 0.5 percent of the data). RAND stated 
in its report that it found little benefit to trimming the sample and 
that it puts more weight on the full-sample results (Chapter 4, 
Results, page 22). Accordingly, SBA eliminated the trimmed-sample 
results.
    The four industries identified using the adopted approach from the 
RAND

[[Page 73288]]

report (NAICS codes 9281--National Security and International Affairs, 
3328--Coating, Engraving, Heat Treating, and Allied Activities, 3371--
Household and Institutional Furniture and Kitchen Cabinet 
Manufacturing, and 4412--Other Motor Vehicle Dealers) are those 
industries in which WOSBs are underrepresented or substantially 
underrepresented in government-wide Federal procurement. The RAND 
report does not, however, expressly find discrimination in the 
identified industries. The equal protection requirements of the Fifth 
Amendment prohibit Federal agencies from discriminating on the basis of 
sex in awarding contracts unless the preference furthers important 
governmental objectives and the means employed are substantially 
related to the achievement of those objectives. See United States v. 
Virginia, 518 U.S. 515, 533 (1996). This standard, which requires an 
``exceedingly persuasive justification,'' id., is commonly referred to 
as ``intermediate scrutiny.'' In applying this standard, Federal courts 
have generally required that the government establish probative 
evidence of discrimination in the relevant industry in order to justify 
sex-based contracting preferences. See, e.g., Engineering Contractors 
Ass'n of South Florida v. Metropolitan Dade County, 122 F.3d 895, 910 
(11th Cir. 1998). Based on these precedents, the Department of Justice 
has advised SBA that before a contracting officer may restrict 
competition to WOSBs under section 8(m), the concerned agency must 
determine through appropriate analysis (including analysis of its own 
procurement history) that the set-aside will be consistent with the 
foregoing constitutional standards. In particular, to ensure 
uniformity, SBA proposes that the agency must determine whether the 
set-aside is substantially related to remedying sex discrimination in 
that industry.

III. Summary of Regulations

    To implement the new section 8(m) of the Act, this proposed rule 
would establish procedures that will assist WOSBs in procuring 
contracting opportunities with the Federal Government. Although these 
procedures would be considered part of SBA's government contracting 
programs set forth under part 125 of title 13 of the Code of Federal 
Regulations (CFR), for ease of reference, the proposed WOSB procedures 
would be contained in a new part 127 of title 13. As proposed, the 
regulations provide the general definitions and clarifications of the 
procedures and eligibility requirements under subparts A and B of this 
rule. The regulations also provide the certification procedures and the 
process for appealing WOSB status protest determinations to SBA's 
Office of Hearings and Appeals (OHA). These proposed regulations also 
provide the specific eligibility requirements for qualification as an 
EDWOSB or WOSB and state the requirement for each agency to conduct the 
appropriate analysis (including analysis of its own procurement 
history) to ensure that the set-aside will be consistent with 
constitutional standards.
    This rule would also modify the process for reserving contract 
opportunities in industries in which SBA and agencies determine that 
WOSBs are substantially underrepresented in Federal procurement. To 
provide procuring activities greater flexibility in structuring their 
procurements to achieve WOSB Federal contracting goals, this rule would 
grant contracting officers the discretion to waive the requirement for 
competition by EDWOSBs in those industries in which WOSBs are 
determined to be substantially underrepresented. The rule also provides 
conforming amendments necessary to integrate these proposed procedures 
into SBA's size and government contracting regulations.
    SBA invites comment on all aspects of this proposed rule.

IV. Section-by-Section Analysis

    The following is a section-by-section analysis of the proposed 
rule.

A. Conforming Amendments to Parts 121 and 125

    The authority citation for 13 CFR part 121 would be revised to 
include 15 U.S.C. 637(m), since part 121 would be amended to include 
references to the WOSB Procurement Opportunity Procedures (Procedures) 
Section 121.401 would be amended to add the procedures governing women-
owned contracting requirements to the list of government procurement 
programs subject to size determinations. This would subject EDWOSBs and 
WOSBs to size protests and determinations under part 121 of title 13.
    Section 121.1001 would be amended by adding a new paragraph (a)(9) 
to describe who may initiate a size protest in connection with a 
particular requirement set-aside for women-owned small business 
concerns. That section would provide that any concern that submits an 
offer for a specific requirement set-aside under the authority of Sec.  
8(m) of the Act, the contracting officer, SBA Government Contracting 
Area Director and the Director for Government Contracting or designee, 
may protest the size of another offeror for the particular requirement.
    Section 121.1008 would be amended by adding a sentence that 
requires the SBA Government Contracting Area Director, or designee, to 
notify SBA's Director, Office of Government Contracting, of receipt of 
a size protest involving a concern that is designated in the Central 
Contractor Registration (CCR) as a certified EDWOSB or WOSB.
    Section 125.6 would be amended to provide that EDWOSBs and WOSBs 
awarded a set-aside contract using these procedures must satisfy 
certain requirements if they intend to subcontract. These 
subcontracting limitations are the same limitations that are currently 
in place for an 8(a) contract or an unrestricted procurement where a 
concern has claimed a small disadvantaged price evaluation preference.

B. Addition of a New Part 127

    A new part 127 would be added to title 13 of the CFR to implement 
the procedures that are required under the statute. Subpart A provides 
background information concerning contracting opportunities for women-
owned small business concerns. Specifically, Sec. Sec.  127.100 and 
127.101 describe the purpose, legal basis and assistance available to 
eligible WOSBs. Section 127.102 defines the relevant terms used in part 
127. Many of those definitions are identical to or derived from the 
definitions provided in parts 121 and 124 of this title, governing 
SBA's size, 8(a) Business Development (BD) and SDB programs.
    The proposed rule also uses several newly defined terms which SBA 
developed for ease of reference to various statutory requirements. For 
example, the proposed rule uses the term ``economically disadvantaged 
WOSB'' or ``EDWOSB'' to refer to the Act's requirement that certain 
WOSBs be not less than 51 percent owned and controlled by one or more 
women who are U.S. citizens and economically disadvantaged. This rule 
also defines what constitutes ``underrepresented'' and ``substantially 
underrepresented.'' SBA has defined the terms ``underrepresentation'' 
and ``substantial underrepresentation'' in this proposed rule to be a 
disparity ratio representing either the WOSB share of Federal prime 
contract dollars divided by the WOSB share of total business receipts. 
If the disparity ratio falls between 0.5 and 0.8, underrepresentation 
is found. If the disparity ratio falls between 0.0 and 0.5,

[[Page 73289]]

substantial underrepresentation is found.
    These disparity ratios were found to be reasonable by the NAS in 
its 2005 report analyzing the preliminary study conducted by SBA in 
2001. See The National Academies Press, Analyzing Information on Women-
Owned Small Business in Federal Contracting (2005), available at http:/
/www.nasonline.com. SBA adopted the threshold value of 0.8 based in 
part on the Equal Employment Opportunity Commission's use of that 
threshold as a rule of thumb for defining underrepresentation in 
enforcing antidiscrimination employment laws. The threshold value of 
0.8 also has the advantage, compared with a higher value, of reducing 
classification errors due to sampling variability or other sources of 
errors within the underlying procurement data. SBA adopted the 
threshold value of 0.5 largely because it is sufficiently below 0.8 and 
sufficiently higher than zero to distinguish substantial from less than 
substantial underrepresentation.
    Subpart B describes the eligibility requirements for qualification 
as an EDWOSB or WOSB. Because these qualifications entail similar 
ownership, control and economic disadvantage criteria as used in the 
8(a) BD and SDB programs, this proposed rule similarly requires that 
the concern be at least 51 percent unconditionally owned and controlled 
by one or more women who are United States citizens. For reasons of 
consistency, the economic disadvantage requirement in Sec.  127.203 
also has the same $750,000 threshold for personal net worth as does the 
8(a) BD program and the SDB program for purposes of determining a 
program participant's continuing eligibility. In order to qualify as an 
EDWOSB, the concern must also prove that it is economically 
disadvantaged. One notable exception is with respect to the application 
of community property laws. The Act explicitly provides that ownership 
shall be determined without regard to any community property laws. As a 
result, Sec.  127.201 precludes the application of community property 
laws in WOSB ownership determinations.
    Subpart C of the proposed rule sets forth the self-certification 
requirements for concerns that submit offers on procurements set aside. 
Section 8(m)(2)(F)(i) of the Act authorizes certification by ``a 
Federal agency, a State government, or a national certifying entity'' 
approved by SBA. Consistent with that provision, subpart C of this 
proposed rule establishes the procedures for obtaining EDWOSB or WOSB 
certification from SBA.
    Specifically, proposed Sec.  127.300 provides that at the time a 
concern submits an offer on a specific contract reserved for 
competition under these procedures, it must be registered in the CCR 
and have a current self-certification posted on the Online 
Representations and Certifications Application (ORCA) indicating that 
it qualifies as an EDWOSB or WOSB. That section would further detail 
the specific representations concerns must include as part of their 
self-certification, including that: (1) The firm is a small business 
concern under the size standard assigned to the particular procurement; 
(2) it is at least 51 percent owned and controlled by one or more women 
who are United States citizens or it is at least 51 percent owned and 
controlled by one or more women who are United States citizens and are 
economically disadvantaged; and (3) neither SBA nor an SBA-approved 
certifier has determined that the concern does not currently qualify as 
an EDWOSB or WOSB. Because ORCA is generally the accepted 
representations process that concerns currently follow to self-certify 
other forms of small business status in Federal procurements, using 
that system for the WOSB self-certification process would minimize 
interference with the procurement process and the burden on contracting 
officers.
    Sections 127.301 through 127.303 provide the specific procedures 
for obtaining EDWOSB and WOSB certification. SBA believes that the 
self-certification process set forth in this rule is consistent with 
the statutory framework of Section 8(m) and with prevailing Supreme 
Court precedent. It also would minimize delays and disruption to the 
contracting process by utilizing the existing system of representations 
and certifications in Federal procurement and by not requiring 
contracting officers to review voluminous documents supporting a 
concern's self-certification.
    Proposed Sec.  127.301 describes the circumstances under which a 
contracting officer may accept a concern's self-certification for the 
particular procurement for which the self-certification is made. That 
section would provide that when a contracting officer receives an 
EDWOSB or WOSB status protest from another offeror, or when the 
contracting officer has information that calls into question the 
eligibility of a concern, the contracting officer must refer the matter 
to SBA for verification of the concern's eligibility pursuant to the 
WOSB status protest procedures under Subpart F.
    To minimize interference with the procurement process, this rule 
would also recognize a concern's certification as an EDWOSB or WOSB by 
an entity approved by SBA. In particular, Sec. Sec.  127.300 and 
127.302 would provide that a concern may use a certification by another 
entity as evidence of its status as a qualified EDWOSB or WOSB in 
support of its representations in ORCA if the concern: (1) Has a 
current, valid SBA certification as an 8(a) BD or SDB women-owned 
concern in good standing under those programs; (2) has a current valid 
certification as a woman-owned business under DOT's DBE program; or (3) 
has a current valid certification by an entity designated as an SBA-
approved certifier on SBA's Web site located at https://www.sba.gov/GC. 
Sections 127.303 and 127.304 explain how entities are selected and 
identified as approved certifiers and how concerns may obtain 
certifications from such entities. Because all certifying entities may 
not use the same eligibility criteria applicable to EDWOSBs and WOSBs 
as provided under Subpart B of this rule, SBA does not intend to 
automatically accept third-party certifications for purposes of 
contracting with WOSBs. Rather, once SBA has determined that a 
certifier uses the same criteria and follows appropriate procedures and 
standards, SBA may designate that entity as an approved certifier. The 
Agency will maintain a list of all approved certifiers on its Web site.
    Section 127.305 would explain the extent to which concerns that are 
determined not to qualify as an EDWOSB or WOSB may submit a self-
certification under Sec.  127.300(b). Specifically, under Sec.  
127.305, a concern that SBA or an SBA-approved certifier determines is 
not a qualified EDWOSB or WOSB would be prohibited from self-certifying 
unless SBA subsequently determines that the concern qualifies as an 
EDWOSB or WOSB pursuant to the examination procedures under Sec.  
127.405. Those procedures specifically allow concerns determined to be 
an ineligible EDWOSB or WOSB to request that SBA conduct an examination 
to determine their eligibility at any time the concern believes in good 
faith that it satisfies all of the eligibility requirements.
    Together, Sec. Sec.  127.300 through 127.305 describe the 
streamlined representations concerns must provide to contracting 
officers to certify eligibility and authorize contracting officers to 
refer questionable self-certifications to SBA for verification of 
eligibility pursuant to the protest procedures. Robust protest 
procedures coupled with the provisions for appropriate examinations to 
monitor

[[Page 73290]]

the eligibility of firms that self-certify their status under Subpart 
D, will minimize the potential for fraud and abuse. These procedures 
will also assist in ensuring that only eligible WOSBs receive the 
benefits consistent with prevailing Supreme Court precedent.
    Proposed Sec. Sec.  127.400 through 127.405 under subpart D discuss 
the examination process for determining the continuing eligibility of a 
firm that is designated on CCR as a certified EDWOSB or WOSB. Those 
sections explain when and how SBA will conduct the examination and the 
decertification procedures SBA will follow when it is unable to verify 
that a concern qualifies as an EDWOSB or WOSB.
    Proposed Sec.  127.401 also explains the distinctions between the 
examination process and the EDWOSB and WOSB protest mechanism provided 
under the proposed subpart F. The proposed Sec.  127.401 makes clear 
that the examination process is intended to verify the continuing 
EDWOSB or WOSB eligibility of a concern generally, while an EDWOSB or 
WOSB status protest is designed to determine the EDWOSB or WOSB 
eligibility of a concern for a specific procurement. The separate WOSB 
or EDWOSB examination procedures will assist in maintaining the 
integrity of the certification process by subjecting certified concerns 
to examinations of their EDWOSB and WOSB eligibility certifications. 
Consequently, examinations will serve to supplement the protest 
mechanism by monitoring the continuing eligibility of firms that claim 
EDWOSB and WOSB status.
    Moreover, Sec.  127.401(a) further provides that if SBA is 
conducting an examination of a concern that has submitted an offer on a 
pending EDWOSB or WOSB requirement and SBA has credible information 
that the concern may not qualify as an EDWOSB or WOSB, SBA may file a 
protest under Sec.  127.600 to challenge the concern's eligibility for 
award for the specific requirement.
    The provisions governing the available Federal contract assistance 
for WOSBs and EDWOSBs are set forth in proposed subpart E. Sections 
127.500 through 127.502 discuss the industries in which contracting 
officers are authorized to restrict competition to EDWOSBs and WOSBs. 
Section 127.500 explains that contracting officers may only restrict 
competition to EDWOSBs and WOSBs in industries in which (1) SBA has 
determined that WOSBs are either underrepresented or substantially 
underrepresented in Federal procurement and (2) the procuring agency 
has found, through appropriate analysis of its own procurement history, 
that the set-aside would satisfy the equal protection requirements of 
the Due Process Clause of the Fifth Amendment of the Constitution. 
Sections 127.501 and 127.502 indicate how SBA will determine, identify 
and provide public notice of those industries. Those sections, like 
section 8(m) of the Act, do not specify how SBA will determine whether 
WOSBs are underrepresented or substantially underrepresented in a 
particular industry. Instead, Sec.  127.501 provides generally that at 
least every five years SBA, or another entity authorized to act on its 
behalf (e.g., a contractor), will conduct a study to identify the 
underrepresented or substantially underrepresented industries. The 
study will include an analysis of the extent of disparity of WOSBs in 
Federal contracting. Based upon that analysis, SBA will designate by 4-
digit NAICS Industry Subsector industries in which WOSBs are 
underrepresented or substantially underrepresented.
    Under Sec.  127.501(b), where an agency seeks to reserve a 
requirement for WOSBs or EDWOSBs in one of the industries identified by 
SBA as being an industry in which WOSBs are underrepresented or 
substantially underrepresented government-wide, the agency must ensure 
that the set-aside meets the equal protection requirements of the Due 
Process Clause of the Fifth Amendment to the Constitution. It must 
conduct an analysis of the agency's past procurement activities and 
make a finding of discrimination by that agency in that particular 
industry sufficient to ensure that the set-aside is substantially 
related to an important governmental objective. As the agency primarily 
charged with implementing this and other set-aside programs under 
section 8 of the Act, SBA proposes this requirement on contracting 
agencies to ensure that this program is implemented uniformly across 
the government and in a manner that ensures it will be constitutional 
under the current Supreme Court jurisprudence.
    Section 127.502 indicates that SBA will post a list of the 
designated industries on its Internet Web site. The list of designated 
industries also may be obtained from the local SBA district office and 
may be posted on the General Services Administration Internet Web site.
    Section 127.503 addresses when a contracting officer is authorized 
to restrict competition to WOSBs or EDWOSBs. It establishes a similar 
``rule-of-two'' standard as used in small business set-asides. This 
standard requires the contracting officer to reasonably expect that at 
least two eligible companies would bid if the contract is set aside, 
based on market research. That section further makes clear that a 
contracting officer may not restrict competition to eligible EDWOSBs or 
WOSBs if an 8(a) BD Participant is currently performing the requirement 
under the 8(a) BD Program or SBA has accepted the requirement for 
performance under the authority of the 8(a) BD program, unless SBA 
consented to release the requirement from the 8(a) BD program. Because 
this limitation on the restriction of competition serves to reconcile 
the ``goal'' requirements of 15 U.S.C. 644(g) with the requirements of 
section 8(m), it is authorized by the Administrator's general authority 
to ``make such rules and regulations as he deems necessary to carry out 
the authority vested in him by or pursuant to this chapter'' and is 
intended to clarify that the implementation of this program does not 
affect the Administrator's authority or responsibilities under the 8(a) 
BD program. 15 U.S.C. 634(b)(6). SBA does not intend to imply through 
lack of mention other programs, such as HUBZone set-asides or service-
disabled veteran-owned small business set-asides, that contract 
requirements currently being fulfilled through other set-aside programs 
must be brought into this program or that this program should be give 
preference over other set-aside programs.
    Sections 127.504 and 127.505 describe the additional requirements a 
concern must satisfy to submit an offer on an EDWOSB or WOSB 
requirement. Section 127.504 indicates that in addition to the 
certification requirements under subpart C, offerors on EDWOSB or WOSB 
requirements must also certify that they are small under the size 
standard for the procurement and that they will comply with the 
limitations on subcontracting rule set forth in Sec.  125.6 of this 
title. Section 127.505 explains that an EDWOSB or WOSB that is a non-
manufacturer, as defined in Sec.  121.406(b), may submit an offer for 
an EDWOSB or WOSB requirement if it meets the requirements of Sec.  
121.406(b). Proposed Sec.  127.506 governs what is required of joint 
venture relationships involving WOSBs when submitting an offer on an 
EDWOSB or WOSB contract.
    The proposed Subpart F sets forth the procedures for protesting the 
status of a concern as an EDWOSB or WOSB, including the procedures for 
filing protests, for rendering protest determinations and for appealing 
those determinations to SBA's Office of

[[Page 73291]]

Hearings and Appeals (OHA). Sections 127.600 through 127.602 describe 
who is authorized to file and decide EDWOSB and WOSB status protests 
and the permissible grounds for filing protests.
    Sections 127.603 through 127.606 prescribe format, and applicable 
deadlines for filing and determining EDWOSB and WOSB protests and for 
appealing SBA's protest determinations. Unlike eligibility examinations 
under the proposed subpart D, protests are time-sensitive because they 
are tied to a particular procurement. As a result, Sec. Sec.  127.604 
and 127.605 prescribe filing and decision deadlines to minimize undue 
interruptions in the underlying procurement.
    The final section of the proposed part 127, subpart G, Sec.  
127.700, prescribes the applicable penalties that may be imposed on any 
person or concern that misrepresents the status of a concern as an 
EDWOSB or WOSB for purposes of receiving a Federal procurement.

C. Amendments to Part 134

    SBA is also proposing to amend Part 134 to include procedures for 
an EDWOSB or WOSB to appeal a protest determination under Part 127 of 
this Chapter. Specifically, Sec.  134.102 would be amended to give OHA 
jurisdiction to hear appeals on WOSB or EDWOSB protests. Further, Sec.  
134.515 would be revised to reflect a change in when a judge may 
reconsider an appeal.
    A new subpart, Subpart G, would be added to prescribe the 
procedures for filing and processing the appeals before OHA. This 
subpart will only apply to appeals to OHA from formal protest 
determinations made by the Director, Office of Government Contracting 
(D/GC) in connection with a WOSB or EDWOSB status protest. Procedures 
for size determination protests and NAICS code designations are 
governed by Subpart C of this part.
    Proposed Sec.  134.701 outlines the scope of the rules under this 
subpart. Sections 134.702 and 134.703 describe who may appeal a protest 
determination and when that person must file an appeal. Under Sec.  
134.702, the protested concern, the protestor, or the contracting 
officer responsible for the procurement affected by the protest 
determination may file an appeal with OHA. Section 134.703 allows for 
an appeal petition to be made within 10 business days after the 
appellant receives the protest determination.
    Section 134.704 describes the effects that the appeal will have on 
the procurement at issue. If OHA determines that a concern is 
ineligible then the contracting officer may terminate the contract.
    Sections 134.705, 134.706 and 134.707 set out the requirements for 
an appeal petition, what the service and filing requirements are and 
when the D/GC transmits the protest file and to whom. The standard of 
review is found in Sec.  134.707. The standard is whether the D/GC's 
determination was based on clear error of fact or law.
    Under Sec.  134.709 the Judge is able to dismiss an appeal if it is 
untimely filed or has already been adjudicated by a court of competent 
jurisdiction over such matters. Section 134.710 sets out the 
requirements of who can file a response to an appeal petition. Sections 
134.711-712 discuss discovery and limitations on new evidence. No 
discovery is permitted and no new evidence will be allowed to be 
admitted. Sections 134.713 and 134.714 set out the timing for the 
appeal petition. Under Section 134.713 the record will close when the 
time to file a response to an appeal petition expires pursuant to 13 
CFR 134.710. Under Sec.  134.714, the Judge must issue a decision 
within 15 business days after close of the record.
    Section 134.715 allows for the OHA Judge to reconsider an appeal 
decision within 20 calendar days after issuance of the written 
decision. Any party who has appeared in the proceeding, or SBA, can 
request reconsideration by filing with the Judge and serving a petition 
for reconsideration on all the parties to the appeal within 20 calendar 
days after service of the written decision.
    Compliance with Executive Orders 12866, 12988, and 13132, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612).

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is a ``significant'' regulatory action under Executive Order 
12866. The Regulatory Impact Analysis is set forth below.

Regulatory Impact Analysis

1. Necessity of Regulation

    This regulatory action implements section 8(m) of the Act, which 
was enacted as part of section 811 of the Small Business 
Reauthorization Act of 2000, Public Law 106-554. Section 8(m) 
authorizes the creation of the set-aside procurement mechanism 
described in this regulation. Under this regulation contracting 
officers will be allowed to restrict competition to EDWOSBs or WOSBs in 
industries in which SBA has determined that WOSBs are underrepresented 
and when the procuring agency has conducted an appropriate analysis of 
the agency's procurement history and made a determination that there is 
sufficient evidence of relevant discrimination in that industry by that 
agency. This proposed rule will establish the requirements and 
procedures necessary to administer these restricted competitions.

2. Alternative Approaches to Proposed Rule

    In developing this proposed rule, SBA considered the costs and 
benefits of the alternatives for certification of small business 
concerns that claim EDWOSB or WOSB status, particularly the 
alternatives provided by section 8(m) of the Act. Specifically, section 
8(m)(2)(F) provides that in order to qualify as a WOSB or EDWOSB, a 
concern must either be certified by a Federal agency, a State 
government, or a national certifying entity approved by the 
Administrator, or, alternatively, must certify to the contracting 
officer that they are a small business concern owned and controlled by 
women. In light of this provision, SBA considered performing the 
certifications by requiring each concern to submit a formal application 
to SBA for a determination of its status. That approach would have 
entailed the electronic or paper submission of written documentation to 
support the concern's claim that it meets the eligibility criteria for 
being designated a WOSB or EDWOSB. SBA decided against utilizing this 
certification process as the method to establish WOSB or EDWOSB status 
primarily because of the paperwork burden and other costs that approach 
would impose on WOSBs.
    However, as an additional approach to self-certification, SBA is 
proposing to permit contracting activities to accept formal 
certification gained by WOSBs and EDWOSBs as a result of their 
participation in Federal small business programs. This may be 
accomplished by designating as WOSB or EDWOSB-certified all those 
concerns that at the time of procurement: (1) Were SBA certified as 
8(a) BD or SDB women-owned concerns in good standing; (2) held a 
current certification as a disadvantaged business enterprise (DBE) from 
a certifying entity of a Department of Transportation grant recipient; 
or (3) were certified by an SBA-approved certifier. SBA has rejected 
them as primary methods for WOSB or EDWOSB certification in favor of a 
self-certification process. In the event of a protest SBA will 
recognize these certifications as evidence of a concern's

[[Page 73292]]

representation in ORCA that it is a qualified EDWOSB or WOSB. The 
standards for meeting this requirement are discussed in more detail in 
the body of this proposed regulation.
    SBA believes that the proposed self-certification process would be 
the most beneficial and cost-effective approach for the small business 
concerns because they will not have to submit formal applications to 
SBA to become eligible for restricted competition for WOSB and EDWOSB 
procurements. As proposed, the self-certification process is similar to 
the one that is used in other existing SBA set-aside programs. For 
example, the SBA programs for small businesses and service-disabled 
veteran-owned small businesses permit those concerns to self-represent 
their size and socio-economic status when bidding on Federal contracts. 
The set-aside program for small businesses has worked well for decades. 
The set-aside program for service-disabled veteran-owned small 
businesses, while more recent, is also working well. Both of these set-
aside programs are credible because they are supported by robust 
protest procedures. In other words, when an interested party such as an 
unsuccessful offeror believes that the apparent successful bidder or 
offeror on a Federal contract is not a small business, or not a 
service-disabled veteran-owned small business in the case of a set-
aside for service-disabled veteran-owned small businesses, there is a 
formal process by which the interested party may submit a protest to 
SBA. This action halts the procurement until SBA investigates the 
allegations and reaches a decision. The subject proposed rule adopts 
the same approach, whereby interested parties may submit protests to 
SBA.
    The self-certification alternative will leverage two existing 
Federal electronic databases, the Central Contractor Registration (CCR) 
and the On-line Representations and Certifications Application (ORCA), 
to facilitate the self-certification process. The approach is also 
consistent with SBA's statutory responsibilities under section 8(m) of 
the Act to establish certification standards and procedures.

3. What Are the Potential Benefits and Costs of This Regulatory Action?

    This rule directs benefits to EDWOSBs and WOSBs at a cost to 
concerns ineligible for the program and at some cost to the taxpayer 
through restrictions on competition, resulting in increased contract 
prices and decreased selection of products and services and new 
administrative costs of managing a Federal procurement set-aside 
program and the eligibility determination processes. Generally, the 
cost of transferring a contract from one business to another has 
minimal cost to society as a whole, but the loss of efficiency through 
restrictions in contracting has broader impacts that depend highly on 
the use of this program by contracting officers and the availability of 
competition among EDWOSBs and WOSBs.
    The most significant effect of this rule will be the transfer of 
contract dollars to EDWOSBs and WOSBs through the contracting officers' 
ability to restrict competition to EDWOSBs or WOSBs in industries in 
which SBA has determined that WOSBs are underrepresented and 
substantially underrepresented and where certain threshold 
determinations are made by an agency. It is difficult to estimate the 
total number of potential beneficiaries or losers that will be eligible 
for Federal small business assistance as a result of this proposed 
rule. Based on the four NAICS codes (9281--National Security and 
International Affairs, 3328--Coating, Engraving, Heat Treating, and 
Allied Activities, 3371--Household and Institutional Furniture and 
Kitchen Cabinet Manufacturing, and 4412--Other Motor Vehicle Dealers) 
identified in the RAND study, utilizing the Dynamic Small Business 
Search (DSBS) engine in CCR, 1209 women-owned small businesses were 
identified as recipients of Federal contracts in these 4 NAICS codes. 
It is expected that the number of awards to EDWOSBs and WOSBs will 
increase within these NAICS codes, should an agency restrict 
competition to only those groups in accordance with the procedures in 
this proposed rule. This estimate is based on an analysis of EDWOSB and 
WOSB participation in Federal contracting and the industry market share 
identified in the RAND report. In addition, one purpose of this program 
is to draw additional EDWOSBs and WOSBs into Federal procurement 
through restricted competition in the identified NAICS codes. However, 
any such economic incentive to enter Federal procurement may represent 
a cost to the taxpayer and society in the form of higher contract 
prices or fewer choices of quality.
    From the point of view of Federal procurement policy, as set by 
statute, Federal agencies may benefit from the increased availability 
of EDWOSBs and WOSBs in order to meet their statutory goals. However, 
in the short term, restriction of competition raises the cost of 
contracts and limits the selection of products available. As more 
EDWOSBs and WOSBs enter into the Federal arena, competition will likely 
increase, lowering the cost of the program and ultimately eliminating 
underrepresentation within those industries and the industry's 
participation in the program. In the long run, even with the 
elimination of underrepresentation in all industries, small business 
opportunities may be enhanced by the experience gained in Federal 
contracting through set-asides under this program, but taxpayers 
ultimately bear the cost of small businesses inexperienced in Federal 
contracting learning through limited competition set-asides.
    Further, large businesses serving the Federal government as prime 
contractors with small business subcontracting goals may also benefit 
from a larger pool of WOSBs by enabling them to better achieve their 
subcontracting goals and at lower prices. No estimate of cost savings 
from these contracting decisions can be made since data are not 
available to directly measure price or competitive trends on Federal 
contracts.
    To the extent that additional firms become active in Government 
programs, this may entail some additional administrative costs to the 
Federal Government associated with additional bidders for Federal small 
business procurement programs, additional firms seeking SBA guaranteed 
lending programs, and additional firms eligible for enrollment in SBA's 
Dynamic Small Business Search data base. Among businesses in this group 
seeking SBA assistance, there will be some additional costs associated 
with compliance and verification associated with certification of small 
business status and protests of small business status. However, these 
activities are likely to generate minimal incremental costs since 
mechanisms are currently in place to handle these administrative 
requirements. In addition, SBA attempted to calculate the cost to 
agencies when determining if there has been discrimination against 
WOSBs or EDWOSBs in the designated industry groups. However, SBA does 
not have access to agency presolicitation market research or any other 
agency maintained data that would reveal the extent of an agency's 
efforts to consider or reject out-of-hand the offers of WOSBs or 
EDWOSBs in a post-contract award environment. SBA can however, state 
that the Government-wide study conducted by the Rand Corporation to 
determine industries where WOSBs were underrepresented cost 
approximately $250,000.00. SBA estimates that similar studies conducted 
by agencies in this regard should not exceed that figure, if they must 
seek outside assistance to make their determinations.

[[Page 73293]]

    This regulatory action promotes the Administration's objectives. 
One of SBA's goals in support of the Administration's objectives is to 
help individual small businesses succeed through fair and equitable 
access to capital and credit, government contracts, and management and 
technical assistance. Implementation of this proposed rule ensures that 
the intended beneficiaries have access to small business programs 
designed to assist them. This proposed rule does not interfere with 
state, local, and tribal governments in the exercise of their 
government functions. In a few instances, state and local governments 
have voluntarily adopted SBA's regulations for their programs to 
eliminate the need to establish an administrative mechanism for 
developing their own size standards.

Executive Order 12988

    This action meets applicable standards set forth in Sec. Sec.  3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    This rule does not have federalism implications as defined in the 
Executive Order. It will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, as specified in Executive Order 13132.
    In the event of a protest, this proposed rule will allow a WOSB 
concern to substantiate its self-certifications by submitting an 
existing certification from an SBA approved State Government certifier. 
In order for SBA to accept a State's certification, the State must show 
that its certification process meets certain standards, including a 
showing that its process is based on the same criteria for WOSB or 
EDWOSB eligibility, as set forth in this regulation. However, this 
proposed rule will not mandate how the States conduct their 
certification processes, and as such the rule will not have a direct 
effect on the States. Therefore, for the purposes of Executive Order 
13132, SBA determines that this proposed rule has no federalism 
implications warranting preparation of a federalism assessment.

Paperwork Reduction Act (PRA)

    For purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 35, 
SBA has determined that this proposed rule does not impose any new 
reporting or recordkeeping requirements. The certification process 
described in Subpart C, Sec. Sec.  127.300 to 127.305, is not an 
information collection. In general, certifications are not subject to 
the PRA notice and review requirements unless such certifications are 
used as a substitute for collecting information. The proposed self-
certification process does not require any concern seeking to benefit 
from Federal contracting opportunities designated for WOSBs or EDWOSBs 
to submit or maintain any information. Rather, the concerns will use 
the existing electronic contracting system (i.e., ORCA) to confirm the 
following statements, under penalty of perjury:
    (1) The concern is certified as a EDWOSB or WOSB by a certifying 
entity approved by SBA and there have been no changes in its 
circumstances affecting its eligibility since certification; or
    (2) The concern meets each of the applicable individual eligibility 
requirements described in subpart B, including that:
    (i) It is a small business concern under the size standard assigned 
to the particular procurement;
    (ii) It is at least 51 percent owned and controlled by one or more 
women who are United States citizens, or it is at least 51 percent 
owned and controlled by one or more women who are United States 
citizens and are economically disadvantaged; and
    (iii) Neither SBA, in connection with an examination or protest, 
nor an SBA-approved certifier has issued a decision currently in effect 
finding that it does not qualify as a EDWOSB or WOSB. The process for 
the annual recertification is similar in nature and as such also does 
not require any reporting or recordkeeping.
    The only occasion on which concerns would have to submit 
information to SBA would be in the context of a protest or examination, 
when SBA might request that a particular WOSB submit documentation to 
substantiate its claim. This proposed rule does not require the WOSBs 
to maintain any specific information for this purpose. Further, any 
request for substantiation would not be standardized but rather would 
be specific to a WOSB's particular status, and as such are also not 
subject to the PRA. Nonetheless, SBA would welcome any comments on the 
process as described.

Regulatory Flexibility Act

    SBA has determined that this proposed rule establishing a set-aside 
mechanism for WOSBs may have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq. Accordingly, 
SBA has prepared an Initial Regulatory Flexibility Analysis (IRFA) 
addressing the impact of this Rule in accordance with section 603, 
title 5, of the United States Code. The IRFA examines the objectives 
and legal basis for the proposed rule; the kind and number of small 
entities that may be affected; the projected recordkeeping, reporting, 
and other requirements; whether there are any Federal rules that may 
duplicate, overlap, or conflict with the proposed rule; and whether 
there are any significant alternatives to the proposed rule.

1. What are the Reasons for, and Objectives of, the Proposed Rule?

    SBA is establishing procedures whereby Federal procuring agencies 
may use restricted competition in industries where WOSBs are 
underrepresented in Federal procurement and when certain other 
conditions are met. The purpose of the proposed rule is to create an 
initial framework and infrastructure for implementing these new 
procedures, thereby providing a tool for Federal agencies to increase 
Federal contracting to WOSBs.
    The objective of this proposed rule is to increase the amount of 
Federal contract dollars awarded to WOSBs in industries where they are 
currently underutilized. These procedures will assist Federal agencies 
in achieving the Federal Government's goal of awarding five percent of 
Federal contract dollars to WOSBs, as provided in the Federal 
Acquisition Streamlining Act of 1994. Federal procurement was just over 
$340 billion in FY 2006, the most recent fiscal year for which 
procurement data are available, and only $11.6 billion, or barely more 
than 3.4 percent, was awarded to WOSBs.

2. What is the Legal Basis for the Proposed Rule?

    SBA is proposing this regulation pursuant to section 8(m) of the 
Small Business Act, 15 U.S.C. 637(m), which authorizes the creation and 
implementation of a new mechanism for Federal contracting with WOSBs.

3. What is SBA's Description and Estimate of the Number of Small 
Entities to Which the Rule will Apply?

    The RFA directs agencies to provide a description, and where 
feasible, an estimate of the number of small business concerns that may 
be affected by the rule. This proposed rule will ultimately establish 
in the Federal

[[Page 73294]]

Acquisition Regulation (FAR) a new procurement mechanism to benefit 
WOSBs. Therefore, WOSBs that compete for Federal contracts are the 
specific group of small business concerns most directly affected by 
this rule. The rule may also affect other small businesses to the 
extent that small businesses not owned and controlled by women may be 
excluded from competing for certain Federal contracting opportunities.
    A survey of WOSBs in the CCR DSBS on September 19, 2007, identified 
a total of 1,208 WOSBs in the four industries identified by the RAND 
Corporation as those in which WOSBs are underrepresented or 
substantially underrepresented. The actual number of WOSBs in these 
industries may be less than 1,208 since some firms may have appeared 
under more than one industry search, and there is no simple method of 
determining how many firms, if any, appeared more than once. In 
addition, many otherwise-qualified EDWOSBs and WOSBs will not find it 
advantageous to pursue set-asides for WOSBs, since the industries in 
which they do business are not one of the four industries that RAND has 
identified in its study that may eventually be eligible for set-asides. 
However, the actual number may be more if SBA approves additional 
industries for set-aside procurements under these procedures.
    This proposed rule may also have a substantially adverse impact on 
small businesses other than WOSBs that are excluded from competition 
for Federal contracts that are set aside exclusively for WOSBs. Non-
WOSB small businesses in the four designated industries identified in 
the Rand Corporation study may lose contracting opportunities when 
contracts are re-competed or may be excluded from opportunities from 
which they would have otherwise benefited. This would be particularly 
harmful for non-WOSBs in these industries that derive a significant 
portion of their business from Federal contracting. The number of small 
businesses that would be excluded under the proposed determination of 
eligible industries or future such determinations is not known at this 
time, but it could be a substantial number. SBA is seeking public 
comment on the adverse effects of this program on non-WOSB small 
business concerns through this proposed rule.
    Additional contracting opportunities identified by Federal agencies 
as candidates to set aside for WOSBs will come from new contracting 
requirements and contracts currently performed by small and large 
businesses. At this time, SBA cannot accurately predict how the 
existing distribution of contracts by business type may change by this 
rule. However, SBA does not expect many, if any, contracts awarded 
through the 8(a), HUBZone, or SDVOSB Programs ($22.6 billion in FY 
2006) to be re-competed as WOSB or EDWOSB set-aside contracts because 
those programs also support other socioeconomic goals that agencies 
strive to achieve through their contracting activities.

4. What are the Projected Reporting, Recordkeeping, Paperwork Reduction 
Act and Other Compliance Requirements?

    WOSBs are not required to be certified as such in order to contract 
with the Federal Government. This will still be true if the proposed 
rule is adopted. However, for a WOSB to be eligible for Federal 
contracts restricted to WOSBs or EDWOSBs, it will have to self-certify 
its status as a WOSB. This requirement ensures that participation in 
certain contracting opportunities is restricted to qualified WOSBs 
according to the terms of section 8(m) of the Act and the criteria in 
this proposed rule. Similar eligibility requirements apply to WOSBs 
desiring to participate in SBA's 8(a) or SDB programs or the Department 
of Transportation's Disadvantaged Business Enterprise program. Further, 
SBA proposes to accept for WOSB-restricted contracts, those WOSBs 
currently certified for those programs.
    However, some WOSBs may choose to participate in procurements 
restricted for competition to WOSBs or EDWOSBs and may decide to pursue 
formal certification under one of the programs referred to in the 
previous paragraph to: (1) Obtain the additional benefits afforded to 
them by those Federal programs; and (2) to use that formal 
certification as an assurance that they are qualified for participation 
in procurements restricted to WOSBs and EDWOSBs.
    This formal certification requirement will have associated costs, 
i