809 Panel Recognized the Mid-Tier Problem

A panel of defense acquisition experts, assembled by the Department of Defense (DoD), recently met with representatives of Mid-Tier or Advanced Small Businesses in order to gain perspective on potential overhaul of the acquisition processes currently in place. The panel was authorized under Section 809 of the National Defense Authorization Act, with the intent of advising and streamlining acquisition regulations to improve the functioning of the contracting system.

The meeting focused on the market barriers to entry that Mid-Tier or Advanced Small Business contractors face after leaving the small business classification and the contract set-asides associated with it. Another aspect inquired by the panel was the potential changes that could be implemented in order to attract more innovative companies that offer new technologies but are not currently competing for contracts.

A point highlighted throughout the presentation was that the DoD does not offer the assistance Mid-Tier or Advanced Small Businesses need to adjust to the higher level of competition they face when they leave the Small Business category. A major problem that was explained by the representatives was because the Mid-Tier or Advanced Small Businesses had a significant portion of their growth assisted by the 23% contract set-asides, when they no longer have that and need to compete against large firms, they face financial ruin trying to compete.

A solution proposed to the panel was that the DoD should issue guidelines/directive that encourage contracting officials to flexibly interpret the application of NACIS codes in defining small businesses. They also suggested that the panel build upon the ideas of a pilot program that was originally in the 2013 NDAA designed to help Mid-Tier or Advanced Small Businesses, it was excluded from the final version that year. The panel expressed interest in the report of a study that the DoD has done on Mid-Tier or Advanced Small Businesses and the issues they face; the study was slated to be released in January 2014 but still hasn’t yet. Further adjustments included review and modification of FAR/DFAR rules that potentially inhibit rapid integration of new technology and the protection of intellectual property and patents of innovating companies.

The competitiveness of Mid-Tier or Advanced Small Businesses is severely hampered by the high overhead costs that they are unable to absorb, unlike the larger firms. This disadvantage leads them to be relegated to mainly subcontractor roles for larger firm’s contracts. These costs, in combination with the low price competition and lowest price technically acceptable environment the defense sector is currently experiencing, further highlight the need for policy to be implemented to support Mid-Tier or Advanced Small Businesses in competition with larger firms.

The panel has stated that it is interested in further follow up discussions to more deeply analyze and examine the issues presented by the representatives.

           

This article was written by Joseph Castelli, an intern with Mid-Tier Advocacy, Inc. (MTA). MTA is a 501(c)3 non-profit which represents Mid-Sized and Advanced Small Federal Government Contractors. For more information and membership please visit www.midtier.org.

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Mid-Tier Advocacy Intern
Intern
Mid-Tier Advocacy
Washington DC
(202) 670-2298
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