RAND Study Assesses Whether Women-Owned Small Businesses Are Underrepresented in Federal Contracting

For Release

April 27, 2007

A RAND Corporation study examining whether women-owned small businesses are underrepresented among firms contracting with the federal government finds that the results vary depending on the way the measurement is made.

The study, conducted for the U.S. Small Business Administration and issued today, is the most thorough analysis done to date of whether women-owned small businesses are underrepresented among firms awarded contracts by federal agencies.

Researchers found that when they examined the total number of contracts awarded, women-owned businesses were underrepresented in more than half of the industry categories studied for federal purchasing during 2002, 2003 and 2005.

However, researchers found that when the dollar value of the same federal contracts was the measurement standard, there was little evidence women-owned small businesses were underrepresented.

“These findings provide policymakers with new information about how to judge whether women-owned small businesses are underrepresented among federal contractors,” said Elaine Reardon, lead author of the study and an economist at RAND, a nonprofit research organization.

While contracting by women-owned businesses has risen over time, it has not yet reached the target set by Congress of 5 percent of prime and subcontract contract dollars for each industry category. Women-owned small businesses accounted for 3.3 percent of the totals in 2005, the last year studied.

Most studies examining whether disadvantaged businesses are underrepresented among federal contractors have focused on the number of contracts awarded. If disadvantaged firms receive fewer contracts than their total representation in the industry studied, they are deemed to be underrepresented.

RAND researchers broadened their analysis of women-owned small businesses by also examining the dollar value of federal contracts awarded to businesses in different types of industries. Researchers wanted to see whether the dollar value of contracts awarded to women-owned small businesses was in proportion to their representation in individual industries.

Researchers used both methods to analyze federal contracts awarded to women-owned small business across broadly defined industries such as manufacturing, construction, education services and health care.

The study also addressed concerns that large firms may be obtaining small business contracts. Researchers used Dun and Bradstreet business information to define small firms as well as data on size from the federal government. The effort did not change findings about industries where women-owned small businesses are underrepresented.

The federal government encourages small and disadvantaged business, including small businesses owned by women, to seek federal contracts.

The study was conducted under the Kauffman-RAND Institute for Entrepreneurship Public Policy. The Kauffman-RAND Institute is dedicated to assessing and improving legal and regulatory policymaking related to small businesses and entrepreneurship in a wide range of settings.

The study, titled “The Utilization of Women-Owned Small Businesses in Federal Contracting,” is available at www.rand.org.

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