U.S. Department of Defense Must Work Harder to Include Small Business Contractors, Audit Says

Defense Contracts for Small Businesses too Few

An audit of two Army Contracting Command centers in Redstone, Alabama and Warren, Michigan, revealed The Department of Defense (DOD) must increase its efforts in order to meet small business subcontracting goals.

The DOD Inspector General Audit was carried out in three different branches. One audit was performed on the Army, and two each on the Marine Corps and the Air Force. According to the audit, small businesses may have lost opportunities because protocols were not followed which could have encouraged more small businesses to be part of the federal marketplace.

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Defense Contracts for Small Businesses

Small businesses have been specifically included in the federal contract bidding process to both support and encourage growth in communities across the country. Head of the House Small Business Committee U.S. Rep. Sam Graves (R-Missouri) announced in Nov. 2017 his desire to raise the federal government’s contracting goal for small businesses to 25 percent, a two percent increase from the current 23 percent target for contracts to be awarded to small businesses today.

The drive to increase the rate comes after the fed actually did manage to hit its contracting goals for 2017.

In a press release addressing the results of the audit and moving forward, Rep. Stephanie Murphy (D-Florida), Ranking Member of the Contracting and Workforce Subcommittee, said, “The federal procurement process can be a powerful tool for stimulating growth and helping small businesses succeed.  On the Small Business Committee, I’ll continue working to ensure more entrepreneurs can access the federal marketplace and win their fair share of federal work, whether that’s working directly with the U.S. government or as a subcontractor for a larger firm.”

Findings of the Audit

But this year, the Inspector General’s audit reported two Army Contracting Command centers failed to observe the subcontracting plans developed to insure the inclusion of small businesses. Under these plans, prime contractors must make a good-faith effort to ensure they provide small businesses with opportunities for participating in federal contract projects.

The Inspector General found close to half of the contracts it examined failed to meet these requirements, a total of 23 contracts valued at around $915 million.

The two locations awarded six contracts worth $330.7 million without a subcontracting plan in place — or where no subcontracting possibilities existed without a contracting officer’s consent. Another contract valued at $480.3 million didn’t have a monitoring system in place to keep track of a prime contractors’ compliance with subcontracting plans for 11 contracts.

Finally, in the case of six other contracts valued at $103.7 million, small business subcontracting goals were not met and subcontractor goals were misreported.

Photo via Shutterstock


Michael Guta Michael Guta is the Assistant Editor at Small Business Trends and currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

3 Reactions
  1. The amount of red tape you have to work through go get government contracts is a huge burden. SMBs just don’t have the manpower to dedicate to it or the scale to spread the cost around. It’s a mess.

    • I would agree with Robert Brady. Often just a RFI or Sources Sought the CO or COR will ask prospective bidders for binders worth of information. This type of situation is difficult for a SB with limited staff and resources. The government isn’t their only client or perspective client. It is setup so that a SB must choose between attending to all clients equally or catering to the government.

  2. Small businesses need to understand the market based on their specific capabilities, build a plan around the agencies who buy what they sell and execute that plan by leading with capabilities and closing with set asides. This is a game. ‘Good faith effort’ means having an event reaching out to smalls and collecting capabilities statements and registering their businesses at their sites so they can fill out the forms for SBA showing they tried or made a ‘good faith effort.’ If they don’t have any piece to give out, they won’t but they’ll have an event at the travel expense of the smalls…again. Small businesses are attending events, performing capabilities briefings, downloading procurement forecasts and asking about them… but there’s always an incumbent. Smalls need to carve out new opportunities. Set asides for smalls are not as common as awards to smalls on contracts not set aside for smalls because those winners get the game. It’s all about leading with your capabilities to the project managers and end users, it’s working with the primes and getting their attention by bringing them the business if the small needs to borrow their bridge(prime’s contract with the agency.) When small business realize they need to initiate the relationship instead of fill out another registration or application, and tge ‘good faith efforts’ is just a waste of time for smalls, they’ll spend all their energy working on the agency instead of visiting small business office after small business office.