In late 2011, the Small Business Administration rolled out the Women Owned Small Business (WOSB) and Economically Disadvantaged Women Owned Small Business (EDWOSB) Programs. It had taken over a decade to realize an idea that had been first authorized by Congress in 2000. At the time, we, along with many of our clients, were very happy to see the new program come to fruition. However, shortly after the program began we noticed that where one door had opened another had closed.
Specifically, in 2012, we started seeing increased scrutiny and outright denials our clients’ applications for 8(a) certification based on gender alone. When the following paragraph appeared in one of our client’s denial letters it was clear what had happened – – the creation of the WOSB program had closed the door on women applying for 8(a) certification.
Please note that SBA has a Woman Owned Small Business (WOSB) contracting program where women are considered socially disadvantaged and do not have to meet the “preponderance criteria”. For more information and application procedures please visit www.sba.gov/wosb. You do not need to apply for 8(a) in order to take advantage of the WOSB program.
Along with that statement, the SBA provided a memo entitled “Preponderance of the Evidence” which details what kind of evidence a woman needs to provide in order to get 8(a) certification. In the SBA’s Preponderance of the Evidence Memo, they state the following regarding what types of evidence can be used to assist in meeting the burden of proof:
Documentary evidence which corroborates or supports assertions made by an owner regarding specific incidents of a pattern of discrimination. Such documentation includes these items:
- Personnel Records
- Payroll Records
- Rejection letters on job applications
- Denials of credit application
- Documents relating to rejected contract offers, i.e., bid abstracts, solicitations, etc.
- Contemporaneous records memorializing meetings, conversations, negotiations, telephone calls, etc.
- Documents setting forth company policy(ies) which are alleged to be discriminatory.
There’s only one problem with the SBA’s statement – in our opinion, it’s completely wrong! To understand why the SBA is wrong, I have to go into a discussion of some legal terms. In the legal field there are three standards of proof. The highest standard of proof is “beyond a reasonable doubt”, which you may have heard about in the criminal law context. Beyond a reasonable doubt means you have to convince the person making the decision that there is no chance that what you are trying to prove is wrong. The reason this standard is used in the criminal context is because people’s lives are at stake and we as a society want to make sure that there’s no chance or very little chance that we are convicting the innocent.
The next standard of proof is “clear and convincing”. In layman’s terms clear and convincing means that your word is not enough. There must be other documented proof to support the thing you are trying to prove.
Finally, there is the “preponderance of evidence” standard. It is the lowest standard requiring the least amount of proof. An uncorroborated sworn statement meets the preponderance of the evidence standard.
Here’s the problem. What the SBA has done is make it harder for women to obtain 8(a) certification by raising the standard of proof from a “preponderance of the evidence” to “clear and convincing” evidence. What makes this particularly disturbing is that the regulations used to require clear and convincing proof. This was specifically changed by Congress.
As a result of the SBA’s stance we no longer recommend that clients apply for certification based on gender alone unless they can show by clear and convincing evidence that they have been discriminated against. We know that some of our competitors have raised their fees to handle gender based 8(a) certifications. Others continue to claim that the can get women-owned businesses 8(a) certified. Based on our experience, we know that it’s just not that easy. If you have a question about whether your women-owned firm qualifies for 8(a) certification, give us a call.