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The efficacy of gender-based federal procurement policies in the United States

Abstract

Because procurement policies are one means of redressing discrimination and economic exclusion, the United States government has targeted 23% of its annual half-trillion dollar spend to SMEs and 5% of its spend to women-owned businesses. This research studies the efficacy of various certifications, with particular reference to that of women-owned, on the frequency with which SMEs bid on, and succeed in obtaining, US federal procurement contracts. The research framework is informed by two theoretical paradigms, feminist empiricism and entrepreneurial feminism, and employs a secondary analysis of survey data of active federal contractors. Empirical findings inform the extent to which certifications are associated with bid frequency and bid success. The results indicate that none of the various certifications increase either bid frequency or bid success. The findings are consistent with entrepreneurial feminism and calls for federal accountability in contracting with women-owned supplier firms. Study recommendations complement research that has criticized US federal government policy with respect to women’s enterprise. The study findings have implications for other economies; emulation of US federal government procurement processes and practices are not supported. Recommendations include the need to review the impact of consolidated tenders on designated (as certified) SME vendors and to train procurement personnel about the economic contributions of women-owned businesses.

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Notes

  1. For example, the Glover Committee (2008) reviewed European government procurement practices, advocating for strategic procurement as a means of accelerating job-creating SME growth; yet, the committee made no reference to the experiences of women-owned enterprises.

  2. Women Influencing Public Policy (WIPP) is an advocacy organization for women-owned enterprises in the USA. Women’s Business Enterprise National Council (WBENC 2016) is the largest third-party certifier of businesses owned, controlled and operated by women in the USA. Outside of the USA, WEConnect International supports certification processes. WBENC and WEConnect International support outreach to identify, educate, register and certify women-owned businesses and to connect them with prospective buyers.

  3. For example, the goal of 5% US federal spending commitment to women-owned firms has only recently (March, 2016) been realized. Not-for-profit agencies such as Women Impacting Public Policy (WIPP 2009) have called for stricter adherence to US federal SME procurement policy goals.

  4. In 2015, the government of Turkey promulgated the establishment of a Women 20 (W20) Outreach Group under the G20. An anchor of the W20 proposal is the establishment of procurement policies for sourcing from women-owned business and related capacity building programs. A key finding is that women-owned SMEs win less than 1% of bids.

  5. Contract compliance seeks to advance equal opportunity by stimulating increased entrepreneurial activity among historically marginalized communities. Set-asides reserve certain purchases for competition only among specified groups of SME owners (CAMSC 2006). Offer backs allow a registered supplier whose tender is unacceptable on price alone to submit a revised tender for part or all of a contract. If the registered supplier is able to match the best offer, the revised tender is accepted (McCrudden 2004). Supplier diversity strategies seek to broaden the buyer’s commercial supplier base to under-represented (target) businesses. Contractors programs require large organizations that wish to supply goods and services to governments to commit to employment equity.

  6. A summary of the requirements for these programs is available at https://www.sba.gov/contracting/government-contracting-programs/8a-business-development-program. Accessed on May 31, 2016.

  7. Certification agencies include: El Paso Hispanic Chamber of Commerce; National Women Business Owners Corporation; WEConnect International; US Women’s Chamber of Commerce; and Women’s Business Enterprise National Council (WBENC). Legislation supports WBENC, a bi-partisan, independent federal advisory council to the President of the United States, the American Congress, and the SBA.

  8. For example, accessing a larger, qualified pool of suppliers, engaging multiple players and increasing competition among vendors is expected to provide both better pricing and more innovative products and services.

  9. Also referred to as liberal feminism (Fischer et al. 1993; Ahl 2006).

  10. For example, under the broader 8(a) qualified firm: “The SBA may ask an agency to conduct a broad search for acquisition opportunities for a specific Section 8(a) qualified firm, or it may identify a specific acquisition requirement in an agency and ask the agency to offer the acquisition to a particular Section 8(a) firm. …Agency procurement officials can award contracts to Section 8(a) firms without competition (i.e., on a sole source basis) for acquisitions that exceed the simplified acquisition threshold (usually $100,000) and those that are less than $5.5 million for manufacturing or less than $3.5 million for nonmanufacturing industry codes.” (Smith and Fernandez 2010, p.89).

  11. For a description of the SBA certification process, including WOSB program requirements and validation procedures, see Layman (2016).

  12. Arguably, the relatively small size of female-owned firms also mitigates against bidding and bid success. At the owner level, gender is reflected in human capital, such as the nature and tenure of professional experience (Coleman 2007; Coleman and Robb 2012) as well as social capital in the composition of networks, quality of referrals, and reputation. In the context of federal procurement, human capital is reflected by the amount of knowledge about submission and contracting processes and how best to respond to requests for proposals (RFPs). Gender influences are also evidenced at the firm level with respect to access to markets and external capital needed to finance expansion (Coleman 2007; Coleman and Robb 2012). One outcome of gender differences is that, on average, female-owned firms are smaller than male-owned firms (Jung 2010). Smaller SMEs have fewer organizational assets with which to identify and respond to complex RFPs, navigate federal bureaucracy, or meet complex contract specifications, including just-in-time inventory obligations (Pearson et al. 1993).

  13. For example, it is well known that women-owned firms tend to cluster (relative to those owned by men) in services sectors. To the extent that procurement is primarily for goods rather than for services, what might seem to be gender differences may simply be driven by sector differences.

  14. Entrepreneurial feminism refers to “the recognition of men’s and women’s unequal conditions and the desire to change this” (Ahl 2004, p. 16). Entrepreneurial feminism embraces perceptions about women’s unique needs, their subordination, differences of power within social interactions, and the need for strategies to improve the well-being of girls and women.

  15. US-based actors include Women Impacting Public Policy (WIPP); Women’s Business Enterprise National Council (WBENC) and WEConnect International.

  16. Active contractors included prime contracts, sub-contracts, or being a “member of a contracting teaming arrangement” (Appendix B1, Question S2).

  17. For example, the sectoral distribution of firms registered on SAM arguably differs from that of the distribution of SMEs in the general population, with firms registered on SAM being relatively more prevalent among the Goods Producing sectors.

  18. Additional details of the data collection process, copies of the screener and main questionnaires, and a comparison of attributes of active contractors with those of inactive contractors is available from the authors on request.

  19. Intuitively, it seems likely that, on balance, the direction of the non-response and selection biases is such that findings from the data are likely to prompt acceptance of the hypotheses. This caveat needs to be considered when interpreting the data. Because the analyses reported here are secondary analyses of data previously collected, further analytical corrections for potential biases are not feasible with the data available.

  20. The LN transformation was employed as it is a standard means of reducing positive skewness in the underlying variable.

  21. Age of firm was based on the question, “When did you start your firm?”

  22. Procurement experience was determined by the question, “In what year did you submit your first proposal for a federal contracting opportunity?”

  23. Firm size comprised a vector of three dummy variables connoting (a) whether the firm was a micro firm (= 1 if the firm had fewer than 10 employees; 0 otherwise) or (b) small firms (= 1 if the firm had 10 to 49 employees; 0 otherwise). Fifty to 500 employees was the third reference category.

  24. IRR is the incidence rate ratio corresponding to model 3.

  25. This variable was based on responses to the survey question, “How much would you say that your business has invested, including all cash outlays and salaries for person-hours, in pursuing federal contracting opportunities in the most recent year?”

  26. This is often a consequence of collinearity. However, this was not found to be a problem based on VIF statistics approximated by re-estimating the model using ordinary least squares.

  27. E(β) is the odds ratio corresponding to model 7.

  28. For OLS and some other regression models, this would normally be accomplished by using interaction variables; however, as Ai and Norton (2003) show, use of interactions in models estimated using maximum likelihood methods (which includes the methods used here) is unreliable and potentially misleading. Greene (2012) provides a means of adjusting for this problem but interpretation of the results is not straightforward.

  29. The specific question on which this question is based was, “You indicated earlier that you have gotten the designation/certification as a (___). How useful has that certification been for you in getting federal business?”

  30. US Small Business Administration (SBA 2017). Accessed March 2, 2017 at https://www.sba.gov/contracting/government-contracting-programs/women-owned-small-businesses.

  31. This point does not imply this is the case for private sector supplier diversity programs or other related initiatives.

  32. We do not assume these issues are applicable to private sector supplier diversity certification or procurement practices. The efficacy of private sector supplier diversity initiatives also requires study.

  33. Weeks 2016. http://www.womenable.com/66/the-state-of-women-owned-businesses-in-the-u.s.:-2015, Accessed March 3, 2017.

  34. Innovation procurement programming is defined as the purchase “of a not-yet-existing product or system whose design and production will require further, if not completely novel, technological development work” (Edquist and Hommen 2000, as cited by Reijonen et al. 2016). This is undertaken by government acting as a testing ground or lead client in the introduction of innovative products and services.

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Correspondence to Barbara Orser.

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It is with sadness that we acknowledge the untimely passing of our co-author Julie Weeks. She was a leading advocate for women’s rights and entrepreneurship. Her leadership roles included Executive Director of the National Women’s Business Council, an agency which advises the US Congress, The Administrator of the Small Business Administration, and the President of the United States. Most recently, Julie was the President and CEO of Womenable, a firm which allowed her to promote women’s entrepreneurship policy development in the US, as well as internationally.

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Orser, B., Riding, A. & Weeks, J. The efficacy of gender-based federal procurement policies in the United States. Small Bus Econ 53, 491–515 (2019). https://doi.org/10.1007/s11187-018-9997-4

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Keywords

  • Procurement
  • Gender
  • Women
  • SMEs

JEL Classifications

  • O25
  • L26