Analyzing Information on Women-Owned Small Businesses in Federal Contracting

Steering Committee for the Workshop on Women-Owned Small Businesses in Federal Contracting

Committee on National Statistics

Division of Behavioral and Social Sciences and Education

NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES

NATIONAL ACADEMIES PRESS
Washington, D.C.
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Analyzing Information on Women-Owned Small Businesses in Federal Contracting Analyzing Information on Women-Owned Small Businesses in Federal Contracting Steering Committee for the Workshop on Women-Owned Small Businesses in Federal Contracting Committee on National Statistics Division of Behavioral and Social Sciences and Education NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting THE NATIONAL ACADEMIES PRESS 500 Fifth Street, NW Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by Contract No. SBAHQ003C0008 between the National Academy of Sciences and the U.S. Small Business Administration. The work of the Committee on National Statistics is supported by a consortium of federal agencies through a grant from the National Science Foundation (Number SES-0112521). Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 0-309-09611-1 (Book) International Standard Book Number 0-309-54934-5 (PDF) Additional copies of this report are available from National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu Printed in the United States of America Copyright 2005 by the National Academy of Sciences. All rights reserved. Suggested citation: National Research Council (2005). Analyzing Information on Women-Owned Small Businesses in Federal Contracting. Steering Committee for the Workshop on Women-Owned Small Businesses in Federal Contracting, Committee on National Statistics, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting STEERING COMMITTEE FOR THE WORKSHOP ON WOMEN-OWNED SMALL BUSINESSES IN FEDERAL CONTRACTING ARLEEN LEIBOWITZ (Chair), School of Public Policy and Social Research, University of California, Los Angeles WILLIAM T. BIELBY, Department of Sociology, University of Pennsylvania JONATHAN S. LEONARD, Haas School of Business, University of California, Berkeley PATRICIA A. ROOS, Department of Sociology, Rutgers University-New Brunswick J.H. (RIP) VERKERKE, School of Law, University of Virginia JOHN E. ROLPH, Marshall School of Business, University of Southern California (ex officio) CONSTANCE F. CITRO, Study Director ANDREW A. WHITE, Study Director (through May 2004) MICHAEL SIRI, Senior Program Assistant

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting COMMITTEE ON NATIONAL STATISTICS 2004-2005 WILLIAM EDDY (Chair), Department of Statistics, Carnegie Mellon University JOHN E. ROLPH (Chair, through June 2004), Marshall School of Business, University of Southern California KATHARINE ABRAHAM, Joint Program in Survey Methodology, University of Maryland ROBERT BELL, AT&T Research Laboratories, Florham Park, NJ LAWRENCE D. BROWN, Department of Statistics, Wharton School, University of Pennsylvania ROBERT M. GROVES, Survey Research Center, University of Michigan, and Joint Program in Survey Methodology JOHN HALTIWANGER, Department of Economics, University of Maryland PAUL HOLLAND, Educational Testing Service, Princeton, NJ JOEL L. HOROWITZ, Department of Economics, Northwestern University DOUGLAS MASSEY, Department of Sociology, Princeton University VIJAYAN NAIR, Department of Statistics and Department of Industrial and Operations Engineering, University of Michigan DARYL PREGIBON, Google Incorporated, New York, NY KENNETH PREWITT, School of International and Public Affairs, Columbia University LOUISE RYAN, School of Public Health, Harvard University NORA CATE SCHAEFFER, Department of Sociology, University of Wisconsin–Madison CONSTANCE F. CITRO, Director

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting Acknowledgments On behalf of the Steering Committee for the Workshop on Women-Owned Small Businesses in Federal Contracting, I would like to thank all of the individuals involved in the workshop and the production of the committee’s report. I thank Eric Benderson, associate general counsel for litigation, at the U.S. Small Business Administration (SBA), for his support and assistance to the committee at the workshop and throughout the project. I also thank John Klein, associate general counsel for procurement law at SBA, who enlightened us on small business contract law and practice; Sharon Drego, Peg Mehan, and Linda Oliver, who provided insights into the contracting process at the U.S. Department of Defense; R. Preston McAfee of the California Institute of Technology, who made an informative presentation on bid-credits as a mechanism for promoting small business work with the federal government; and Robert Goldstein of the UCLA Law School, who made an informative presentation on relevant case law. I am grateful for the excellent work of the staff of the Committee on National Statistics (CNSTAT) and the Division of Behavioral and Social Sciences and Education (DBASSE) for developing and organizing the workshop and assisting in the preparation of the report. Andrew White, who served as study director for the project through May 2004, was chiefly responsible for organizing the workshop and for preparing the initial report draft. Constance Citro, CNSTAT director, ably shepherded the report through the final drafting and revision process. Michael Siri handled all administrative matters regarding the workshop, and Christine McShane of the DBASSE reports office edited the report.

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the Report Review Committee of the National Research Council. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the charge. The review comments and draft manuscript remain confidential to protect the integrity of the process. We thank the following individuals for their review of this report: Richard Berk, Department of Statistics, University of California, Los Angeles; Farrell Bloch, Economic Consultant, Washington, DC; Barbara D. Boyan, Department of Biomedical Engineering at Georgia Institute of Technology and Emory University; Paula England, Department of Sociology, Stanford University; Joel Horowitz, Department of Economics, Northwestern University; and Barbara Valentino, President, Evolving Communications, Washington, DC. Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the recommendations or conclusions nor did they see the final draft of the report before its release. The review of this report was overseen by Burt Barnow, Institute for Policy Studies, Johns Hopkins University, and Douglas Massey, Woodrow Wilson School of Public and International Affairs, Princeton University. Appointed by the National Research Council, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. Arleen Leibowitz, Chair Steering Committee for the Workshop on Women-Owned Small Businesses in Federal Contracting

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting Contents     EXECUTIVE SUMMARY   1 1   INTRODUCTION   9      Committee Charge,   9      Outline of the Report,   10 2   LEGAL FRAMEWORK   12      Legislation and Executive Orders,   12      Court Decisions and Agency Response: Race-Based Programs,   18      Gender-Based Programs,   21 3   THE FEDERAL SMALL BUSINESS CONTRACTING PROCESS   26      Women-Owned Small Businesses in the Federal Contract Market,   27      The Contracting Process—A Case Study,   28      Types of Restricted Competition,   33      Limited Data on Outcomes,   34 4   DISPARITIES AND REPRESENTATION   38      Disparity,   38      Underrepresentation,   49      Data Quality Issues,   50      Disparity Ratios in the Literature,   55

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Analyzing Information on Women-Owned Small Businesses in Federal Contracting 5   MEASURING DISCRIMINATION   67      Defining Discrimination,   68      Causal Inference,   69      Statistical Estimation Methods,   70      Conclusion,   78 6   CONCLUSION AND RECOMMENDATIONS   79      Conclusion,   79      Recommendation 1—Revise the CAWBO Preliminary Estimates,   80      Recommendation 2—Produce More Useful Reports on Federal Contracting,   88      Recommendation 3—Collect Data on Subcontracting,   88      Recommendation 4—Develop a Research Agenda on Women-Owned Small Business Contracting,   89     REFERENCES   92     APPENDIXES     A   Workshop Agenda and Participants   95 B   Biographical Sketches of Committee Members and Staff   97