The eligibility criteria for WOSBs are set forth in 13 C.F.R. § 127.201. In general,
- The company must be “small” in its primary industry in accordance with SBA’s size standards for that industry. (For construction trades, the maximum annual revenue of the company is currently $36.5 million for building contractors and heavy infrastructure contractors, $15 million for specialty trades.)
- The company must be at least fifty-one percent (51%) unconditionally and directly owned and controlled by one or more women who are U.S. citizens.
- Management and daily operation must be controlled by one or more of the women owners.
- The women owners must make long-term decisions for the business.
- For corporations, women must either: (1) comprise a majority of the Board of Directors (or have a majority of the Board votes through weighted voting); or (2) hold 51% of the voting power, sit on the Board and have enough voting power to overcome any supermajority requirements.
Illustrative of the problem is In the Matter of C & E Industrial Service, Inc., SBA No. WOSB-112, 2019 (S.B.A.), 2019 WL 1590652 (April 8, 2019). C & E, a purported WOSB, was awarded a contract for rebuilding four parking lots at the White Sands Missile Range in New Mexico. An unsuccessful bidder protested the award, claiming that the owners of C & E, one of whom was its President, weren’t qualified to run a construction firm. While they had significant managerial responsibilities at the firm, including overseeing administrative and field operations, their backgrounds were as school bus drivers. Their husbands, on the other hand, had decades of experience in the construction field; one had 28 years of welding, commercial fabrication, construction, plumbing, heating and cooling experience along with 17 years in business ownership, management, and supervision, while the other had 25 years of industrial construction experience as a supervisor at a machinery and fabricating shop and in a construction company.
The SBA upheld the protest, finding that “the women owners lacked the adequate managerial experience and expertise to run the concern. While Ms. Hernandez and Ms. Valles do perform administrative and financial tasks, they must also participate in the long-term decision making and day-to-day management to be found to be in control of the company. A significant part of the day-to-day management, the field operations, are run by Mr. Hernandez and Mr. Valles. Moreover, the business license for Appellant lists Mr. Valles as the qualifying individual. There is no indication that either Ms. Hernandez or Ms. Valles has supervisory control over the individual who holds the important business license, Mr. Valles, or over those with technical expertise, Mr. Hernandez and Mr. Valles.”
There are significant penalties for intentional misrepresentation of WOSB eligibility, including suspension, debarment and even civil or criminal penalties, but proving intent to dupe the Government is rarely a simple matter. How much doing away with self-certification lessens the incidence of fraud remains to be seen.