Small Business and Defense Acquisitions: A Review of Policies and Current Practices

Abstract : For much of the past century, the federal government has consistently sought to boost small businesses. These efforts have included, in recent years, a federal government-wide statutory goal for 23 percent of prime contract dollars on goods and services to be spent with small businesses. Recent federal policies have also set spending goals with more narrow categories of women-owned businesses and small disadvantaged businesses as certified by the Small Business Administration (SBA). Because the Department of Defense (DoD) accounts for most federal purchases, its spending practices draw considerable attention from small business advocates. This report reviews the origin of these small business policies, evidence of their effects, and what lessons best commercial practices may offer for their improvement. Efforts to support small business are long enduring and have been promoted by Congresses and presidential administrations of both parties. DoD has had mixed results in meeting some of its mandated small business goals, exceeding them in some industries while falling short in others. In Fiscal Year 2007, 20.4 percent of its prime contract dollars went to small businesses, although the nature of data available for analysis may mean that this figure is an underestimate of actual total purchases with small businesses. Part of DoD s challenge in meeting its small business goals may be in the nature of different industries and their conduciveness to small business. DoD exceeds the overall 23 percent goal for small business utilization in some categories of its expenditures. Some of the industries for which it does not meet this goal are those in which industry consolidation has concentrated business among larger firms.