June 4, 2020 - Small Business

SBA Issues New Certification Regulations for Women-Owned Small Businesses

Small BusinessStarting July 15, 2020, a new certification process is being implemented for Women-Owned Small Businesses (“WOSBs”) and Economically Disadvantaged WOSBs (“EDWOSBs”) competing for U.S. federal set-aside, sole source, and multiple award contracts. The Small Business Administration (“SBA”), which is responsible for oversight of these programs, recently updated certification requirements in a long‑awaited final rule.

The new rule eliminates the prior self-certification option for WOSBS and EDWOSBs pursuing set‑aside contracts or sole source contracts under the SBA’s Procurement Program for Women-Owned Small Business Concerns (the “Program”).[1] Once the rule is effective, WOSBs and EDWOSBs that are not certified will not be eligible for contracts under the Program. However, other WOSB concerns that do not participate in the Program may continue to self-certify their status, receive contract awards outside the Program, and count toward an agency’s goal for awards to WOSBs. For Program participants, the new rule requires companies to apply for certification by SBA in one of three ways:  1) directly through SBA; 2) through SBA-authorized third-party certifiers; or 3) with a certification from the U.S. Department of Veterans Affairs Center for Verification and Evaluation (“CVE”).[2]

Although the final rule becomes effective July 15, 2020, many of the certification process changes will not become fully operative until October 15, 2020. This delay will give contractors sufficient time to adjust to the new regulations and plan for certification prior to future procurement opportunities. Below, we highlight some key changes made by the rule and offer some takeaways and guidance on what contractors can do now to prepare for implementation of the changes.

Certification Process Changes: A 2014 Requirement Finally Fulfilled in 2020

SBA’s elimination of the self-certification option for WOSBs and EDWOSBs should come as no surprise to companies, as the change is the culmination of a long-overdue rulemaking that finally aligns SBA regulations with the law. Although SBA has allowed WOSBs and EDWOSBs to self-certify since program inception in 2010, the option was statutorily eliminated nearly six years ago in the 2015 National Defense Authorization Act (“NDAA”). Before the 2015 NDAA, WOSBs and EDWOSBs could legally certify either through an SBA-authorized third-party certification process or through self-certification. To self-certify, companies were only required to compile and transmit all relevant documents to SBA with written assurance that all documents were accurate. The process was popular due to ease of access and the fact that it was free. However, the 2015 NDAA changes were designed to correct perceived drawbacks in the process and, particularly, to address problems identified in federal inspector general audit reports, which had uncovered instances of false and incorrect WOSB self-certifications.

Congress therefore decided to eliminate the self-certification process by amending the Small Business Act to require that companies seeking set-aside or sole source contracts as WOSBs or EDWOSBs must be certified as such by either a federal agency, a state government entity, SBA, or an SBA-approved national certifying entity. Notwithstanding the statutory elimination of the self-certification option, SBA has continued for years to allow companies to self-certify. It was not until an internal SBA audit report again revealed false certification and fraud issues in the WOSB program that SBA promulgated the recent final rule.

Untangling the Certification Options and Due Dates

As noted above, the final rule implements the 2015 NDAA changes to the WOSB and EDWOSB programs by removing the self-certification option and authorizing certification in three ways, discussed in turn below:

SBA Certification

The first certification option is for companies to apply for certification directly through the SBA website.[3] The online application process is free, and companies can begin submitting applications under this new certification process on July 15, 2020, with decisions to follow starting October 15, 2020. SBA has provided checklists of required documents for certification, including personal financial records, corporate records, and individual and business bank statements.

The new regulatory changes state that SBA, in considering a certification application, may rely solely upon the information as submitted, may request additional information, or may take additional steps to verify the information before making a determination. If a concern fails to cooperate with SBA’s requests for additional information, SBA may draw an adverse inference and deny the certification.

Third-Party Certification

Companies also can obtain certification from SBA-approved third-party certifiers. There are currently four such approved organizations, although the SBA has indicated that it plans to expand this list in the future. The approved organizations are:

El Paso Hispanic Chamber of Commerce

National Women Business Owners Corporation

US Women’s Chamber of Commerce

Women’s Business Enterprise National Council

Once a company receives certification through one of these organizations, it must provide proof of that certification to the SBA at certify.sba.gov.

U.S. Department of Veterans Affairs

Finally, companies can certify by filing with the SBA proof of women-ownership and control, coupled with a recent certification by the U.S. Department of Veterans Affairs CVE, which certifies concerns as Service‑Disabled Veteran-Owned or Veteran-Owned Businesses. SBA will begin accepting this documentation on July 15, 2020.

Self-Certification Still Allowed Through October 15, 2020

Although the final rule eliminates the self-certification option, the current self-certification process will remain available to companies until October 15, 2020 at certify.sba.gov. Companies that have self-certified under active WOSB or EDWOSB contracts will be considered properly certified throughout the life of the contract, except that contracts with durations of more than five years will require recertification in accordance with SBA requirements.

What WOSBs and EDWOSBs Can Do Now to Prepare for the Certification Changes

The recent changes may require some companies to change their certification approaches, while others will not need to change their processes at all. Below we highlight some actions companies can take to prepare for the upcoming rule changes.

  • Determine whether your company even needs WOSB or EDWOSB certification. The certification process requirements will only affect companies pursuing set-aside, sole-source, and multiple award contracts for WOSB and EDWOSB-reserved pools. If your company is not going after such specifically set-aside work, it can continue to self-certify, and agencies can use the certification as a basis for WOSB credit. Data on WOSB federal contract awards suggest that federal procurement officers are currently using the SBA’ Program more often than in past years, but most federal contracts awarded to WOSBs are still awarded in open competition pools or through other small business programs, such as the 8(a) or HUBZone programs.
  • Download your current certification documentation from the existing WOSB repository. Between now and July 15, 2020, companies should download any previously submitted certification documentation from sba.gov . Shortly after July 15 it is expected that the SBA will create a new certification platform, and concerns will need to create a new account in the new certification platform and upload information there to complete processing.
  • Review the SBA’s certification checklists. Companies that decide to pursue SBA certification should look at the WOSB and EDWOSB checklists for required actions and begin organizing the specified documentation. These checklists will also be useful in the event of an SBA program examination, the process that will be used by SBA to verify the accuracy of certification documentation. Maintaining current records will also help expedite future recertification efforts. Companies that seek to maintain certification must recertify every three years and attest annually that they remain eligible for certification.

Other Considerations

Although the self-certification option was administratively convenient, the new rules do not introduce significant additional burden. The SBA’s certification process remains free and requires much of the same documentation that previously had to be provided as part of the self-certification process. The only downside to use of this certification method is that it could potentially be time-consuming. Use of third‑party certification could be quicker, but will involve extra cost. Finally, the CVE option is primarily useful only for companies that do business with the Department of Veterans Affairs.

If a company needs to be certified by a date certain, that may dictate or influence which method it selects. For new set-aside contracts, a company only has to demonstrate that it has applied for certification before the submission date. For sole source contracts, however, a firm must be certified prior to proposal submission. Knowing what contracts are in the pipeline, and when they are up for renewal or when proposals will be due, will help with certification planning.

Our hope is that SBA’s implementation of the final rule is a sign that more attention will be placed on the WOSB and EDWOSB programs and that more agencies will elect to use these set‑aside options. Companies that did not previously self-certify because they saw relatively little benefit to the designation may now be encouraged to do so. However, companies that may not have previously met the programs’ requirements but self-certified nonetheless will be subject to further scrutiny, thereby strengthening the integrity of the WOSB and EDWOSB programs.

[1] As further described below, self-certification remains an option under full and open competitions where the agency is only seeking WOSB award credit, not issuing set aside contracts.

[2] The final rule also standardizes the economic disadvantage threshold across the 8(A) Business Development and the EDWOSB program, setting both at $750,000. Previously, the economic disadvantage net worth threshold was $750,000 for EDWOSBs and continuing 8(a) BD programs, but $250,000 for initial eligibility of the 8(a) BD program.

[3] This website is currently https://certify.sba.gov, although SBA may establish a successor system.