Small Disadvantaged and Women-Owned Businesses

OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

Small Disadvantaged and Women-Owned Businesses

AGENCY: Executive Office of the President, Office of Management and

Budget (OMB), Office of Federal Procurement Policy (OFPP).

ACTION: OFPP is requesting comments on its plans to comply with the

review requirements of small disadvantaged and women-owned businesses

in accordance with the Federal Acquisition Streamlining Act of 1994.

-----------------------------------------------------------------------

BACKGROUND: The Federal Acquisition Streamlining Act of 1994, Public

Law 103-355, provides, in section 7107, that the Administrator for

Federal Procurement Policy shall conduct a comprehensive review of

Federal laws, in effect on November 1, 1994, to identify and catalogue

all of the provisions in such laws that define (or describe for

definitional purposes) the following small business concerns: (1)

Concerns owned and controlled by socially and economically

disadvantaged individuals; (2) minority-owned concerns; (3) concerns

owned and controlled by women; and, (4) woman-owned concerns. (In this

notice, these 4 categories will also be referred to as disadvantaged

and women-owned businesses.) The definitions of concern are those which

authorize the participation of such small business concerns as prime

contractors or subcontractors in (1) contracts awarded directly by the

Federal Government or subcontracts awarded under such contracts, and

(2) contracts and subcontracts funded, in whole or in part, by Federal

financial assistance under grants, cooperative agreements, or other

forms of Federal assistance.

In conducting this review, the Administrator shall provide for the

participation in the review by representatives of (1) the Small

Business Administration (SBA) (including the Office of the Chief

Counsel for Advocacy); (2) the Minority Business Development Agency

(MBDA) of the Department of Commerce; (3) the Department of

Transportation (DOT); (4) the Environmental Protection Agency (EPA);

and (5) such other executive departments and agencies as the

Administrator considers appropriate. The Administrator must also

consult with representatives of organizations representing (1)

minority-owned business enterprises; (2) women-owned business

enterprises; and (3) other organizations that the Administrator

considers appropriate.

On the basis of the results of the review, the Administrator is to

develop (1) uniform definitions for disadvantaged and women-owned

business concerns; (2) uniform agency certification standards and

procedures for (A) determinations of whether a small business concern

qualifies as a disadvantaged or women-owned business concern under an

applicable standard for purposes of the types of contracts and

subcontracts referred to above, and (B) reciprocal recognition by an

agency of a decision of another agency regarding whether a small

business concern qualifies as a disadvantaged or women-owned business

concern; and (3) such other related recommendations as the

Administrator determines appropriate, consistent with the review

results.

Section 7107 requires the Administrator, not later than 60 days

after the date of the enactment of the Act, to publish in the Federal

Register a notice which (1) lists the provisions of law identified in

the review carried out during the first 60 days; (2) describes the

matters to be developed on the basis of the results of the review; (3)

solicits public comment regarding the matters described in the notice

for a period of not less than 60 days; and (4) addresses such other

matters as the Administrator considers appropriate in order to ensure

the comprehensiveness of the review.

Finally, section 7107 requires that not later than May 1, 1966, the

Administrator for Federal Procurement Policy shall submit to the

Committees on Small Business of the Senate and the House of

Representatives a report on the results of the review. The report shall

include a discussion of the results of the review, a description of the

consultations conducted and public comments received, and the

Administrator's recommendations.

PERFORMANCE OF REVIEW: In response to this direction, the Administrator

for Federal Procurement Policy, through the Office of Federal

Procurement Policy (OFPP), has conducted a review of the

[[Page 457]] various laws defining the business concerns listed in

section 7107, and has formed an informal task force with

representatives of the SBA (including its Office of Chief Counsel for

Advocacy), the MBDA, the DOT, the EPA, the Department of Defense, the

Department of Energy, and the General Services Administration.

Additionally, the Administrator has held meetings with representatives

of 21 organizations or companies representing minority-owned, women-

owned, and other appropriate business enterprises to discuss the

review. During these meetings, OFPP has discussed the need for uniform

definitions and the desirability of uniform certification standards and

procedures.

This review has indicated that there are divergent definitions of

the terms section 7107 covers. The primary problem appears to be that

while the Small Business Act contains comprehensive definitions of

socially and economically disadvantaged small businesses and women-

owned small businesses, other statutes contain either differing

definitions or similar terms with no definitions. Consequently, to

further their program implementation responsibilities, agencies have,

in some instances, adopted through the regulatory process definitions

which differ from those of the Small Business Act. This tends to cause

confusion and inefficiency within the government and within the small

business community.

Statutory definitions: It is not always clear from the relevant

statutes as to which of the four terms in section 7107 the statutes

would apply. However, after reviewing the laws and discussing the

issues with representatives of Federal Government agencies and of

minority and women-owned businesses, the Administrator has determined

that the following provisions of law are relevant to defining (a)

concerns owned and controlled by socially and economically

disadvantaged individuals; (b) minority-owned concerns; (c) concerns

owned and controlled by women; and, (d) woman-owned concerns:

1. Concerns Owned and Controlled by Socially and Economically

Disadvantaged Individuals and Minority-owned Concerns:

10 U.S.C. Sec. 2323(a) (Armed Forces)

15 U.S.C. Sec. 637(a)(4) (Small Business Act)

15 U.S.C. Sec. 637(a)(5) (Small Business Act)

15 U.S.C. Sec. 637(a)(6) (Small Business Act)

15 U.S.C. Sec. 637(a)(13) (Small Business Act)

15 U.S.C. Sec. 637(a)(14) (Small Business Act)

15 U.S.C. Sec. 637(a)(15) (Small Business Act)

15 U.S.C. Sec. 637(a)(17) (Small Business Act)

15 U.S.C. Sec. 637(d)(3)(C) (Small Business Act)

49 U.S.C. Sec. 332 (Transportation)

49 U.S.C. Sec. 47113(a) (Transportation)

Public Law 101-165, Department of Defense Appropriations Act, 1990,

Section 9004

2. Concerns Owned and Controlled by Women and Woman-owned Concerns:

15 U.S.C. Sec. 632(n) (Small Business Act)

15 U.S.C. Sec. 637(d)(3)(D) (Small Business Act)

49 U.S.C. Sec. 332 (Transportation)

49 U.S.C. Sec. 47113(a) (Transportation)

Public Law 102-377, Section 304 (a)&(b) Energy and Water Development

Appropriations Act, 1993

Public Law 102-486, the Energy Policy Act of 1992, Section 3021

Public Law 102-240, Intermodel Surface Transportation Efficiency Act of

1991, Section 1003(b)

Example of Statutory Discrepancy: The Small Business Act, at 15

U.S.C. Sec. 637(d)(3)(D), provides as follows: ``The term `small

business concern owned and controlled by women' shall mean a small

business concern--(i) which is at least 51 per centum owned by one or

more women; or, in the case of any publicly owned business, at least 51

per centum of the stock of which is owned by one or more women; and

(ii) whose management and daily business operations are controlled by

one or more women.'' Section 1003(b)(2)(B) of the Intermodel Surface

Transportation Efficiency Act of 1991 provides as follows: ``Socially

and Economically Disadvantaged Individuals.--The term ``socially and

economically disadvantaged individuals'' has the meaning such term has

under section 8(d) of the Small Business Act (15 U.S.C. Sec. 737(d))

and relevant subcontracting regulations promulgated pursuant thereto;

except that women shall be presumed to be socially and economically

disadvantaged individuals for purposes of this subsection.'' For their

respective programs, these two statutes provide differing coverage for

women-owned businesses. One provides a separate definition; the other

includes women within the definition of socially and economically

disadvantaged individuals.

Regulatory definitions: In addition, the following provisions of

federal regulations, which represent the implementing guidance of the

various federal departments and agencies, are relevant to the

interpretation of the statutes cited above:

48 CFR Part 19 (Federal Acquisition Regulation System)

7 CFR Part 3403 (Agriculture)

10 CFR Part 470 (Energy)

13 CFR Part 124 (Business Credit and Assistance) (Small Business

Administration)

48 CFR Part 219 (Federal Acquisition Regulation System) (Defense)

49 CFR Part 23 (Transportation)

49 CFR Part 265 (Transportation)

Review of statutory definitions: OFPP has reviewed the above listed

statutes and regulations. OFPP interprets the provisions of section

7107 as directing the Administrator to recommend a single, uniform

definition for socially and economically disadvantaged and minority

owned small businesses. It makes the same interpretation regarding

small businesses owned and controlled by women and woman-owned small

businesses. Consequently, the Administrator does not intend to

recommend substantive changes in the definitions of these terms, other

than those necessary to arrive at a uniform definition. The

Administrator does intend to recommend adoption of a single, uniform

definition for small disadvantaged businesses and for women-owned small

businesses, respectively. Furthermore, the Administrator currently

intends to recommend statutory provisions which would provide that the

definitions of these terms contained in the Small Business Act, as it

would be amended, would supersede all other similar definitions of

these terms contained in various other laws.

Certifications: Certification of firms as eligible participants in

a program for small disadvantaged or small women-owned businesses is

one of the most important features of such a program. A reliable

certification program ensures that only eligible firms participate,

while preventing ineligible firms from taking advantage of the program.

A certification program that meets this objective may range from the

simple to the complex and may, depending on the nature of the program

adopted, impose significant administrative and financial burdens on

agencies and small businesses. Several issues have been raised

regarding possible changes to certification standards and procedures.

The preliminary discussions held to date indicate a wide variety of

views as to the most desirable method of performing certifications of

small businesses as socially and economically disadvantaged and as

women-owned. The possible methods of accomplishing this include the

following:

a. Creation of a uniform federal government-wide certification

program. [[Page 458]] Such a program could be administered by one

agency or by several agencies of the government. In any case, once a

certification was granted to a business concern, that certification

would be good for all other federal departments and agencies for the

period of time set for the certification. Potential problems that would

have to be addressed include availability of resources to administer

the program and availability of local information on applicants.

b. Adoption of certifications by non-federal agencies, possibly

state and local governments or private organizations. Such governments

or organizations would have to first qualify as applying standards

compatible with those of the federal government. After such

qualification, they would act in the place of the federal government

for purposes of granting certifications or on behalf of the federal

government. This might be accomplished either by creating a program

granting them the necessary authority or by contracting with them to

perform the service for the federal government. Certification by such

organizations would be good for all federal departments and agencies

for the period of time set for the certification.

c. In addition to the issues of who might grant certifications or

how, the question of auditing was also raised. Currently, under the

Small Business Act 8(d) program (for subcontractors) and certain

Department of Defense programs, businesses can self-certify. If a self-

certification program of this type were extended to other federal

programs, local certifying authorities, if they were adopted, could

engage in an auditing program, whether universal or random in nature.

Potential problems that would have to be addressed include utility of

the program in preventing ``fronts'' from exploiting the program and

availability of resources to administer the auditing program.

Various aspects of these approaches could also be combined.

MATTERS TO BE DEVELOPED: The Administrator intends to develop

recommendations for uniform definitions relating to small disadvantaged

businesses and to women-owned small businesses. These definitions will

be applicable to all federal departments and agencies in their

contracting, grants, and cooperative agreements actions. In addition,

the Administrator intends to develop recommendations for a single,

uniform system of standards and procedures for federal certification of

small disadvantaged and small women-owned businesses. The Administrator

also intends to consider whether the term ``socially and economically

disadvantaged business'' should be changed to some other appropriate

term.

PUBLIC COMMENTS: The Administrator solicits the comments of interested

agencies and parties regarding their views of the matters to be

developed. These comments may include references to additional statutes

that the commentor believes relevant, to proposals regarding terms to

be used in the uniform definitions, to proposals for ways and means of

creating a uniform system of certifications, and suggestions as to what

form it should take. Additionally, commentors may address the goals to

be achieved by creating uniform definitions and uniform standards and

procedures, differences in procurements under contracts, grants, and

cooperative agreements, and means of avoiding unnecessary disruption of

existing programs.

DATES: Comments in response to this notice should be received at OFPP

by close of business on February 20, 1995.

ADDRESSES: Comments should be submitted to the OFPP, New Executive

Office Building, Room 9001, 725 17th Street, NW, Washington, DC 20503,

Attention: Ms. Linda Mesaros.

FOR FURTHER INFORMATION CONTACT: Ms. Linda Mesaros at 202-395-4821.

Steven Kelman,

Administrator.

[FR Doc. 95-7 Filed 1-3-95; 8:45 am]

BILLING CODE 3110-01-M