Composition of the DoD Small Business Industrial Base

Every so often the San Diego Chapter of the National Defense Industrial Association (NDIA) delivers an enlightening talk on a topic of great interest to yours truly in particular, and the DoD small business industrial base in general.  On Wednesday, June 8th there was such a presentation by PW Communications Inc's Amanda Bresler (abresler@pwcommunications.com), their Chief Strategy Officer and cum laude graduate from Georgetown University's McDonough School of Business, who runs their Future Capabilities Practice.  She did a fabulous job delivering her company's findings, some of which I very briefly present for your consideration below.

PW Communications' paper presents their extensive, highly data driven analysis of the DOD small business industrial base by painstakingly analyzing publicly available contract and subcontract award data from 2015 through 2021, not only objectively demonstrating that small businesses in the DoD market have shrank by 23% while awards to small businesses grew by 68%, but also backing up their conclusions that the DoD's policies have failed "...to address the underlying issues that keep small and nontraditional companies from navigating the defense market successfully."  What PW Communications was also able to demonstrate was the government's policies "...enable the largest SBs–which include companies that generate hundreds of millions or billions of dollars in DOD revenue annually–to expand their market share, irrespective of price, quality, or innovativeness."  As a personal comment, on what planet is a company pulling in billions in revenue a "small business"?  Apparently on this one, as far as the DoD is concerned.  Finally, Ms. Bresler presented real recommendations on ways to improve the faulty programs so that they might actually achieve their stated objectives.  

The following are extracted from PW Communications' paper delivered to the NDIA San Diego Chapter's membership for consideration:

• "We conclude that rather than achieving its stated objectives, the DoD small business program reduces opportunities for small businesses, creates a less competitive economic climate, and weakens the defense industrial base (DIB)."
• "The fact that the pool of small business vendors simultaneously shrank not only runs counter to the intended purpose of the program, but also suggests anti-competitive forces at play.  The more the DoD procured from small businesses, the fewer small businesses benefited."
• "DoD small business policies have made the DoD increasingly reliant on fewer suppliers, thereby reducing the variety of available products and services and posing risks to the health and resilience of the industrial base."
• "...businesses can receive hundreds of millions, or even billions of dollars, in DoD contracts annually and still qualify as small.  Furthermore, the top 20 small businesses alone received more than $53.6 billion in DoD funded procurement-- over 10% of all DoD funding to small businesses."
• "...the number of small businesses that received more than $100 million in DoD funded procurement in 2021 was 3.23x that of 2015.  By comparison, the number of DoD small businesses awarded $1 million or less in DoD procurement shrank by 32%.  An increase in small business spend has disproportionately benefitted the "largest" small businesses, enabling them to dramatically expand their DoD market share while the DoD market became less opportune for the smallest businesses."  
• "Since the DoD is not incentivized to exceed the 23% set-aside goal, smaller small businesses are in turn crowded out of the defense market."
• "Current policies... have created an inhospitable environment for smaller companies.  Based on our analysis, it is evident that the system favors the largest small businesses at the expense of smaller ones, which runs counter to the stated purpose of the small business program."
• "Liberal teaming and subcontracting policies also create opportunities for the largest small businesses to partner with one another as similarly situated contractors, making the defense market even harder for smaller small businesses to penetrate."  
• "As the largest small businesses expanded their DoD market share, thousands of other small businesses ceased working in the defense market."
• "Simply limiting competition for certain contracts to small businesses does not address these underlying issues.  Until the SBA, DoD and USG address them, the defense market will continue to prove inhospitable for non-entrenched suppliers."  

I encourage you to contact Amanda Bresler to obtain the research paper and to discuss PW Communications findings, methodologies, etc. in further detail.  At a local level, I sincerely hope their analysis, conclusions, and recommendations inspire the Naval Information Warfare Systems Command (NAVWAR), their Warfare Centers, and their supported Program Executive Offices (PEOs) to collaborate with the NDIA and other related association chapters, specifically their Small Business Committees and the NDIA Government-Industry Outreach Committee (of which yours truly is chair), to flesh out the practical implications of these findings on the local DoD small business industrial base, and what if anything we can do to turn the tide.  The PEOs' program offices' Deputy Program Managers are charged with the collateral duty of Small Business Advocates, and I'd therefore assume they'd take an active interest.  

Frankly, this excellent analysis by PW Communications should strongly reinforce the message that the small business industrial base is no longer interested in hearing from DoD organizations that the current policies don't give them "credit" for working with small businesses who aren't big enough to prime, and that the government counts on prime contractors (both "big smalls" and large) to perform the care and feeding for the smallest small businesses.  If anything, my take-away from PW Communications' analysis is how utterly absurd that position is to the truly small small business industrial base.