DIY No More: The End of Self-Certifying Woman-owned Small Businesses

ICYMI… The Small Business Administration (“SBA”) is eliminating the option for women-owned small businesses (“WOSB”) and economically disadvantaged WOSBs (“EDWOSB”) to obtain WOSB or EDWOSB status via self-certification. This went into effect on July 15, 2020; however, SBA is in the midst of a transition process that will allow the self-certification option to continue through October 15, 2020.

Background

The Government may set aside contracts to WOSBs or EDWOSBs. The field levelling provided by WOSB or EDWOSB set asides gives qualified businesses a significantly greater opportunity to win the award of a contract. WOSB and EDWOSB set asides are limited to procurements in SBA-identified eligible industries (listed here).

A business will be a WOSB if it is a small business that is at least 51% owned and controlled by women who are US citizens in which women manage the company’s day-to-day operations and also make long-term decisions about the company. A WOSB will be an EDWOSB if the women owners each have a personal net worth less than $750,000, with income less than $350,000 over the previous three years, and total personal assets less than $6 million.

Lest you think these qualifications are straightforward, there have been many, many disputes over whether the recipient of a WOSB or EDWOSB contract rightfully meets these requirements.

Certification

From the inception of the formal WOSB/EDWOSB set aside program in 2011, the Government has required businesses to provide certifications of their eligibility to participate in the program. Until recently, one could meet this requirement through “self-certification” or via certification by a third party.

To self-certify as a WOSB, the company was required to obtain a DUNS number, register on the System for Acquisition Management (“SAM”), and establish an account on the SBA system. In addition to signing representations attesting to your WOSB or EDWOSB eligibility, you were required to upload citizenship documentation and copies of business documentation that varied depending on the type of business (i.e., partnership agreements, articles of incorporation, etc.). Third party self-certification essentially requires the same documentation except that the third party organization will review the documentation and issue a certificate of eligibility that you then upload to the SBA repository.

EDWOSB certification requires the same information applicable to a WOSB plus financial documentation for the women owners documenting their economic disadvantaged status. This includes a signed request for a tax transcript, copies of the three most recent tax returns and W-2s, and documentation regarding the value of assets, liabilities and income. Like WOSBs, EDWOSBs could upload the documentation to the SBA repository and self-certify or they could obtain a third party certification.

Elimination of Self-Certification

Self-Certification, however, essentially is an honor system because, in the absence of a protest,  no one is truly policing the veracity of documentation or the signed certifications. The only real requirement is that Contracting Officers (“COs”) had to confirm that an offeror had provided the requisite certification and that the documents had been uploaded. Inspectors General and the Government Accountability Office reported that there were shortcomings in program oversight if not out-and-out fraud. Likely in response to these reports, Congress eliminated the self-certification option in the 2015 National Defense Authorization Act.

Some six odd years or so later, the SBA has issued a final rule (found here) and is in the process rolling out of the new certification process in which prospective WOSBs and EDWOSBs may submit the documentation supporting their status on the new beta.certify.sba.gov website. You can find checklists of required documentation here. SBA will review the documentation and grant WOSB or EDWOSB status on the documents alone or it has the option request more information. If an applicant fails to cooperate with the SBA, it can deny the certification. 

The third party certification option remains available. The third party organizations (see here for a listing) may charge fees; however, it’s conceivable that paying a fee could be advantageous if it can expedite an approval in the event of an SBA backlog—although the relative advantages of either method remain to be seen. Ostensibly, the SBA will make a status decision within 90 days “whenever practicable.” 

Parenthetically, businesses can rely on VA determinations of Service-Disabled Veteran Owned or Veteran-Owned small business status together with proof of women ownership and control to seek WOSB status. And, if the requisite financial information is provided, the business can seek EDWOSB status. Documentation of women ownership and control together with an organization’s most recent eligibility review of 8(a) status can be used to obtain EDWOSB status. The same is true with a Disadvantaged Business Enterprise certification from the Department of Transportation.

Impact on businesses that presently are certified

If your company is self-certified (or has obtained 3rd party certification) and has a current contract, its WOSB or EDWOSB status remains valid for the contract’s duration including all options up to a maximum of five years. After that, you need a fresh certification. Also, agencies can require a fresh certification for an order under the GSA schedule even though a firm’s status is current on the schedule contract.

If your company is self-certified, but has no current contracts, you need to obtain SBA or third party certification now. If your self-certified business fended off a status protest or passed an SBA examination within two years before July 15, 2020, you will have to re-certify and undergo a full review at the end of the third year following the decision on the protest or stamp of approval from the SBA.

If your company has a current third party certification, it will remain valid until three years after the date of the third party certification. A new certification can be obtained via the SBA website process or through a third party certifier.

For more information

You can consult the SBA’s website for information on the WOSB program here.

The new application site is here. In addition, the SBA maintains an “FAQ” here. In addition to the FAQ, the SBA maintains articles, training media, and a searchable “knowledge base” about the WOSB and EDWOSB programs here. Links to third party certifiers can be found here.

A listing of industries for which COs can set aside contracts for WOSBs or EDWOSBs can be found here. In addition, the SBA maintains a tool here to assist business in determining whether they are small for particular types of industries.

In closing, I cannot emphasize strongly enough the fact that you do not want to be foolishly clever in this process. The representations you make in the pursuit of these certifications must be true, otherwise you might find yourself in a deep, potentially criminal, mess. If you’re feeling unsure after you’ve reviewed the SBA guidance, you might want to seek advice before you proceed.