Four Steps Congress Should Take to Help WOSBs in the FY2021 NDAA

By Elizabeth Sullivan

If you listen to our advocacy team’s monthly updates, you will likely hear us reference the National Defense Authorization Act, or more lovingly known as the “NDAA.” As it remains one of the last “must pass” bills – due to the Constitutional requirement that Congress provides for a common defense – each year presents an opportunity to advocate for changes that will benefit women-owned businesses. So, here is what we think should be included this year: 

1.     Expand investment in women- and minority-owned companies. Currently, women-owned businesses receive around 2.8% of all venture dollars. Due to WIPP’s championship of this issue, Senators Marco Rubio (R-FL) and Maria Cantwell (D-WA) introduced the Women and Minority Equity Investment Act of 2019 (S. 1981), which would allow women-owned contracting firms to take investment by women-owned equity firms and still meet the “51% unconditionally owned and controlled” standard set by SBA to participate in the WOSB/EDWOSB program. Representative Robin Kelly (D-IL) introduced an identical bill in the House (H.R. 3633). The same barriers apply to minority-owned businesses. These bills allow minority-owned federal contracting firms to take investment by minority-owned equity firms.This legislation is groundbreaking on both sides of the equation. It opens up a path for investment in women-owned businesses who are government contractors, as well as strengthens women investors. Women in investment firms tell us that this change in the law would strengthen their ability to secure greater equity positions within their companies and women-owned companies looking for investment will be incentivized to seek out women-owned investment firms. The same holds true for minority investments under this legislation. 

2.     Increase the share of contracts awarded to small businesses. WIPP fought and won sole source authority for the WOSB program in 2015—gaining parity with other federal contracting programs. While the fight has changed in 2019, the drumbeat is the same: parity. Currently, the sole source dollar limits for WOSBs are $4 million and $6.5 million (manufacturing) over the life of the contract. While this might sound like a lot of money, in the $550 billion federal marketplace, $4 million over 5 years is small potatoes. We have also heard from WOSBs that even though agencies are interested in awarding sole source contracts to them, these dollar limits are too small.

A shift in government buying calls for a shift in rules for sole source contracts. As government buying continues to trend toward buying through large vehicles and moving away from direct contracts, the ability for small companies to win sole source awards is more crucial than ever. Increasing the award amounts for sole source contracts is extremely beneficial to the small business contracting community, however, it is equally as important to streamline and simplify rules for awarding these contracts. It is not uncommon to hear from small contractors that are told over and over again by the federal workforce the same thing – awarding a sole source contract is too confusing and/or time consuming. 

WIPP supported H.R. 190, which passed the House and gives all small businesses including WOSBs greater opportunities through sole source contracting. This bill raises the dollar amounts for sole source contracts to $4 million and $7 million to be awarded each year, instead of over the life of the contract. A proposal in the Senate would also raise these thresholds to $8 and $10 million each year. 

With respect to simplification, WOSBs, HUBZones and SDVOSBs require that a contracting officer must justify through market research that not two or more offers at a reasonable price are expected. The contracting community has interpreted this as “you are the only company in the world that performs this work,” leading to exceedingly few sole source awards. While the missions of these programs are all different, one thing is crystal clear – putting these contracting programs on equal footing with respect to this rule would ease the burden for the federal government and the businesses trying to meet its agencies missions.

3.     Give Small Businesses More Runway. You may be thinking wait – I have heard this one before. That’s because a significant WIPP-supported legislative victory was achieved in 2018, giving small firms more “runway” to transition out of the small business set aside program and into full and open competition. The law allows businesses to average revenues over 5 years rather than the previous 3 years for purposes of determining size standards. In fact, the law finally went into effect earlier this month. Despite the expanded time this gives many small contractors, there are some that are still left in the lurch – businesses whose work falls under employee-based NAICS.

These companies face the same challenges – bumping out of their size standards and struggling to compete with billion-dollar companies in the full and open marketplace. Therefore, increasing the length of determination for industries measured based on annual average employees would give small companies a little more runway to succeed when they become midsize companies. Using a five-year standard for all industries this would create parity for small businesses in every industry and promote sustainable growth of small businesses.

4.     Share Best Practices for Contracting with Small Businesses. WOSBs continue to find that agencies are reluctant to use small business programs. Recognizing this challenge, WIPP worked with the Homeland Security and Governmental Affairs Committee to introduce S. 3038, The Promoting Rigorous and Innovative Cost Efficiencies for Federal Procurement and Acquisitions (PRICE) Act of 2019, which addresses agency utilization of small businesses in the federal marketplace. Introduced by Senators Gary Peters (D-MI) and Joni Ernst (R-IA), this bipartisan bill requires the Director of the Office of Management and Budget (OMB) to convene the existing Chief Acquisition Officers Council (CAOC) to identify and disseminate best practices in non-defense small business contracting in the federal government. The PRICE Act would positively impact the way in which this valuable information is gathered and shared across the federal government, as well as provide increased opportunities for small businesses by educating the acquisition workforce on best practices for using small business programs. 

As we promote these changes, look for action alerts and other ways to engage from our team. Since it is an election year, there will be limited opportunity to advance this legislation – all the more reason why the NDAA is so important. These four changes would go a long way to help the government meet its 5% goal of contract awards to women-owned companies.