For the first time, the Pentagon has exceeded departmental goals for small-business contracting, a senior Defense Department official said last week.
Small businesses made up 23 percent of the Defense Department’s prime contracts in fiscal year 2014, receiving about $53 billion in work, said Andre Gudger, director of the office of small business programs, in a DoD News interview.
“This year, the Department of Defense not only exceeded its goal, but it also is on course to exceed the federalwide goal. … That's significant -- that's historical, in fact,” he said.
The department also exceeded its goal of 3 percent for contracts with small businesses owned by service-disabled veterans -- about $9 billion in contract value -- Gudger said. “There's no one better than that group of people to know what we need and how fast we need it, and help us to reduce the barriers in acquiring it,” he said.
Prime contracts are contracts in which the department contracts directly with the business, as opposed to subcontracting, where a second company is hired by a defense contractor to accomplish some part of the work.
Critical to battlefield dominance
This is an important accomplishment, Gudger said, because small businesses are critical to dominance on the battlefield.
“The department is very interested in technology innovation capability,” he said, “and traditionally, small business is the hub for innovation in technology.” This led DoD to focus on small businesses as mission enablers, Gudger explained, and the office of small business programs serves as the principal advisor to the secretary of defense in all matters of small business.
“Small companies are typically very agile and nimble,” he said. “They are very responsive to new and emerging threats, new and emerging technologies and new and emerging capabilities, so being more agile and nimble, they can bring and deliver products to the market faster.”
Perhaps even more critical in a tight fiscal environment is that small businesses drive competition and, in turn, drive affordability, Gudger said.
“If you go back to Better Buying Power 1.0, small business was specifically called out there, and it carried forward into Better Buying Power 2.0, and now we have Better Buying Power 3.0, and small business is continuing to be a focus, because there is a value proposition there,” he said.
The defense contracting community has accepted the challenge, Gudger added.
“In light of the perfect storm -- a sequester, a continuing resolution, a shutdown, a furlough, a workforce reduction -- it made it very difficult in a time of budget uncertainty to achieve small business goals. … And so, you have to do things on purpose,” he said. “You have to plan.”
Improving relationship between government and business
As the first director of the small business office to come from the private sector, Gudger said that the decision to bring in someone with his background was driven by President Barack Obama’s focus on improving the relationship between government and business. The president has referred to small business as “the engine of job creation.”
In sharp contrast to when he first arrived at the small business office -- when, Gudger said, it seemed much of the department felt that small business contracting goals were basically another box to check, the Defense Department and the entire federal government now actively seeks to contract with more small businesses, and more businesses in general.
Through an interagency collaboration program Gudger described as "fantastic," the government reached out to small businesses to generate awareness of shifting investment priorities, and they responded.
Looking for modern, capable products
For example, in times of budget uncertainty, the department looks to services for efficiencies, and looks for more modern, capable products to invest in, Gudger said. "We wanted small businesses to really be aware where the Department of Defense was going to make investments," he added.
The small business office oversees $100 billion in spending, for products ranging from boots and clothing to supersonic aircraft, Gudger said, adding that small businesses play a role in every one of those contracts.
“There's a myth that small businesses don't build planes or ships or nuclear equipment,” he said. “Our Virginia-class sub -- a nuclear sub -- is 70 percent built by or developed by small businesses at the prime contract level.”
This arrangement led to the development of interoperable systems, Gudger said, which drove down costs while helping the Navy modernize and maintain its dominance in undersea warfare.
"Small businesses at the prime contract level can lead to a phenomenal outcome and lead to a capability that's the finest in the world," he added.
(Follow Claudette Roulo on Twitter: @roulododnews)