Over the last few years we have received scores of calls and have been retained by  numerous  women business owners attempting to certify their firms as  Disadvantaged Business Enterprises. Often these firms are either facing  difficulties attempting to get certified or have been decertified for a number  of reasons.

In our  experience, the most common reason for the denial or decertification of women  owned businesses is the involvement of non-economically disadvantaged individuals in the business as owners, managers or other high-level positions. Often these  non-economically disadvantaged individuals are the husbands of the female  owner, or male high level employees or qualifiers for the business.  If a  male individual is involved in the business, the reasons cited for denial can  be lack of independence, control or ownership. This is often disconcerting for  the woman owner because she often controls the day-to-day operations and the  managerial and bookkeeping aspects of the business. However, control of those  aspects of the business alone is not enough to show ownership, control and  independence as defined by the Department of Transportation (“DOT’).

The regulations  governing the DBE program specifically state that non-disadvantaged individuals  can be involved in the business. Unfortunately, what the regulations state and  how the rules are interpreted and enforced can be very different. The following  are 10 tips for the woman business owner on how to obtain and keep your DBE certification.

1. Know your business. Knowing your business means having the technical expertise and knowledge to run your  business. If, for example, you own a construction company, you will be expected  to have the licenses, educational background and job history to actually run  the business. Hiring personnel with the requisite expertise is not enough,  especially if those key employees are men. You must be able to show that you  can perform the work yourself. One key requirement that often trips up women business  owners is allowing others to handle estimating and bidding functions. Handing  these key functions overt to a male employee or owner is an almost guaranteed  way to have your firm’s certification denied.

2.  Own your business.
Owning your business means showing the certifying agency that you, in fact, own  your business. Borrowing money to start your business from a non-economically  disadvantaged individual, subcontracting with only one male-owned company, and  being a party to overly restrictive agreements are all reasons for your firm to  be denied. The example we see most are firms that were once wholly owned by  men, which become women owned by various devices. Firms in this category must  be especially prudent in documenting how the woman owner came to own a  controlling share of the company.

3. Know the difference between “family owned” and “woman owned”. The DBE regulations provide that if a  certifying agency can’t tell if a business is owned and controlled by its  female owner or her family, that firm can be classified a “family owned business” and be denied DBE certification. The prime example we see are  companies owned jointly by husbands and wives. Even if the wife in such a company owns  51% of the company, the firm can be denied certification if the wife fails to  meet certain criteria such as having technical expertise, knowledge of the  business, control of finances and other decision making processes.

4. Control the finances of your  businesses. We have seen women owned business decertified or denied  certification simply because a male employee or owner has unrestricted access  to a firm’s bank accounts. As the owner of the company, the woman business  owner must have full control of the company’s finances. If you must share  signatory power on bank accounts with male employees or owners limit their  signatory power. Banks will allow you to limit signatory power to a certain  dollar amount, number of checks or other limitations. Having these limitations  in check can assist you in obtaining your DBE certification by showing that you  are in control of the firm’s finances.

5.  Pay yourself. The DBE regulations require that  the disadvantaged owner “must enjoy the customary incidents of ownership, and  share in the risks and profits commensurate with their ownership interests, as  demonstrated by the substance, not merely the form, of arrangements.” This has  been interpreted to mean that the woman business owner must be the highest paid  person in the firm. If the female owner is not the highest paid person the  burden is on her to show why this shouldn’t be held against her. If for some reason, you are not the highest paid  person at your firm, be prepared to explain why and have the documents to back  up your explanation.

6. Ensure that your corporate documents  reflect control and ownership by a woman. We have seen woman business  owners denied DBE certification because they relied on generic forms to create  their company. For example, if a woman owns 51% of a firm and a  non-disadvantaged individual owns 49% and the firm is managed by a board of  directors consisting of the two owners who each have an equal vote, the woman  owner will not deemed to be in control of the company. Generic corporate  documents such as bylaws and articles of organization often contain clauses that will guarantee you will be denied DBE certification. Its imperative  that  have an attorney who understands the requirements of the DBE program  prepare and/or review your corporate documents.

7. Keep your business independent.  Sharing space, equipment or personnel with another firm, especially if the other firm is owned by a non-socially and economically disadvantaged  individual, can lead to a denial. We even caution our clients to stay away from home-based business if they are married. Independence also becomes an issue if  you only have one source of business, especially if that source of business is owned by a non-socially and economically disadvantaged individual(s). Your company should be self-reliant or you may deal with questions regarding whether your company is truly independent.

8. Avoid owning more than one company. The DBE regulations require that you devote your time to the DBE certified firm. Owning more than one company, even if that company is inactive, can cause your DBE certification to be denied or delayed. Additionally, your interest in any business other than the DBE firm will count towards your  Personal Net Worth. Depending on the number of businesses you own and their value, this could cause you to exceed the personal net worth requirement of  $1.32M and cause you to be denied DBE certification. If you own more than one business and plan to apply for DBE certification contact us to assist in you in structuring your business interests to meet the requirements of the DBE program.

9. Avoid full-time employment. Similarly, to number 8 above, having a full time job in a business other than the firm seeking DBE certification can cause your application to be denied.

10. Don’t engage in fraud. We have seen instances where female employees are asked by their employers to create firms so that the employer can take advantage of the DBE program and other certification programs. Don’t do it! First, it is illegal and can get you into serious trouble. Second, it is relatively easy to spot such companies. Remember, the burden is on the DBE applicant to prove that she meets the requirement of the program. The certifying agency will have access to various documents ncluding your corporate documents, tax returns, resumes and other information that can easily show whether your company is legitimate or not.

Hopefully, the tips provided above will assist you as you seek DBE certification for your  woman owned business. If you have any questions or need any assistance please feel free to call us at (305) 517-1392 ext. 102.

What is the Women Owned Small Business Certification?

The Women Owned Small Business Certification (WOSB) and the Economically Disadvantaged Women Owned Business (EDWOSB) certifications are programs newly created by the Small Business Administration (SBA). The new programs are intended to provide greater access to federal contracting opportunities for WOSBs and EDWOSBs.  The Program allows contracting officers, for the first time, to set aside specific contracts for certified WOSBs and EDWOSBs and will help federal agencies achieve the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs.

What are the requirements to be certified as a Women-Owned Small Business?

 To be certified as a WOSB, a firm must be 51 percent owned and controlled by one or more women, and primarily managed by one or more women. The women owners must be U.S. citizens. The firm must be “small” in its primary industry in accordance with SBA’s size standards for that industry.

 In order for a WOSB to be deemed “economically disadvantaged,” its owners must demonstrate economic disadvantage in accordance with the requirements set forth in the final rule.

 The WOSB must be engaged in business in one of the 83 industries (identified by “NAICS” codes) in which women-owned small businesses are under-represented or substantially under-represented in federal procurements.   The 83 NAICS codes can be found at the following link:  

      http://www.sba.gov/sites/default/files/files/gc_wosb_naics_grids.pdf

 How do I obtain the WOSB and/or EDWOSB certifications?

Eligible firms may self certify as WOSB and/or EDWOSB or be certified by third-party certifiers, including government entities (such as the SBA or Department of Transportation DOT) and private certification groups. WOSBs which self-certify will be required to submit to a robust certification verification.

 What steps must firms take to obtain certification?

•  WOSBs must register with the CCR (Central Contractor Registration) at www.ccr.gov. Firms may enter their small business profile information on the Dynamic Small Business Search page. Creating a profile in CCR and the Dynamic Small Business Search, and keeping it current, helps provide access to Federal contracting opportunities.
• WOSBs must complete the certifications at the federal Online Representation and Certification Application (ORCA) Web site, and also to submit a core set of eligibility-related documents to an online “document repository” to be maintained by the SBA. Each agency’s contracting officers will have full access to this repository.
  • The SBA intends to engage in a significant number of program examinations to confirm eligibility of individual WOSBs.
  • In the event of a contract protest or program review, the SBA has the authority to request substantial additional documentation from the WOSB to establish eligibility.
  • SBA intends to pursue vigorously punitive action against ineligible firms which seek to take advantage of this program and in so doing to deny its benefits to the intended legitimate WOSBs.

 If my firm is already DBE certified must I recertify as a WOSB and/or EDWOSB?

 The quick answer is yes. There are enough dissimilarities between the DOT’s DBE program and the WOSB that its pretty clear that SBA’s requirements will not be met with a DBE certification alone. Accordingly, every WOSB or EDWOSB must satisfy the regulatory requirements wether they are certified through private third party certification, 8(a) certification, DOT DBE certification, or any other certification. SBA has determined that it will evaluate each DOT DBE certifier on an individual basis. SBA will review the state and local entity’s Uniform Certification Program (UCP) to determine if the WOSB Program requirements can be met with the UCP.

Once SBA approves a DOT DBE Program certifier, SBA will maintain a list of approved state and local entities from which it will accept DOT DBE certifications on SBA’s Internet Web site at http://www.sba.gov. Any interested person may also obtain a copy of the list from the local SBA district office or SBA Area Office for Government Contracting.

At Kleiner & Cazeau we are prepared to assist eligible firms in obtaining EDWOSB certification, appealing certification denials, defending eligible firms in bid protests or initiating bid protests against firms not eligible to participate in the program. If you are interested in obtaining EDWOSB certification or have questions or concerns about the program please call us at (305) 517-1392 ext 102.