In January, an Arlington, Texas-based health care consulting company agreed to pay $3.9 million to settle claims that it falsely presented itself as a women-owned small business to secure government contracts.
The company, QuarterLine Consulting, misrepresented itself in 2019 to secure a government contract to provide anesthesiologists for the military treatment facility at Joint Base San Antonio, Texas, according to a statement from the Justice Department.
In 2022, the company was acquired by Planned Systems International. Even though QuarterLine was previously awarded contracts, it no longer qualified for the federal program due to its business size.
The U.S. Small Business Administration, or SBA, which offers an array of federal funding programs, faces rampant fraud, including in the women-owned small business program — and Utah Rep. Celeste Maloy set out to change that.
What is the federal Women Owned Small Business program?
Ann Marie Wallace, the state director of the Women’s Business Center of Utah, which partners with the SBA and the Salt Lake Chamber to help female entrepreneurs, said, “Larger companies have somehow been able to get certified and take advantage of the available contracts.”
“The first eligibility requirement has always been the business is small. So, if that is not enough to ensure that the right people are benefiting, then I think it’s a good idea to add one step of verification,” she added.
This program has evolved over the decades since it was created in 2000 to meet the goal of awarding 5% of all federal contracts to women-owned small businesses and “provide a level playing field.” Initially, it allowed a limited number of industries — typically underrepresented by women — to apply, but the federal program’s eligibility criteria later expanded. So far, according to Wallace, they met the contracting goal of 5% once, in fiscal year 2015.
In a 2017 report, the SBA found about 40% of businesses that received contracts under the WOSB program were ineligible. Three years later, the SBA stopped allowing businesses to self-certify. Instead, potential contracts have to be certified by the SBA or through a third-party authorization.
Jan Quan-Esplin is the CEO of Centeva, a federal contract management and software development company. Centeva was awarded a nearly $150,000 contract by the Nuclear Regulatory Commission for its software services.
She remembers when the certification process changed for the better in terms of avoiding fraud.
Still, the SBA didn’t have a process to verify the business was woman-owned. Nor did it ask for documentation related to size requirements, according to a 2022 inspector general report.
“It is just a checkbox, that says, yes, I meet the standards,” said Wallace.
Rep. Celeste Maloy’s bill to verify business size for government contracts
In line with these recommendations, Maloy, R-Utah, introduced the bipartisan WOSB Integrity Act of 2024 last month that requires applicants to verify their business size to receive federal contracts. Her bill passed the House on Thursday.
“This piece of legislation is not about adding red tape or about the government picking winners and losers,” said Maloy on Thursday. “The WOSB Integrity Act will simply ensure that competition for government contracting opportunities includes women small business owners and is fair.”
She added: “These entrepreneurs drive our economy forward, and when we support them, innovation thrives and the country prospers.”
In the Beehive State, 16% of businesses are owned by women, with the second-highest rate of growth of women-owned businesses in the country, as the Deseret News previously reported.
As Utah State University professor Susan Madsen, who is the founder and director of the Utah Women & Leadership Project, noted in a LinkedIn post, “Using a more historic lens to understand which states have seen the highest percentage increase in women-owned businesses over the last two decades, Utah is ranked second, with a 77% increase.”
Rep. Hillary Scholten, D-Mich., acknowledged that entrepreneurs face “immense challenges,” which are “exponentially greater for women entrepreneurs — especially when it comes to accessing resources to help open or sustain a business.”
“Our bipartisan bill will be critical to breaking down barriers that prevent women-owned businesses from competing for contracts in the federal marketplace,” she said.
To ramp up participation in the WOSB program in Utah, the state SBA district office launched a 12-week training program for women entrepreneurs interested in entering the government contracting space.
The problem with the WOSB program
Quan-Esplin encouraged qualified businesses to sign up for the program, despite the challenges. “I’m not gonna lie, there’s a lot of paperwork in the federal space and a lot of people say how hard it is to get in — which is true,” she said. “I’ve been trying to get into Hill Air Force Base for the last 17 years, and I haven’t been able to.”
It usually takes her company over a month to write the required proposals, research the opportunity and get the required documentation in order.
“It just depends on meeting the right people and convincing them that you have what it takes,” Quan-Esplin added.
Maloy said she hopes her bill will “ensure that larger, more established firms aren’t able to exploit federal contracts, grants or loans at the expense of women-owned small businesses.”
Quan-Esplin, said she supports such a measure against fraud but added that she believes the WOSB program should model the SBA’s 8(a) program, geared toward awarding federal contracts to socially and economically disadvantaged businesses.
“A contracting officer can identify a certified company that is qualified to do the work, and directly award the contract to that company,” she said. “Especially if I was already doing the work, or I can prove that I am capable of the work because of my past performance.”
Plus, the SBA inadvertently ends up awarding these contracts to big businesses, who subcontract to woman-owned small businesses, she said.
“Because you’re a small business, you can only take on so much,” she noted, especially when the awarded amount is packaged as a $50 million to a $100 million contract since “it’s easier to do one big contract as opposed to finding a bunch of small businesses.”
Wallace said she agreed that these federal contracts are “probably awarded to men,” who work as a prime contractor and subcontract to women-owned businesses. This means “the women are actually not working with the government.”
But, she added, it’s harder to be approved for the 8(a) program, which creates another barrier to entry. Her solution: set a percentage goal for women to be awarded as prime contractors.
Rep. Celeste Maloy encourages women to push boundaries
At a House Small Business Committee markup meeting earlier this month, Maloy’s first since getting elected, lawmakers passed the bill in a unanimous vote, Scholten said, “Women working together. Happy to see it!”
Maloy is the first female member of Utah’s congressional delegation since 2019 and the fifth woman in the state’s history. She spoke to the Deseret News in January on what women should consider when getting involved in politics.
“I think a lot of times women hold back and don’t put themselves out there being on a ballot — you are literally asking everybody to judge you and that’s a tough thing to do. But I would encourage women to get involved and to take the risk,” Maloy said.
Plus, she added, there are other ways to get involved other than running for office, like getting involved in legislative organizations. Maloy was involved with the Washington County Utah Republican Women, which she describes as “one of the most powerful political entities in the south part of the state.”