Women-Owned Small Businesses Struggle to Get Contracts, Capital

Pervasive problems with accessing capital, having affordable childcare, and finding mentors limit success for women-owned small businesses, according to a Senate committee report released Wednesday.

The executive and legislative branches have outlined policies to improve small business participation in the federal marketplace. In that vein, a Senate Small Business Committee report emphasized the importance of government contracting dollars for small firms.

Catherine Koch, president and CEO of K-Tec Systems, Inc., told lawmakers Wednesday that the Air Force buys her company’s advanced control and automation technology. However, the military purchases the goods via a larger, male-owned business “who quite literally is the middleman because he can afford the resources to navigate the procurement process.”

“The federal government is paying more for them than they would be purchasing directly from me because he marks up the price,” she added. “The only reason for this is because the procurement process is too difficult and resource-intensive to navigate.”

Double Counting

“Women-owned small businesses, particularly Black women-owned small businesses, are leading the charge post-pandemic with historic numbers of new small businesses, startups, but still face systemic barriers to success as entrepreneurs,” Committee Chair Ben Cardin (D-Md.) said at the hearing.

Across the federal government, which is the largest buyer of goods and services in the US, 10% of spending goes to contracts and 23% of that total must go to small business vendors.

The goal for the government’s purchases from women-owned small businesses is 5%, a target that’s only been hit twice, in 2015 and 2019, in the 30 years of the standard. In fiscal 2022, women-owned small businesses were awarded a record $28.1 billion in prime federal contracting dollars but still fell short of 5% of overall procurement, according to the report.

Federal agencies are able to double count awarded contracts as fulfilling both small business and women-owned small business goals.

Using one purchase toward multiple goals has “muddled” benchmark figures for contracting goals, the committee’s report said.

The report cited Bipartisan Policy Center figures that show $27.1 billion in federal contracts were categorized as going to a women-owned small business in fiscal 2020. That fell to $26.4 billion after removing the double counting.

Legislation

Access to affordable childcare options would improve women entrepreneurs’ ability to fully participate in the US economy and workforce, according to the report.

The Senate panel’s ranking member, Joni Ernst (R-Iowa), introduced a bill (S. 1470) to improve accountability in the women-owned small business contracting program by closing loopholes businesses could use to claim set-aside status. The measure also calls for department and agency leaders to testify before Congress when they don’t meet their women-owned small business goals.

She’s also supporting another bill (S. 673), which allows nonprofit childcare providers to access the Small Business Administration loans to create more affordable childcare options.

The Department of Health and Human Services has determined that childcare is unaffordable if it exceeds 7% of a family’s income, which is the case in 36 states and Washington, D.C.

To contact the reporter on this story: Patty Nieberg in Washington at pnieberg@bloombergindustry.com

To contact the editors responsible for this story: Amanda H. Allen at aallen@bloombergindustry.com; Fawn Johnson at fjohnson@bloombergindustry.com