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Why Small Businesses Are Essential to U.S. National Security

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Small businesses are the engines of the U.S. economy, the heartbeat of communities, and the sources of U.S. global economic strength. This is often heard from the nation's leaders, but what is not often heard is the importance of small businesses to national security.

Since the middle of the 20th century, the Defense Department has relied on contributions from small businesses to make significant advances in defense capabilities. These contracts with small businesses enable citizens to benefit from technological advances in their everyday lives.

Companies most people know, such as Qualcomm and Symantec, and technologies, such as GPS and modern-day LASIK surgery, were developed from defense or other federal agency contracts. In fact, even Moderna's mRNA technology, which was used in its COVID-19 vaccine, was funded with a grant from the Defense Advanced Research Project Agency to research mRNA therapeutics in 2013.

Federal law requires government agencies to award a minimum of 23% of all contracts annually to small businesses, and DOD awards its proportional share. Last year, DOD's awards to small companies amounted to more than $80 billion, with 45% of those dollars going to disadvantaged and women-owned businesses, and those are just prime contracts.

While there are tens of thousands of small businesses with DOD prime contracts, there are almost an equal number of small businesses supporting the defense mission as sub-tier suppliers to large companies that produce major platforms and systems for DOD. These companies are innovators developing cutting-edge technologies; manufacturers producing critical parts and components; and service providers that bring some of the nation's best talent to the workforce.

However, over the past decade, there have been some alarming trends. The number of small-business suppliers in the federal marketplace — specifically in the defense marketplace — has declined. If this decline continues at the current pace, the nation is at risk of losing key domestic capabilities.

Further, small businesses continue to struggle with bureaucratic red tape, including competing in an environment where larger businesses are generally favored. Small businesses face disproportionate barriers to entering that marketplace.

At a time when the nation faces unprecedented competition from adversaries, supply-chain vulnerabilities due to climate change and the global pandemic, and a wealth of talent from underserved communities going untapped, these trends must be reversed.

That's why President Joe Biden, in his first months in office, signed several executive orders focusing on increasing equity in federal procurements, increasing the resilience and diversity of domestic supply chains, and promoting competition in the U.S. economy. Small businesses are at the nexus of all of these efforts.

To support these presidential priorities, the DOD took immediate action.

First, the DOD wanted to hear directly from small businesses to better understand the challenges they face and work to address them. To that end, the department recently posted a notice in the Federal Register asking companies to let DOD know what barriers to entry they are facing.

The department is streamlining entry points in the defense marketplace for small businesses by making a single entry point for small businesses that want to learn how to do business with DOD and which small-business programs are available. 

DOD is also helping companies become ready to do business with the department by increasing the connectivity between Procurement Technical Assistance Centers, which support companies pursuing and performing on DOD contracts, with the acquisition workforce and by providing cybersecurity resources to small businesses through Project Spectrum.

There are companies in the commercial marketplace that have never done business with the DOD. These companies have the advanced technologies and capabilities needed to support missions in areas like additive manufacturing, robotics and artificial intelligence. To engage these companies, efforts such as the Defense Innovation Unit and others are using flexible, commercial-style contracts to do business with these innovative commercial firms.

There is more work to be done to strengthen and ensure a vibrant small-business industrial base. This requires DOD to work closely with the private sector.

Small businesses do more with more, and their innovations, agility, and diversity are pivotal, not only to DOD but to national security. Small businesses remain vital for the nation to address the myriad global challenges faced today.

(This article first appeared on Business Insider.)

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