Analyzing Information on Women-Owned Small Businesses in Federal Contracting (2005) / Chapter Skim
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4 Disparities and Representation
4 Disparities and Representation
Pages 38-66
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From page 38... ...
Disparities may be due to any number of factors, including, but not necessarily and not limited to, discriminatory practices and behaviors. This chapter focuses on the definition and measurement of disparities and underrepresentation of women-owned small businesses in federal contracting.
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From page 39... ...
Calculating the disparity ratio begins by calculating the values of two shares for a target group, in this case womenowned small businesses. The two shares are a utilization share, U, and an availability share, A.1 The utilization share looks at an outcome of interest, which in this case is winning government contracts, measured in number of contracts or dollars awarded.
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From page 40... ...
For example, if industry A has 10 percent women-owned small businesses and industry B only 2 percent women-owned small businesses, a comparison of counts or percentages of contracts awarded would be misleading because one would not expect women-owned small businesses to win as many contracts in industry B as in industry A Differences among industries also suggest the importance of examining each industry separately and not lumping industries together in the calculation of a single disparity ratio (or difference)
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From page 41... ...
0.25 2.50 1.15 NOTE: Calculating the disparity ratio for the two industries combined would lead to the conclusion that women-owned small businesses were overrepresented in federal contracting, when the data indicate that they are underrepresented in industry A and then summarize and assess the approach to these issues in the SBA CAWBO study and other studies.
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From page 42... ...
Data on total size of awards for individual contracts also require combining FPDS individual action records. Although defining the outcome measure in terms of dollar amounts awarded makes sense for estimating utilization shares to respond to the congressional mandate, it would also be useful to examine utilization shares in terms of contract awards, or actions, in order to better understand the contracting picture for women-owned small businesses.
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From page 43... ...
.3 The detailed information in the FPDS for awards over $25,000 permits estimating utilization shares for smaller and larger award size categories. Also, with the currently available data, disparity ratios can be calculated only for prime contract awards but not for subcontracts.
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From page 44... ...
Typically, only the first definition has been used in the literature for estimating availability shares. Whichever measure is used (numbers or dollars)
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From page 45... ...
If disparity ratios are to be used in a comprehensive analysis of barriers that women may face in business ownership and growth, which could, in turn, produce underrepresentation in federal contracting, then a broad definition of the total population of firms for estimating availability shares is likely to be appropriate. If, however, disparity ratios are to be used in court to justify remedial preferential contracting programs for womenowned small businesses, then a broad definition is likely to be inappropriate.
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From page 46... ...
Some studies of disparities in state and local contracting have used restricted business lists, such as contractor registries and survey respondents that report interest in or efforts to obtain contracts, to estimate availability shares. The Department of Commerce used a regression methodology with several data sources to estimate a ready, willing, and able population of firms for estimating availability shares for federal contracting (see "Disparity Ratios in the Literature," below)
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From page 47... ...
Yet an inconsistent calculation that bases utilization shares on contract dollars awarded and availability shares on number of firms could well produce downwardly biased disparity ratios, thereby overstating the need for preferential contracting programs. The reason is the heavily skewed distribution of U.S.
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From page 48... ...
appear too broad to be used as the basis of disparity ratios to inform understanding of the role of womenowned small businesses in federal contracting and what kinds of preferential treatment may be indicated. At the other extreme, there are so many specific industries identified by 6-digit NAICS codes that the resulting disparity ratios are likely to be adversely affected by sampling variability and also by errors of classification.
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From page 49... ...
Given sufficient sample size and heterogeneity in a 3-digit category, then disparity ratios could also be calculated separately for two or more 4-digit groupings. UNDERREPRESENTATION Congress did not define underrepresentation or substantial underrepresentation -- that is, how small the disparity ratio must be to single out an industry for instituting preferential treatment programs for women-owned small businesses in federal contracting.
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From page 50... ...
There are no perfect data sources for estimating disparity ratios by industry for women-owned small businesses in federal contracting, particularly in the case of availability shares. Better-suited data are available for estimating utilization shares, except that detailed information is not available about contracts under $25,000, and no information is available about subcontracts.
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From page 51... ...
Outliers Careful examination of the distribution of the data on important dimensions, such as contract award size or firm size, should be part of the process of estimating disparity ratios. It may be that outliers or extreme values are present that distort the estimates for a given industry, contracting agency, or time period.
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From page 52... ...
52 for also Data every (and NSA on Action for form FAA, under General (ICAR) actions DD-350 for from on and Federal being (e.g., Congress, SF-279 $25,000 courts, in FPDS-Next U.S.
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From page 53... ...
, than competed, fiscal Updated reports for analyses ICAR agency, identification, kind dollars deobligated, product principal contractor principal performance, bundled, modification price) , (e.g., other number extent contractor whether HUBZone, preference evaluation percent subcontracting subject six and (e.g., (e.g., SSN, party codes, reports; physical grants business to business or or factors up SIC types agencies ID employees, revenue, whether URL, where type, type, woman-owned)
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From page 54... ...
54 & c. In (small Dun Office; category y ID, number by ministration; contractor's small average only)
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From page 55... ...
If data sources with consistent reference periods are not available, then consideration could be given to adjusting one or another source to achieve greater consistency -- for example, trend indicators from other sources might be used to project the 1997 SWOBE data forward in time. Consistency of concept As discussed above, the concept underlying the utilization and availability shares must be as consistent as possible for appropriate estimation of disparity ratios.
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From page 56... ...
Urban Institute Meta-Analysis The Urban Institute collected reports of 95 state and local governmentcommissioned disparity analyses and reviewed them to screen out those that did not provide relevant or statistically defensible results. Studies were included only if they satisfied all four of the following criteria: they provided disparity ratios or the data to construct ratios and not just anecdotes; they reported findings separately by industry category; they reported the number of contracts used in the analysis or the statistical significance of the calculated ratios; and they included more than 80 contracts in total.
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From page 57... ...
Availability measures based on all firms or all firms with paid employees used data from the 1987 SWOBE. To combine results across studies, the Urban Institute first averaged the disparity ratios for each study (jurisdiction)
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From page 58... ...
As noted above, almost all 58 studies calculated disparity ratios that were internally inconsistent because the utilization measure was in terms of contract dollars awarded and the availability measure was in terms of number of firms in a specified universe. Some studies also calculated disparity ratios consistently, in that the utilization measure was in terms of numbers of contracts awarded, not dollars.
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From page 59... ...
. This finding suggests that women-owned businesses received a higher percentage of construction subcontracts than of the subcontract dollars awarded.7 The Urban Institute meta-analysis is not directly useful to the SBA to respond to the congressional charge to estimate disparity ratios by industry for women-owned small businesses in federal contracting.
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From page 60... ...
These firms were identified from a survey of federal contracting officers, who were asked to provide names of bidders for a sample of 16,616 new, competitive procurements stratified by industry and, for construction industries, by the 9 census geographic divisions. The survey had a 76 percent response rate.
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From page 61... ...
Measuring "Ready, Willing, and Able" The next step in the Commerce Department's methodology was to measure the capacity of the ready and willing firms in the integrated data set. A dollar value for capacity was assigned to each firm equal to the geometric mean value of federal contracting work for contractors of a given size and age in a given industry group.
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From page 62... ...
Availability shares were calculated as the total capacity value assigned to all small disadvantaged businesses in the data set divided by the total capacity value assigned to all firms in the data set. Based on the results, the Department of Commerce determined that small disadvantaged firms were eligible for a 10 percent price evaluation adjustment, or bid-credit, in 71 industry groups, and for 3 construction industries, within each of 9 geographic divisions.
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From page 63... ...
Whether such analysis was done for the equations used by the department or alternative forms of those equations is not known. SBA CAWBO Study The preliminary CAWBO study of women-owned businesses in federal contracting was summarized for the committee in the open session of its spring 2004 workshop.
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From page 64... ...
Assessment A major limitation of the CAWBO study is the same as that of the Department of Commerce study reviewed above -- namely, incomplete and unclear documentation of data sources and estimation methods and the lack of any published sensitivity analysis that would indicate the robustness of the estimated disparity ratios to alternative measures of utilization and availability. Tables and graphs are not clearly labeled, and the steps followed to evaluate and select data sources and construct estimates are not clearly described.
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From page 65... ...
CAWBO noted that small firms can subcontract, engage in joint ventures, hire temporary staff, or take other steps to expand their capacity as needed. CAWBO rejected the idea of a regression analysis to estimate the capacity of available firms to handle federal contracting on the grounds of lack of time and resources to assemble the necessary firm-specific data.
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From page 66... ...
Women-owned small businesses were underrepresented in the private market as well, but not as much as in the government market, a finding that CAWBO believes supports the conclusion that capable women-owned small businesses are not being well used in federal contracting. This and the other analyses summarized in the CAWBO document indicate the hard work that the analysts put into the study.
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