You could do worse than launch a business that relies on the buying power of the U.S. government, which spends roughly $460 billion annually on everything from office furniture and staplers to medical supplies and new building construction. Until recently, however, you'd be hard-pressed to find a more difficult customer.
Lynlee Altman started Cleveland's Pinnacle Construction in 2000. In 2005, she got a certification for the Small Business Administration's 8(a) business development program, which helps economically and socially disadvantaged businesses compete for federal contract money for a period of nine years.
That certification has been instrumental for her business, which works on projects such as recreating the surface of Mars in miniature for NASA and constructing access controls for military bases. Pinnacle currently has 30 employees and $16 million in annual revenue.
A separate certification has benefitted the company far less, however. Being a woman-owned company, Altman's firm is able to access the Women-Owned Small Business (WOSB) set-aside program, which grants qualifying companies access to 5 percent, or about $20 billion, of federal contracts annually.
"The chief benefit [of being] a woman-owned business is that there is a smaller pool of qualified builders," Altman says.
But in practice, she's only managed to tap the program on few occasions. In particular, over the last 10 years, Pinnacle has gotten just three federal-contracting jobs thanks to having WOSB status. Close to 100 jobs have come to the business as a result of her disadvantaged small business status.
Altman is hardly the only business owner to note the program's flaws. "For over 20 years, goals for women businesses have never been met," says Kristie Arslan, executive director of Women Impacting Public Policy, an advocacy group which lobbies in Washington on behalf of women business owners.
For fiscal year 2013, the most recent year for which the SBA has complete data, 23.4 percent of eligible federal contracts went to small business owners, worth $83 billion. (By law, small businesses are supposed to get 23 percent of prime contracts, an amount that varies every year.) WOSBs got 4.23 percent of contracts, worth $15.3 billion in 2013. In 2003, WOSB's received scarcely 3 percent of contracts.
For 2014, according to the Office of Management and Budget, which compiles its information on small business contracts separately, women owned businesses received $17 billion in contracts, at 4.7 percent of the goal.
Compare that to small disadvantaged businesses, which have exceeded their contracting goal of 5 percent for nearly two decades. In 2013, such businesses got 8.6 percent of contracts, worth $30 billion. In 2003, such businesses got 7 percent of contracts, worth $19.5 billion, according to the SBA. And for 2014, such businesses took in $35 billion, nearly twice the set-aside goal, according to the OMB.
This imbalance may soon be a thing of the past, however. Thanks to a series of rule and law changes asked for by the White House, the SBA, and policy groups, the WOSB set aside should be a whole lot more user friendly in the next few years.
Although women entrepreneurs have gotten federal contracts, albeit in relatively small amounts, for decades, it wasn't until 2000, when Congress passed the Small Business Reauthorization Act that they became an official group in the eyes of the federal government. A subsection of that act officially set up a program for women-owned and economically-disadvantaged, women-owned small businesses that would help them procure contracts.
However, final rules for the program languished for more than a decade and weren't formalized in the Federal Register until 2011. When the rules were finalized, however, contracts to women-owned businesses were saddled with caps of $6.5 million for manufacturing contracts, and $4 million for all other kinds of contracts. (Such limitations have never been placed on other types of small businesses seeking federal procurements.)
Those caps were lifted in 2013 by congressional action, finally allowing WOSBs to compete at parity with groups like service disabled veterans and socially disadvantaged businesses, which maintain their own set-aside programs. And toward the end of 2014, as part of the National Defense Authorization Act, federal contracting agents will, pending a review process, soon be able to give WOSBs something called single source authority, which has been available to other small businesses seeking contracts.
Previously, agents had to round up at least two qualified WOSBs for a contract bid. Single source authority lets them settle on one, provided the bidder has prior contracting experience, and the contract isn't for more than $4 million for contracts that don't require manufacturing, and $6.5 million for manufacturing jobs.
"In the past, we had [sole sourcing] for veterans and disadvantaged businesses, and we've just added this for women, and the potential for this is enormous," SBA Administrator Maria Contreras-Sweet said during a recent interview with Inc.
One of the lingering issues for woman-owned small businesses is the lack of education on the part of 64,000 contracting agents at government agencies, experts say. The agents have known for years about fulfilling goals for disadvantaged businesses in the 8(a) program and service disabled veteran owned businesses, for example, but they lack equivalent information about WOSBs, experts say.
"Prior to 2011, economically-disadvantaged, women-owned small businesses and women-owned small businesses did not see many of the opportunities set aside for them," said Lourdes Martin-Rosa, an advisor on government contracting for American Express OPEN. "So there's a trickle down effect by the time the SBA trains acquisition folks, and it takes some time."
Still, business owners like Altman are hopeful that operating as a woman-owned small business will have an increasingly meaningful affect on her ability to secure federal contracts in the near future.
"We have some really opinionated and persistent women on the Hill who are pushing for changes," Altman says. "We are going to get there eventually."