Last week, Jon Hansen ‘tagged’ me in a Twitter exchange about women-owned small businesses and their rate of success in winning public sector contracts. The catalyst article, “Businesses Owned by Women Less Likely to Win U.S. Contracts, Study Shows” was written by Jackie Calmes, and ran on the NY Times on February 2nd. It documents concerns about the fact female entrepreneurs and the companies they lead win a fraction of federal government awarded contracts despite congressional efforts to improve their win rate over time.
I always get a little jumpy when it seems like women are being singled out artificially so I quickly clicked on the link to read Calmes article.
If you only read the title, you’ll be on your way to the hardware store to pick up a torch and a pitchfork. Clearly step one in this process is to stop, take a deep breath, and read the article more slowly.
Let me start by singling out the data points we are given:
- In FY 2014, companies owned by women received 4.7% of all federal contract dollars, up from 4% in 2011
- Economists looked at 600,000 federal suppliers, 20% of which identified themselves as woman-owned
- Businesses owned by women account for about 30% of American companies
The main revelation of the article, or, more specifically, the Small Business Administration (SBA) study serving as its foundation, is that woman-owned small businesses win a disproportionately small percent of all federal contracts. The SBA study looked at the impact of a program designed to increase the percent of federal contract dollars awarded to woman-owned small businesses to 5% over a five-year period. Between 2011 and 2014, the program resulted in an increase from 4% to 4.7%. The data for 2015 was not available at the time the article was written.
Here are a few of my concerns:
The data we are given doesn’t provide a complete picture.
While woman-owned small businesses win a smaller percentage of federal procurement dollars than other companies, we can’t assume that they are represented in the bidding pool in the same proportion they represent in the overall market. The one set of statistics we get seems to indicate that they are being passed over, but doesn’t quite provide all the facts we need to be certain. According to the article, 30% of all small businesses are women-owned, but only 20% of the 600K federal suppliers are woman-owned. What would be a more powerful indicator is the percentage of woman-owned small businesses that bid on (rather than win) federal contracts. If that number happened to be 20%, it would mean that woman-owned businesses represent the same proportion of the bidding and contracted suppliers. If, on the other hand, woman-owned businesses represent only 10% of federal contract bidding companies, they are being selected for contracts at a higher rate.
Woman-owned isn’t necessarily Woman-Owned.
Procurement professionals know that being an actual woman-owned business means nothing if you aren’t certified. In other words, despite what the study was trying to accomplish, they focused on companies “which identified themselves as owned by women.” While some of those businesses may not have certifications proving their diversity status, it is just as possible that some of the companies are woman-owned without having a certification or identifying themselves as such. Running the whole list of 600,000 suppliers against a diversity database might revise the woman-owned percentage upwards.
The method of increasing federal dollars going to woman-owned businesses seems oddly forced.
Let’s assume for just a moment that all of the numbers mentioned in the article are indicative of a gender-based disadvantage for federal contract awards. What is the proposed solution? Awarding no-bid, single-source contracts to woman-owned small businesses. This seems odd to me for two reasons:
- The goal is to increase the federal dollars spent with woman-owned businesses, yet the solution emphasizes contract numbers. You can win an entire contract that is worth $100,000 or you could win 1% of a $100,000,000 federal spend category. Now, math has never been my strong suit, but I know which I would pick. I also know which is a better match for the stated goals of the program. Besides, forcing the awards to be sole-source increases the risk for the government and for the suppliers. It may actually be counter productive, causing agencies to balk at the all-or-nothing requirement by awarding business to larger, safer, non-diversity suppliers.
- Removing the requirement to compete does a disservice to everyone. Compounding the sole-source requirement is the no-bid element. While it might seem like not forcing woman-owned business to compete against conventional players gives them a better change to get their foot in the door, it forces agencies to make a selection without evaluating other alternatives. To know who the qualified woman-owned businesses are, you would have had to discover and qualify them through other means. This also implies that a business can’t be a woman-owned small business and the best, most competitive solution. (Grrrrrrr….)
I think the SBA program has good intentions, but the devil is in the details as they say. And this doesn’t even include the fact that being a federal supplier isn’t always all its cracked up to be. For instance, the federal SupplierPay and QuickPay initiatives are focused on paying small businesses who serve the federal government sooner – a critical success factor for fledgling operations. Neither would be necessary if the government were easier to work for. Maybe woman-owned businesses are making the strategic decision to grow in more forgiving markets than the public sector.
If the goal is really to increase the percentage of federal contract dollars that go to woman-owned businesses, it would be a far better to award a percentage of large spend categories to these businesses. The risk would be reduced, supply base diversity would be increased, and the capabilities of the woman-owned businesses and the public sector would both be improved.
But then, these are just my opinion as a (non-certified) woman-owned small business who wouldn’t want to do business with the federal government even if they did pay me in a timely manner…