Proposed SBA Regulation Jeopardizes Self-Certification for Women-Owned Small Businesses

10 min

The U.S. Small Business Administration ("SBA") is proposing to amend its regulations to remove the option for Women-Owned Small Business ("WOSB") concerns and Economically Disadvantaged Women-Owned Small Business ("EDWOSB") concerns to self-certify their status with the SBA, to establish a free SBA certification program, and to overhaul the third-party certification process.

Comments on the SBA's proposed rule must be received by July 15, 2019.

Under the SBA's current regulations, a woman-owned small business concern submitting an offer for a contract set aside for WOSBs or EDWOSBs may self-certify and represent that it is a WOSB or EDWOSB or that it has been certified as such by an SBA-approved certifying entity. See 13 C.F.R. § 127.300(b)(1).

On May 14, 2019, the SBA issued a proposed rule (84 Fed. Reg. 21256) to overhaul these regulations (13 C.F.R. Parts 124 and 127, specifically) to implement a provision of the National Defense Authorization Act ("NDAA") for Fiscal Year 2015 to remove self-certification for WOSBs and EDWOSBs and to establish a formal SBA program for WOSB certification. Section 825 of the 2015 NDAA amended Section 8 of the Small Business Act (15 U.S.C. § 637(m)) to require that, in order to receive contracts awarded as set aside or sole source contracts to WOSBs or EDWOSBs, a small business concern must be certified as a WOSB by "a Federal agency, a State government, the Administrator [of the SBA], or a national certifying entity approved by the Administrator." The 2015 NDAA removed self-certification as an option for WOSBs and EDWOSBs seeking such set-aside and sole source contracts.

While the SBA had previously made changes to its regulations to implement other provisions of Section 825 of the 2015 NDAA—such as the authority for contracting officers to make sole-source awards to WOSBs and EDWOSBs (80 Fed. Reg. 55019 (Sept. 14, 2015))—SBA had held off on amending its regulations to remove the WOSB self-certification and implement the WOSB certification program provision due in part to its complexity. The SBA issued an Advance Notice of Proposed Rulemaking in December 2015 requesting public comments on drafting the WOSB certification program. See 80 Fed. Reg. 78984 (Dec. 18, 2015). The new proposed rule finally takes the next step toward removing self-certification as an option for WOSBs and establishing SBA's WOSB certification program.

SBA is proposing to amend 13 C.F.R. § 127.300 to establish three methods for WOSB certification:

  1. A concern may apply for SBA certification, free of cost;
  2. A concern may submit evidence that it is a women-owned concern and previously certified as an 8(a) Participant, certified by the Department of Veterans Affairs ("VA") Center for Verification and Evaluation ("CVE") as a service-disabled-veteran-owned business or veteran-owned business, or certified as a Disadvantaged Business Enterprise ("DBE") by a state agency authorized by the Department of Transportation ("DOT"); or
  3. As detailed below, a woman-owned concern may submit evidence that it has been certified by an approved third-party certifier in accordance with specific requirements.

SBA further proposes to establish four methods for EDWOSB certification:

  1. A concern may apply for SBA certification, free of cost;
  2. A women-owned business certified as an 8(a) Participant qualifies as an EDWOSB;
  3. A concern certified by the VA or under DOT's DBE program as a WOSB will be deemed owned and controlled by women, but must apply to SBA to demonstrate economic disadvantage to be certified as an EDWOSB; or
  4. A concern may submit evidence that it has been certified by an approved third-party certifier in accordance with specific requirements.
SBA Certification Procedures

Women-owned small business concerns will be able to apply for WOSB or EDWOSB certification through SBA whenever they meet the eligibility criteria, have completed all representations, and are in a position to submit the required supporting information and documentation. SBA is proposing to maintain a list of required documents on, which "may include, but is not limited to, corporate records, business and personal financial records, including copies of signed Federal personal and business tax returns, and individual and business bank statements," as well as any other additional information that SBA may request. SBA will process all applications online through—the same website where participants in the WOSB Program previously self-certified their status. Applicants will be required to notify SBA of any changes affecting their eligibility after application submission and could be proposed for decertification if they fail to do so. An applicant must be eligible as of the date that it submitted an application and must remain eligible through the time that the SBA issues a decision regarding certification.

The SBA Director of Government Contracting ("D/GC") will be authorized to approve or decline certification applications. SBA will only begin processing applications after all information and documentation have been received. Applicants will be notified within 15 calendar days after submission of an application about whether the application is complete or what information is still required. SBA will make a certification determination within 90 calendar days after receipt of a complete application. SBA will be able to request additional information and the applicant will have the burden to prove its eligibility. If an applicant fails to submit requested information or submits incomplete information, the SBA "may presume that disclosure of the missing information would adversely affect the business concern's eligibility or demonstrate a lack of eligibility in the area or areas to which the information relates." The certification decision will be based upon the information contained in the application, information received in response to SBA's requests, and any changed circumstances since the application date.

The SBA will send written notice of an approved application to the concern and will update, the Dynamic Small Business Search system ("DSBS"), and the System for Award Management ("SAM") indicating that the concern has been certified. A concern whose application is denied will receive a written decision with specific reasons for the denial. A denial is considered an SBA final decision unless the denied concern seeks reconsideration by filing a request for reconsideration through within 30 calendar days of the denial. The applicant must include any information and documentation that would overcome the reasons for SBA's original decline decision. The SBA will issue a written decision on the reconsideration request within 60 calendar days either approving the application, denying it on the same grounds, or denying it on other grounds. If the SBA declines again based solely on issues not raised in its original decline decision, the applicant can request reconsideration a second time. The SBA's decision to decline is its final decision.

If a concern is declined certification or has been decertified, the concern may seek certification after one year "if it believes that is has overcome all the reasons for decline or decertification and is currently eligible." Concerns found ineligible through a WOSB/EDWOSB status protest are precluded from applying for one year after the final SBA decision (either D/GC or the Office of Hearings and Appeals ("OHA")).

Third-Party Certification Procedures

Currently, WOSBs and EDWOSBs may receive third-party certification from any of four organizations that the SBA has approved to provide such certification. The SBA is proposing to continue to accept a third-party certification of WOSBs and EDWOSBs, with some expanded requirements. The SBA will accept current and valid third-party certifications from entities designated by the SBA as approved certifiers.

The SBA is proposing to hold periodic open solicitations to which entities believing that they meet the criteria to be a third-party certifier may respond. In order to enter into an agreement with the SBA to be a third-party certifier, an entity will be required to establish the following:

  1. It will render fair and impartial WOSB/EDWOSB Federal Contract Program eligibility determinations;
  2. It will provide the approved applicant a valid certificate for entering into the SBA electronic platform, and will retain documents used to determine eligibility for a period of six (6) years to support SBA's responsibility to conduct a status protest, eligibility examination, agency investigation or audit of the third party determinations;
  3. Its certification process will require applicant concerns to register in SAM (or any successor system) and submit sufficient information as determined by SBA to enable it to determine whether the concern qualifies as a WOSB. This information must include documentation demonstrating whether the concern is:
    1. A small business concern under the SBA size standard corresponding to the concern's primary industry, as defined in 13 CFR 121.107;
    2. At least 51 percent owned and controlled by one or more women who are United States citizens; and
  4. It will not decline to accept a concern's application for WOSB/EDWOSB certification on the basis of race, color, national origin, religion, age, disability, sexual orientation, marital or family status, or political affiliation.

The agreement between the SBA and the third-party certifier will detail the requirements that the certifier will be required to meet. A third-party certifier's certification process must meet the SBA's certification standards and track the WOSB and EDWOSB eligibility requirements included in Subpart B of 13 C.F.R. Part 127. Third-party certifiers will be permitted to charge a "reasonable" fee but will be required to notify the concern beforehand in writing that the SBA offers free certification, and the SBA must approve the notification.

Concerns will be required to submit their third-party certifications to If a concern has been deemed ineligible by a third-party certifier, the concern may request a free redetermination within 30 calendar days, which the third-party certifier must complete within 60 calendar days of the request. The third-party certifier will have to notify the SBA of the decline decision and the concern must wait one year to request a reexamination from either a third-party certifier or the SBA (and cannot seek certification from a different third-party certifier during the one-year waiting period).

Perhaps in response to a recent report from the Government Accountability Office ("GAO") regarding the ongoing oversight issues surrounding the SBA's assessment of the current third-party certifiers, third-party certifiers will be required to submit quarterly reports to the SBA and the SBA will conduct periodic compliance reviews of the third-party certifiers (each certifier will be reviewed once every three years) to ensure that they are acting in accordance with the WOSB/EDWOSB requirements.

Maintaining Eligibility Over Three Year Intervals

WOSBs and EDWOSBs will be required to recertify every three years (more specifically, within 30 calendar days before the third-anniversary date of the initial or recertification) and confirm that they continue to meet all the applicable eligibility requirements. Additionally, woman-owned concerns will be required to notify the SBA in writing of any material changes that could affect eligibility, including, but not limited to, a change in the ownership, business structure, or management of the concern. Failure to do so may result in decertification as well as additional penalties.

Similar to other certified concerns, any time after a woman-owned concern has been certified, the SBA may conduct a "program examination" to verify that the concern (a) currently meets the eligibility requirements, (b) met the requirements at the time of its certification application, (c) met the requirement at the time of its most recent recertification, or (d) met all requirements at the time of its certification in connection with a particular WOSB or EDWOSB contract. The SBA may require additional information from a concern in connection with a program examination, and failure to cooperate may lead to the SBA drawing an adverse inference, leading to decertification.

The SBA will propose a concern for decertification if it believes that the concern does not meet the eligibility requirements, if the concern has not provided or maintained all of the required certifications or the documentation to confirm that requirements were met, or if the concern has failed to notify the SBA of a material change impacting the woman-owned requirements. If decertification is proposed, the concern will have an opportunity to respond and challenge the SBA findings. The SBA's decision on decertification will be final.

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We will continue to follow the developments in the SBA's proposed change to the woman-owned small business certification process.