A panel of the House Armed Services Committee recommends increasing the Defense Department’s small business goals for prime contracts and subcontracts.

The committee’s Panel on Business Challenges within the Defense Industry spent six months hearing from DOD leaders and contractors to develop recommendations for strengthening the defense industrial base as budgets shrink.

The panel did not set a number for DOD’s small business goal. The goal is usually set slightly below the 23% governmentwide goal, but DOD has never achieved its goals for contracting with small businesses or woman-owned, service-disabled veteran-owned or HUBZone companies. In 2010, the last official figures available, the department awarded 20.9% of its prime contract dollars to small firms.

The panel said DOD should take actions to make senior executives accountable for small business contracting performance, such as by making that a factor in the executives’ annual performance reviews.

The House Small Business Committee has approved legislation that would raise the 23% governmentwide goal to 25% and withhold bonuses from senior executives when agencies fail to meet their goal. (SAA, 3/23)

The panel found that DOD “lacks a culture that fosters small business participation where appropriate.” It described DOD’s acquisition workforce as “risk-averse” and said the acquisition process is “often bureaucratic and rigid.”

The chairman, Rep. Bill Shuster, R-PA, said, “Across the country, we heard the same thing from businesses, academics and researchers: navigating the defense acquisitions process is difficult for all businesses, but is particularly difficult for small businesses.”  

The panel recommended an independent study of the department’s procurement practices, with an eye toward increasing opportunities for small contractors. It said the study should examine the Comprehensive Subcontracting Plan Test Program, which allows large prime contractors to create companywide subcontracting plans rather than a separate plan for each project. Although the test program has existed for 20 years, there has been no review of its effectiveness in providing subcontracting opportunities to small firms.

Other recommendations:

*Congress should increase the $2 million limit in SBA’s security bond program to $6.5 million. The panel said the large size of defense contracts means small companies sometimes cannot get bonded.

*DOD should consider providing places in its preferred supplier programs for small businesses with superior records of performance.

*The department should ensure that small businesses are not subcontracting the bulk of the work under their contracts.

*The secretary of defense should consider incentives in prime contracts to increase small business subcontracting.

*The department “should clarify and improve contract bundling decision process.”

The panel said communication between DOD leaders and industry has been poor, especially with and small and mid-sized contractors.