House Armed Services subcommittees are planning six hearings this week to mark up the fiscal 2013 Defense Authorization bill. Aside from discussing force readiness, the size of the civilian and uniform workforces and a host of other priorities, the committees will focus on how they can make it easier for small businesses to work with the Defense Department.
The spotlight on small businesses comes after a report by members of the committees found what many in contractors have known for a long time: working with DoD can be an arduous process.
“It seems that the Defense Department treats [businesses], whether they are Boeing or a little company in the middle of Nebraska, as the same as they go through contracting and auditing and things like that,” said Rep. Bill Shuster (R-Pa.), chairman of the Panel on Business Challenges in the Defense Industry and a member of the Armed Services Committee, in an interview with Federal News Radio. “They face considerable contracting and regulatory challenges, and when you have an acquisition culture that is risk-adverse, it really negatively affects these small businesses because they don’t want to take a chance that they are not sure of their size and if they can do their work.”
Rep. Bill Shuster (R-Pa.)
The panel found DoD’s contracts are often too large for small contractors as they cannot obtain a surety bond above $2 million from the Small Business Administration. The report also found that the mid-sized businesses able to obtain a large enough surety bond cannot compete for the small business set-aside contract.
DoD also lacks a comprehensive strategy for managing and maintaining an industrial base and is inconsistent in how it communicates, especially in program office/private industry relationship.
“It makes it very difficult for them, and navigating the defense acquisition process is extremely difficult for these small and medium businesses,” Shuster said. “We need to make some changes to make sure we have these small businesses that are out there and still robust because, not only is it important to DoD itself, but the large primes rely on them to complete a lot of these contracts they get involved in and they win.”
DoD support of small firms is mixed
DoD’s support of small businesses has been mixed over the last 20 years. On one hand, DoD is one of the few agencies that meets the governmentwide goal of awarding at least 5 percent of all contracts to small, disadvantaged businesses and 3 percent of all contracts to Historically Underutilized Business Zone (HUBZone) firms. In 2010, the most recent data available, DoD awarded 7.1 percent to SDBs and 3.2 percent to HUBZone firms.
Across DoD, the small business offices are more aggressive than most in the government. For example, the Air Force recently released a new small business plan to hold senior officials and vendors more accountable for meeting their goals.
But DoD is one of the main reasons why the government hasn’t met the governmentwide small business goal of awarding at least 23 percent of all contracts to small firms each fiscal year. In 2010, the government awarded $98 billion to small contractors, but fell short of the goal for a fifth year in a row. Small businesses received 22.7 percent of all contracts. DoD, for its part, awarded 21 percent of all contracts to small firms.
Shuster said as part of the Defense authorization bill, the committee plans to hold senior officials more accountable for meeting those goals by including small business metrics in their performance plans.
“We have to figure out a metric that makes sense,” he said. “For different senior executives, it may make sense to do it differently. How many contracts small businesses were able to earn or have they been able to exceed the goals? I can’t give you a specific metric, but I know we need to put that in there so they know it’s a priority to do business with small businesses.”
Military needs a long-term strategy
Through 16 hearings and nine meetings with DoD officials, small businesses and other stakeholders, the House panel found the Pentagon needs to do more to help small firms.
“Some of the major initiatives [that] come from this report is the need to develop a long-term strategy for maintaining a robust defense industrial base, and that includes these smaller and medium-sized small businesses,” Shuster said. “DoD also needs to maintain and improve the capabilities of the acquisition workforce is critical. At the Pentagon, there is a very risk-adverse culture in the acquisition community, and we need to encourage them to take risks. We need to encourage them to take risks because when you take risks, you get greater reward.”
Shuster also admitted that some of the risk aversion is because of Congress, and he pledged to support DoD for taking appropriate risks.
“We really have to, starting from Congress, push out to DoD and say we are willing for them to take risks and see them fail,” he said. “We have to be able to compare the great successes when we did take risks versus the failures when we take risks. I don’t think there is any way around us getting the best, most innovative, high-tech solutions that our warfighters need [without taking risks].”
Shuster said he also has to be willing to step up and tell his fellow lawmakers that taking risks can be good in order to get innovation.
“We will propose to put in there very specific [provisions] in the bill,” he said. “Getting the recommendations into the bill is an important goal of the panel, but I also think after we pass the NDAA [National Defense Authorization Act], I will go back to the chairman and ask for this panel to continue on. I don’t think we will solve the problems just by the six months we are putting in there, but it’s a start.”
Shuster compared changing the culture of the Pentagon as it relates to small businesses to the Goldwater-Nichols Act that promoted jointness starting in 1986.
He said it took DoD more than six years to change its mindset after Congress passed Goldwater-Nichols.
The full committee markup of the Defense authorization bill is scheduled for May 9.
By Jason Miller
April 23, 2012