SBA Final Rule concerning Woman-Owned Small Business (WOSB) and EDWOSB

My company is DynaGrace Enterprises (DGE).  We are a certified 8(a) (Small Disadvantaged Business (SDB)) as well as 8(m) (Woman-Owned Small Business (WOSB) / Economically Disadvantaged Woman-Owned Small Business (EDWOSB)).  We have been in business since 2006 and the 8(a) is a great program but DGE will eventually graduate. 

The U.S. Small Business Administration (SBA) issued a final rule authorizing federal agencies to award sole-source contracts to women-owned small businesses eligible for the WOSB Federal Contract Program. It was published in the Federal Register September 14, 2015, and was effective October 14, 2015.  The rule levels the playing field for WOSB across the federal contracting marketplace.

Here is a link to the rule as it appears in the Federal Register on September 14, 2015. https://www.federalregister.gov/articles/2015/09/14/2015-22927/women-owned-small-business-federal-contract-program

It appears that for now, the current list of applicable North American Industry Classification System (NAICS) codes published by SBA for WOSB and EDWOSB contracting set-asides will remain in force, and will be used to facilitate sole source awards until superseded by new data.  This NAICS code list can be found here:

2012 WOSB-EDWOSB NAICS Codes

DGE has past performance in the following NAICS codes:

237130	EDWOSB	Power and Communication Line and Related Structures Construction
238210	EDWOSB	Electrical Contractors and Other Wiring Installation Contractors
238990	EDWOSB	All Other Specialty Trade Contractors
541330	EDWOSB	Engineering Services
541511	EDWOSB	Custom Computer Programming Services
541512	EDWOSB	Computer Systems Design Services
541519	EDWOSB	Other Computer Related Services
541990	EDWOSB	All Other Professional, Scientific, and Technical Services
561621	EDWOSB	Security Systems Services (except Locksmiths)
561990	WOSB	All Other Support Services
811310	EDWOSB	Commercial, Industrial Machinery/Equipment (except Automotive & Electronic) Repair & Maintenance

This new regulation is great news and represents an opportunity for woman-owned firms.  If you are interested in working with DGE, please contact us.

As a Woman-Owned Small Business (WOSB) who should I market?

Government contract awards need to meet socioeconomic goals.  The fact that DynaGrace Enterprises (DGE) is both a Woman-Owned Small Business (WOSB) as well as an 8(a) makes DGE count in multiple socioeconomic categories for these objectives. Formal goals are in place by the Small Business Administration (SBA) to ensure small businesses, like DGE, especially those with socially and economically disadvantaged individuals, get work from the Government. Marketing the socioeconomic advantage to customers as a way for them to meet their SBA goals is an important marketing strategy. DGE utilizes several places to determine socioeconomic marketing targets:

1. The SBA produces a scorecard for 24 agencies required to report the socioeconomic goals of their procurement activities. For Fiscal Year 2014 the document is titled FY 2014 Scorecard Summary by Prime Spend with Sub K and Plan Progress Document and is represented in the following graphic. 



FY 2014 SBA Scorecard Summary

According to the data, DGE should market the following agencies:

Agencies that did not meet their WOSB goals

• Department of Defense
• Department of Energy
• Department of Veterans Affairs
• National Aeronautics and Space Administration
• National Science Foundation
Agencies that did not meet their SDB goals

• Department of Energy
• Department of Education
2. DGE utilizes the Small Business Dashboard to analyze potential marketing targets. The data can be up to 90 days delayed in posting, but it still gives a visual picture of socioeconomic percentage trends. The following represents a partial listing of this data. According to the Small Business Dashboard, DGE will target the following agencies:
Agencies that did not meet their WOSB goals

• Department of Defense
• Department of Energy
• Department of Veterans Affairs
• National Aeronautics and Space Administration
• Agency for International Development
• Executive Office of the President
• Federal Energy Regulatory Commission
• Railroad Retirement Board
• Equal Employment Opportunity Commission
• Federal Trade Commission
• National Gallery of Art
• Agency for International Development
• National Transportation Safety Board
• Recovery Accountability and Transparency Board
Agencies that did not meet their SDB goals

• Department of Energy
• Department of Education
• Consumer Financial Protection Bureau
• Peace Corps
• Millennium Challenge Corporation
• Federal Energy Regulatory Commission
• Railroad Retirement Board
• Equal Employment Opportunity
• National Gallery of Art
• National Transportation Safety Board





Small Business Dashboard

Once marketing targets are identified DGE queries the Federal Business Opportunities, FedBizOpps (FBO) and discovers procurement opportunities by Agency and then further defined by North American Classification System (NAICS) code. DGE can approach the procurement official about utilizing WOSB or 8(a) set asides for their procurement effort to meet their socioeconomic goals. Also, physical visits or digital email by DGE business development personnel and attendance at agency conferences is a must for the socioeconomic marketing plan to succeed.

For further information please visit the DGE web site.

Choosing a Corporate Structure (One size does not fit all)

DISCLAIMER:  I, Linda Rawson, am not an attorney or accountant.  I am merely giving you my opinion and lessons learned from my experiences.

 

Okay.  Pay attention to that disclaimer as I will be referencing it again.  The proper way to choose a corporate structure is to consult an expert such as an attorney or accountant.

One of the first and most important choices when starting a business is the selection of the type of legal entity your company will be.  This decision will affect how much you pay in taxes, how much paperwork you will need to do, determine personal liability and impact the ability to raise money through the sale of equity.

I reviewed C Corporation, S Corporation and Limited Liability Company (LLC) when I started my business. 

C Corporation and S Corporations require a corporate return, corporate minutes and give you the option to establish shares to sell for equity.  It sounded like a lot of high-cost record keeping work that I wanted to avoid.  Nobody likes to do paperwork. 

When I started, it was just me.  I didn’t imagine I would be anything else other than a consultant.  I thought I would be claiming all my income on my individual tax return Schedule C.   I wanted simpler taxes, so I incorporated as an LLC without consulting an attorney or accountant.  The State of Utah makes it so easy to incorporate.  It even generates the articles of incorporation for you.  Why would I want to do all that extra bookkeeping?

Then the next thing is filing with the IRS.  Here is where I made a critical error that almost prevented me from obtaining my 8(a) status when I first applied.  They classified me with my Employment Identification Number (EIN) as a Single-Member LLC.  Single-Member LLC was great until the SBA said an LLC is defined as one or more people and we cannot approve your application unless you get this changed.  I had ten days, I added my daughter as the other member, expedited the articles of incorporation, and our 100 percent Woman-Owned Small Business (WOSB) expanded to two people.  That was in 2009 when our 8(a) application was approved by the SBA.

Later, after participating in the Mentor-Protégé Program, we used a lawyer to convert DynaGrace Enterprises to an S Corporation to have the option to sell shares if we needed to raise capital.  Payment for government work can be delayed up to 90 days and as a company you have to carry that money and wait for the government to catch up.  You will get paid, but it may take some time. 

The main advantage to switching to an S Corporation was to minimize Social Security and Medicare taxes for myself and to limit my personal liability.  The profit and losses are still passed to me utilizing a K-1 form and reported on my individual return.   I didn’t choose to experience the double taxation that is the downside of the C Corporation.

When I started my business, Sole Proprietorship wasn’t talked about much but it is my understanding if you own 100 percent of your business this may be the option for you.  Again please consult an attorney or accountant to figure out the best choice.  

Remember in business, as in life, one size does not fit all.  

It can be expensive to convert to a different corporate structure later, but it is not a critical mistake, and change can mean growth but know the facts and make the best decision at the time.

Why start a government contracting business?

I have owned DynaGrace Enterprises, a Woman-owned Small Business (WOSB) and 8(a) firm for almost a decade.  So why did I start a government contracting business?  The answer is quite simple.  I was younger and dumber and wanted to see if I could.  I did not know what I should have known when I started.  Maybe this article can give you some insight and help you determine if it was the good idea you thought it was. 

There are several types of government contractors, and the one I am most familiar with provides services to the federal government.  The manufacturing part and being able to offer a product to the government might be better for you, but I am not as familiar with that type.

Federal government contracting can be a way to start a small business.  The market is worth over $100 billion in sales to small businesses each year.  Providing services or products to the government is quite different than selling to the commercial sector.

Government contracts can guarantee ongoing revenue to your business. A stable cash flow enables a business to develop marketing budgets, hire staff and grow their business intelligently. Reoccurring monthly business generated from government contracts can also hedge against months that are slow. In fact, many contracts have 3-5 continuous year contract terms.  Keep in mind though it can take 30 to 90 days to get paid.  But once the payments start you are usually fine.

The procurement process for a government contract is extensive.  You can speed up this process by marketing to government customers that have a budget.  That can be like finding a needle in the haystack.  The government goes through cycles for services.  Sometimes they ramp up contractors and some years they ramp up on civilian employees. 

You should be prepared for long hours when responding to solicitations.  The last couple I have lost to very low bidders.  I am not sure how they expect to give any benefits to their employees, but the government will get what they bid for, hence the term, “low bidder”.  It is like buying the cheapest vehicle and realizing the plastic cracks in the sun after a month of owning it.  I refuse to win a bid on the backs of my employees so the contract goes to a company that will.

The good part is I have some fantastic employees, and I have met some wonderful business people who are involved in government contracting.  I started out as a civilian employee way back when and then worked for about four contractors before starting my own small contracting business.  Having a small budget or lack of budget is a huge problem.  The government employees in charge of budgets are usually friendly and appreciate the services we have to offer. 

I would never even have thought about having my own business, and this opportunity has given me the experience and the pleasure of being an entrepreneur.  It is an excellent way to get started and the SBA offers some training but expect to learn a lot on your own and with the help of mentors.

What is my story? (Today’s version)

I was glancing through my LinkedIn feed this morning and noticed Leadership Coach, Ken Sharrar, asking “What is your story?”

Hmmm…my story is always evolving.  I am a serial entrepreneur and of course ideas flow constantly.  Determining which of those ideas can be profitable is the question I always have.  But my entrepreneur story starts about ten years ago in a building at Hill AFB, UT where I was writing database software for the 84th Radar Evaluation Squadron (RADES).  I got hired as an Oracle DBA but was also a talented.Net programmer, so a few information systems became born or enhanced during my time there.  I love writing software and data has always been my thing.  I love getting information out of a relational database and formatting to fit what the user wants.  I was perfectly happy being a cube rat.

When I started at the RADES, I was just going through a divorce.  My husband had moved out the weekend before I started.  It was not expected although we had issues for a while.  So the first week I was in shock but also relieved.  So while my personal life was in strife, I had to turn my life around and take care of my three teenage kids so that their life was somewhat normal.  I poured myself into my work and managed to run the kids around to all their activities. 

I never thought about being an entrepreneur although as I look back I can see I had tendencies.  I sold things door to door as a child.  I had ADHD so my mom was constantly shoving me out the door, so I didn’t drive her crazy.  I wasn’t good in school until I was a teenager, and I always got good grades while being involved in FBLA, sports, and band.  I grew up in a penniless single mom household.  From meager beginnings came the experience in how to work hard to achieve results.

I was working in the RADES for about two years when I got the call that would change my career forever.  The call that came was from Vincent Kinsey.  He was working for IHS and was trying to integrate an RFID tag into a Hazardous Material system called HMMS at Edwards AFB in California.  As a single mom, I had to consider my family first.  Then I thought, I have skills, what would be the worst thing that would happen?  My kids might have to sleep on somebody’s couch for a month or two.  It doesn’t hurt children to experience hard times. 

I jumped in and became a sub to MECX, and Sensory Technology Consultants became born.  That was in June of 2006.  It is so hard to believe that I have worked for myself all of that time.  Sensory Technology Consultants has since become Dynagrace Enterprises and is a 100 percent women-owned small business and we are 8(a) certified.  My kids never slept on anybody’s couch, and I managed to give them an excellent lifestyle.

No matter what your story is, you can be successful.  Don’t let anything stop you and don’t be afraid to take risks.  Believe in yourself and your abilities and you will go far.

Get that SBA Certification

For companies wanting to obtain government work the best way to get started is to obtain one of the four SBA Certifications.  It is imperative you get started now in reaching that goal.  The certifications are :  8(a) Certification, WOSB, Hubzone, and SDVOSB.  According to the SBA Statutory Guidelines the following is a breakdown of targets of awards to these businesses:

• 23% of prime contracts for small businesses;
• 5% of prime and subcontracts for women-owned small businesses;
• 5% of prime and subcontracts for small disadvantaged businesses;
• 3% of prime and subcontracts for service-disabled veteran-owned small businesses;
• 3% of prime subcontracts for HUBZone small businesses.

Federal agencies are required to make every available effort to comply with these statutory targets, so small businesses with certifications are given contracting opportunities not available to other companies. These certifications allow for the following two ways to break into government contracting:

1. Set-aside contracts allow the procurement officer greater ease in contract award and provide for a way around the formalized bidding process making it more likely for the company to be awarded a contract. 
2. Joint Ventures give the SBA certified company the ability to use the other company’s capabilities and past performance to secure contracts. The joint venture firm is usually in need of the SBA certificate holder’s inclusion in the bid in order to be awarded the contract. 

You can see the advantage of having one of these certifications but what do you do next?  As always, we entrepreneurs sometimes have a problem planning.  Visualize yourself with one of these statuses.  You must be a small business.  You must keep meticulous records.  There is a lot of paperwork involved getting the status as well as maintaining the status.

I was in business for almost two years when I applied.  By the time they reviewed my paperwork I did not need to file the two year waiver.  I also had to prove gender discrimination which requires at least 10 stories relating to how you were discriminated based on gender.  The process was arduous but so worth it.  There are many lessons to be learned along the way and I will be blogging about those lessons.