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The Wait Is Over

Finally, after 10 years of controversy, the Small Business Administration has launched the women's procurement program to help the federal government meet its statutory goal of awarding 5 percent of contract dollars to women-owned small businesses.

The guidance, issued in early October, is a huge victory for advocacy groups that fought hard to get the program off the ground -- particularly the Women's Chamber of Commerce. The bad news is there are roadblocks up ahead not only for this initiative, but also for federal contracting as a whole.

The Equity in Contracting for Women Act, which President Clinton signed in 2000, hasn't so much languished as it has been mired in implementation concerns and political foot-dragging. As written, the law allows agencies to set aside small-business contracts for women in industries where they are historically underrepresented. But the drafters failed to realize the time and energy it would take to define underrepresentation, or how susceptible their language was to interpretation.

During the Bush administration, SBA commissioned a study to pinpoint industries where women entrepreneurs were falling behind the federal contracting curve. The RAND Corp., which performed the research, offered a number of ways to measure underrepresentation. So, depending on the methodology, RAND's report showed underrepresentation in anywhere between 0 percent and 87 percent of federal contracting fields.

In 2008, the report's primary author, Elaine Reardon, told Government Executive that RAND was hired not to determine whether women-owned small businesses were underrepresented but to find out how susceptible the measures were to methodology. "If you're going to base policy on these numbers, you're going to want to know how sensitive they are to tweaking," she said.

As it turns out, the answer is "very." In its first proposed rule, SBA used the RAND data to classify women-owned small businesses as underrepresented in only four industries, and required agencies to prove past discrimination in those fields before implementing the program. After women's business advocates complained, SBA officials told Congress they felt compelled to apply the program narrowly to avoid legal challenges.

After a brief flurry of rule-making and congressional hearings fizzled out in 2008, it became clear the Bush administration was leaving a hot potato for its successors. The Obama administration took its first crack at it in March, drafting a new rule that determined women-owned small businesses were underrepresented in 83 industries compared with the four under SBA's previous interpretation.

It seems inevitable that the political, social and legal concerns -- and even prejudices -- that stymied this program for 10 years will continue on some level. But the biggest threat is more likely to be opportunists rather than political detractors. Like participants in other small business contracting programs, women-owned firms will be allowed to self-certify. The firms will be required to submit proof of eligibility -- which they themselves produced -- to an SBA database.

SBA has said it will examine documentation and punish ineligible firms that have submitted fraudulent certifications. But given rampant fraud in other small business contracting programs, particularly in the service-disabled veterans program, it's hard to have much confidence that approach will work this time around.

While the risk of fraud looms, the desire to quash it unites supporters and critics alike. Neither side benefits if ineligible firms receive set-asides. On the one hand, such abuse undermines the legitimacy of socioeconomic contracting programs and funnels money away from intended recipients, and on the other it artificially increases use of these programs to the detriment of other small businesses competing in the broader federal market.

SBA has its hands full implementing a significant new program while tackling existing challenges and responsibilities. But the dialog about contracting programs needs to change at the congressional, administration and agency levels. The existing programs are broken and abused, and solutions should be proposed before future discussions about how to further divvy up pieces of the contracting pie take place.

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