In our last article, we discussed how the federal government is looking to approve sole-source contracts for Women-Owned Small Businesses and Economically Disadvantaged Women-Owned Small Businesses (WOSB and EDWOSB, respectively, though we’ll only use the former for an inclusive shorthand). These sole-source contracts mean that qualified WOSBs will be able, in some circumstances, to circumvent the traditional bidding process and be awarded a contract, helping them establish themselves in the often closed world of construction.
Of course, the key term here is “qualified.” While opponents of such programs might claim that they are open to fraud, the process is strictly regulated and becoming more so. Companies have to be bonded by a trusted surety company, and for federal work that includes payment bonds (since a lien can’t be held against government property). That also includes that contractor having a track record, a solid plan, and a fair bid. And, most importantly perhaps, it looks like it will require certification of being a WOSB.
The SBA could start requiring WOSBs to get certified through them for federal work.
Image Source: sba.gov
Women-Owned Small Business Certification
For years, WOSBs were allowed to self-certify. This was a nice idea, but it unfortunately led to issues with fraud, as we’ve discussed and as anyone reading the paper would know. Women (or veterans, handicapped people, or minorities) were made to be paper owners, fronts so that larger and less-scrupulous owners could be awarded plum bids. Into this void came a lot of wonderful organizations, like the National Women Business Owners Corporation, which issue their own certifications. This might have seemed like they are making it more difficult for women (and they admit their process is intense), but it helped keep out frauds, which bolstered their membership. To qualify for their certification, you had to be able to prove a few things:
- That at least 51% of the business is women-owned. Partnerships are great, but a woman has to be the majority shareholder.
- That a the owner holds the highest position in the company and takes an active role in daily management and in moving the company forward. Too many so-called WOSBs were fronts where the owner put his wife’s name on the deed, but really ran the company himself. Even if she was nominally the head, she didn’t wield any actual control. This doesn’t count, either.
- Owner must be a US citizen and should be in business for at least three months. The latter helps to ensure someone isn’t throwing together a shell company because they hear of an upcoming job.
These standards are pretty universal, even if some of them are difficult to prove. That’s a good thing, though. Fraudulent firms would have a much more difficult time jumping through these hoops, and it closes the gate against the barbarians. A firm that makes it through these has the proper certification.
For the sole-source contracts, it is increasingly likely that a WOSB will have to be licensed as such by the Small Business Administration in order to qualify for federal work, adding another layer (or 30) of paperwork. A firm would potentially first need to become qualified as a small business as well. Being a small business isn’t an absolute thing — it is your size relative to your industry.
We’ve had clients ask us about the certification process, and if it is worth it. After all, there is a lot of paperwork involved, and completion of the process does not guarantee work. The answer is that yes, the certification process which we described above is worth it. For WOSBs or not, it helps to prevent fraud and help prevent people from taking advantage of the system. It supports all legitimate businesses.
Why Surety Will Matter
Once you are certified, it is more important than ever to get bonded. A certification process helps to level the playing field, which means that once again, the most important factors are experience and protection. For federal work, where liens can’t be applied, having a surety bond for payment and performance will be crucial to getting work. Especially when applying for a sole-source contract, the government bidding agent will have to know that your firm has the backing of a trusted surety company.
This of course applies to all contractors, not just WOSBs. To get work, you need the necessary protection. The goal is to have paperwork transform into real work, and a surety is the most important step in that.
Getting the contract requires the backing of a strong Surety company with a reputation you can depend on. Contact Surety1 today for a quick and fair bonding process that’ll get you to work.