SBA set-asides fight goes to Senate

(FORTUNE Small Business) -- Women's business groups will be rallying at a U.S. Senate hearing today to fight a proposal by the U.S. Small Business Administration (SBA) that would limit federal contract set-asides to four, fairly obscure industrial sectors.

The hearing, titled "Holding the Small Business Administration Accountable: Women's Contracting and Lender Oversight" will be held by the U.S. Senate Committee on Small Business & Entrepreneurship chaired by Sen. John Kerry (D-Mass.).

Organizations such as the U.S. Women's Chamber of Commerce and the National Association of Women Business have called on their members to fight the SBA proposal, which would limit set-asides to national security consulting, printing and engraving, cabinet making and some vehicle sales. A similar hearing by the House of Representatives Small Business Committee was held Jan. 16.

The groups are miffed about a Dec. 27 proposal to limit set-asides to the four areas out of some 2,300 possible industrial sectors. The SBA's proposal resulted from a study by the Rand Corp. to determine the business sectors in which women are under-represented in winning federal contracts.

"I am very surprised at the small portion of the market that Rand focused upon," says Erin M. Fuller, executive director of the National Association of Women Business Owners.

Margot Dorfman, executive director of the U.S. Women's Chamber of Commerce says her group's study of the same Rand data shows that some 87 percent of industrial sectors show under-representation by women-owned businesses in federal contracting.

"We have no idea how the SBA came up with these four sectors," she says.

The controversy stems from a 1994 Clinton Administration law that set a goal of ensuring that 5% of all federal contracts go to women-owned businesses. Ten years later, the level was only about 3.4% There are an estimated 10 million U.S. small businesses owned by women.

In 2000, Congress passed another law directing the SBA to study whether women-owned business were underrepresented in federal contract letting. Later, frustrated by the SBA's sluggishness, the U.S. Women's Chamber of Commerce successfully sued the SBA to force the law's implementation. In 2006, Rand Corp. won a contract to determine underrepresented sectors using guidelines set up by the National Academy of Sciences.

Kerry has slammed the SBA proposal. U.S. Rep. Nydia Velazquez (D. New York), chair of the House Committee on Small Business, blames the Bush Administration for repeatedly blocking women contract set-asides, noting that the SBA proposal "shuts out most of the entrepreneurs it was specifically designed to help."

At the Jan. 16 house committee hearing, SBA Administrator Steve C. Preston defended the proposal, saying it "represents careful analysis" that used the "most appropriate" research methods. The deadline for comments on the proposal is Feb. 25.