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WOSB and EDWOSB contracting set-asides will remain in force, and will be used to facilitate sole source awards until superseded by new data.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.

What is the System for Award Management (SAM)?

The System for Award Management (SAM) located at www.sam.gov is the data repository necessary for doing business with the federal government.  The website is free to the public and users of SAM include contracting officials, contractors, and the public. 

To be awarded a contract by the federal government, contractors are required to register in SAM.  The one-time registration provides basic information for both procurement and financial transactions.  The information must be validated annually by updating and renewing the entity registration. 

SAM allows government agencies, contracting officials, and other contractors to search for your company based on your ability, size, location, experience, ownership, and more. SAM allows users to search for firms certified by the Small Business Administration (SBA) under the 8(a) Development and HUBZone Programs. SAM also incorporates the Online Representations and Certifications Application (ORCA) system.  ORCA is a web-based system where the contractor provides required information about the company (e.g., accounting procedures; travel policies).  ORCA verifies that the firm meets certain Federal requirements (e.g., complies with equal opportunity legislation).

SAM validates the contractor’s information and electronically shares the secure and encrypted data with the Federal agencies' finance offices to facilitate paperless payments through Electronic Funds Transfer (EFT). Additionally, SAM shares the data with Government procurement and electronic business systems. A contractor only needs to input business information in one database), which will then automatically populate the SBA Dynamic Small Business Search (DSBS) database.

As a contractor to register in SAM you need to have the following:

• Dun & Bradstreet Data Universal Numbering System (D-U-N-S®).  See my previous blog Dun & Bradstreet (A Necessary Evil)
• Taxpayer Identification Number (TPIN) is an identification number used by the Internal Revenue Service (IRS).  The TPIN will be verified by the IRS so it must be entered EXACTLY like the paperwork from the IRS.  The TPIN will be either the Employer Identification Number (EIN) for the contractor company or in the case of a Sole Proprietor the number will be the Social Security Number (SSN).  Keep in mind activating a new EIN with the IRS takes 2-5 weeks.
• Bank Account information for EFT
• North American Industry Classification System (NAICS).  The NAICS codes will inform the public what kind of industry work you can perform.

Once your registration is submitted for processing, information from SAM is routed to Defense Logistics Information Service (DLIS) in Battle Creek, Michigan for Commercial and Government Entity (CAGE) Code assignment.  Once the CAGE code is approved it will be sent to SAM to update the registration.  Government contracting requires a CAGE code.   The code may be used for a Facility Clearance, a Pre-Award survey, automated Bidders Lists, pay processes, source of supply, etc. In some cases, prime contractors may require their sub-contractors to have a CAGE Code also.

For further information please visit the DGE web site.

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.

Dun & Bradstreet (A Necessary Evil)

A necessary evil is defined in the Cambridge Dictionary as “something unpleasant that must be accepted to achieve a particular result.”  Yes, a Data Universal Numbering System (D-U-N-S®) number is just that, unpleasant.  You must have one to do business with the federal government.

From the D&B website:

“Created in 1962, the Data Universal Numbering System or D-U-N-S® Number is D&B's copyrighted, proprietary means of identifying business entities on a location-specific basis.  Assigned and maintained solely by D&B, this unique nine-digit identification number has been assigned to over 100 million businesses worldwide.”

“The D-U-N-S® Number is widely used by both commercial and federal entities and was adopted as the standard business identifier for federal electronic commerce in October 1994.  The D-U-N-S Number® was also incorporated into the Federal Acquisition Regulation (FAR) in April 1998 as the Federal Government's contractor identification code for all procurement-related activities.”

A real mix of commercial and federal government usage is what this appears to be.  To do business with the federal government, you have to register with a commercial company first to obtain an identification number.  This process has never made sense to me and every time I have had to register either a joint venture or new company it is painful. 

It used to be worse.  Back in the day it could take three weeks to get a D-U-N-S®.  If you had any trouble, it amounted to talking to about ten different people before you got to the department.  Then you were placed on their sales list for them to try and sell their products and services to you. 

According to this article, “Is GSA stuck with proprietary numbering system?” the current contract for D-U-N-S® numbers is an eight-year, sole-source contract awarded to Dun & Bradstreet in 2010. The contract now totals up to $154 million, according to GAO.

Noted in this 2012 letter sent to Senator Ben Nelson (D–NE) the Government Accountability Office (GAO) identified challenges.  I believe D&B has a monopoly on the numbering system for the federal government.  Regardless you will need a D-U-N-S before you can register your business in sam.gov to obtain your Commercial and Government Entity (CAGE) code.  The link to establish a D-U-N-S® number for the federal government is http://fedgov.dnb.com/webform, and you will need the following:

• Personal Point of Contact Information (Name, Email, Address, Phone)
• Business Information (Legal Name, Address, Structure, Date Started, Ownership Demographic

The last time I got a D-U-N-S® I was in a hurry.  They do not notify you that you have received a number.  You will need to call them.  It took four days.  Once you have the number, you can proceed to register your business in sam.gov.  It is part of the process to start doing government contracting.  Yes, a necessary evil but in government contracting you must get used to doing exactly what is needed to obtain work.

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.

SBA Finalizes Rule Adopting Changes to Contracting Program for Women-Owned Small Businesses

The Small Business Administration published an interim rule to lift the existing caps on federal contract awards for the Women-Owned Small Business program. The new interim rule is effective immediately, according to the Federal Register Notice.

The provision is expected to benefit women-owned small federal contractors. It was approved by Congress and the White House in the National Defense Authorization Act of 2013 (NDAA) signed by the president in January. 

The interim final rule removes the anticipated award price of the contract thresholds for women-owned small businesses (WOSB) and economically disadvantaged women-owned small businesses (EDWOSB) to allow them greater access to federal contracting opportunities without limitations to the size of the contract.   The rule can be accessed at: http://www.gpo.gov/fdsys/pkg/FR-2013-05-07/html/2013-10841.htm and comments can be submitted on or before June 6, 2013, at www.regulations.gov, identified by the following RIN number:  RIN 3245-AG55.

As a result of the rule change, contracting officers will be able to set aside specific contracts for certified WOSBs and EDWOSBs at any dollar level which will help federal agencies achieve the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs. The SBA is currently working on the changes to the Federal Acquisition Regulations.

Prior to the rule change, the anticipated award price of the contract for women-owned and economically disadvantaged women-owned small businesses could not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts.