Analyzing Information on Women-Owned Small Businesses in Federal Contracting (2005) / Chapter Skim
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2 Legal Framework
2 Legal Framework
Pages 12-25
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From page 12... ...
requires the Small Business Administration (SBA) to "conduct a study to identify industries in which small business concerns owned and controlled by women are underrepre-sented with respect to Federal procurement contracting." Paragraph (3)
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The Investment Company Act of 1958, among other things, authorized the SBA to license, regulate, and help provide funds for privately owned and operated venture capital investment firms, which provided long-term debt and equity investments to high-risk small businesses. The creation of this program resulted from a Federal Reserve Board study that determined, in the simplest terms, that small businesses could not get the credit they needed to keep pace with technological advancement.1 1961 to 1980 The 1960s saw the beginning of small business contracting assistance programs that focused specifically on socially and economically disadvantaged small businesses (principally minority-owned businesses)
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; (B) the contracting officer has a reasonable expectation that 2 or more small business concerns owned and controlled by women will submit offers for the contract; (C)
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(4) IDENTIFICATION OF INDUSTRIES -- The Administrator shall conduct a study to identify industries in which small business concerns owned and con trolled by women are underrepresented with respect to Federal procurement contracting.
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. There are general size standards for industry groups: for example, 500 employees for a manufacturing business; 100 employees for a wholesale trade business; $28.5 million average annual receipts for a general or heavy construction business (ex cept dredging)
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The act set a goal of 5 percent of total dollar awards of prime contracts to be made to small disadvantaged businesses, which were given a 10 percent evaluation preference over other competitors. The act also provided for contracting set-asides, that is, competitions restricted to small disadvantaged businesses.
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, the U.S. Supreme Court determined that state and local preference programs for minority-owned firms must meet the court's "strict scrutiny standard" under which racial preferences must serve a "compelling interest" and be "narrowly tailored" to meet that need.
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From the legislative history of relevant statutes, the Urban Institute study, and other evidence of barriers to participation of minority-owned firms in government contracting, the Justice Department concluded that race-based "affirmative action in federal procurement is necessary, and that the federal government has a compelling interest to act on that basis in the award of federal contracts" (U.S. Department of Justice, 1996:26042)
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The Department of Commerce published its first industry benchmarks in June 1998, determining that a 10 percent bidding credit for small disadvantaged businesses could be employed in contracts in 71 industry groups (defined by 2-digit Standard Industrial Classification codes) , as well as in all 9 geographic divisions for 3 construction industry groups (U.S.
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(See Chapter 4 for a review of the methodology.) Other actions taken in response to the Adarand decision included suspension by the Defense Department in October 1995 of its small disadvantaged business set-aside program based on the rule of two: that is, limiting competition to minority firms whenever the contracting officer determined that two or more responsible small disadvantaged firms could bid on a project.
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In making its ruling, the Supreme Court stated that, in seeking to uphold a gender preference, the government must establish "an exceedingly persuasive justification" for it. In essence the government must show that the preference "serves important governmental objectives and that the discriminatory means employed are substantially related to the achievement of those objectives." While the two standards may appear somewhat different, lower court decisions applying the equal protection doctrine to government contracting have not yet clarified precisely how the standards differ.
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. The procurement program for women-owned small businesses provided for in the 2000 Small Business Reauthorization Act, 15 U.S.C.
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1995) , the Third Circuit invalidated a local preferential contracting plan favoring women and minorities because the government's disparity analysis assumed that all firms were equally ready, willing, and able to perform cityfinanced public works contracts without considering how many minorityowned and women-owned firms actually sought to bid on them.
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LEGAL FRAMEWORK 25 parities is fraught with methodological difficulties. After describing the federal contracting process in Chapter 3, we discuss conceptual, measurement, and data issues in estimating disparities in Chapter 4 and issues in inferring discrimination from statistical evidence of disparities in Chapter 5.
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