February 26, 2018

Small Businesses Stand to Benefit from Section 809 Panel Recommendations

6 min

The National Defense Authorization Act (NDAA) for fiscal year (FY) 2016 commissioned the Section 809 Panel to advise Congress on streamlining and codifying U.S. Department of Defense (DoD) acquisition regulations. The Panel released the first volume of its three-volume report on January 31, 2018. (The Panel previously released an "Interim Report" in May 2017, setting forth three statutory recommendations that were all enacted into law in the FY 2018 NDAA.)

Volume 1 of the Section 809 Panel's report contains a number of recommendations for improving DoD's acquisition processes, including reforms relating to procurement of IT business systems, commercial buying, contract compliance and audit, and small business goals. The Panel's recommendations are set forth in eight sections of the report, followed by voluminous appendices. Although the law that established the Panel does not require Congress or the DoD to adopt its recommendations, they are expected to influence Congress's deliberations over the FY 2019 NDAA.

In this article, we provide an overview of the Panel's report, including its tone and overarching goals for the DoD, and we highlight certain proposed recommendations for improving DoD's small business policies and programs in particular.

Overview of the Panel's Recommendations

With Volume 1 of its report, the Panel introduced its vision for "the Dynamic Marketplace framework," which describes the Panel's "approach for an outcome-based acquisition system for providing DoD access to the entire market." The Panel criticizes the existing system as "cumbersome, and often one-size-fits-all," and recommends enhancements to "the process by which DoD acquires IT business systems, streamlines DoD's cumbersome auditing requirements, addresses challenges in how the small business community and DoD interacts, updates commercial buying, clarifies definition of personal and nonpersonal services, removes statutory requirements for 13 acquisition-related DoD offices, and repeals 20 acquisition-related statutory reporting requirements." The Panel's report incorporates 24 recommendations for streamlining the DoD acquisition process, broken down into 73 discrete sub-recommendations that are helpfully summarized in the report's List of Recommendations.

In particular, the report urges DoD to move away from the current "process-oriented" acquisition system toward a mission-driven and results-oriented system. The Panel concludes that the current DoD acquisition process impedes agencies' ability to access the modern marketplace, rendering the DoD essentially stuck in the "captive industrial base of the Cold War era." The Panel advises that a forward-looking DoD acquisition system must incorporate deeper market analysis and problem-driven competitions, moving away from DoD's current cost-centric emphasis on defining requirements.

Notably, the Panel highlights the need for transparency in the defense acquisition system. For example, while it will continue to research the topic of bid protest reform, the Panel concluded, "[I]t is clear that protests have become a tool for industry to receive feedback and better understand the government's decisions." The Panel cautioned that "[s]uch extreme and costly steps should not be needed for industry to get information on DoD's needs and processes or to understand the end result of the acquisition process." Informed perhaps by the recent DoD-commissioned report by the RAND Corporation, which found that less than 0.3% of DoD contracts are protested, the Section 809 Panel may take less interest in bid protest reform in its ongoing research and recommendations. However, the emphasis on transparency is fundamental to its recommendations across the DoD acquisition system.

Small Business Acquisition Reform

Volume 1 of the Section 809 Panel's report contains several recommendations geared toward expanding and improving DoD's small business policies and programs. Based on its research, the Panel concluded that DoD's "[s]mall business policy objectives and programs, as executed today, do not emphasize promoting small businesses that directly enable DoD to better execute its missions." To maximize the utility of small business policies, programs, and practices in meeting DoD objectives, the Panel recommends that the DoD "[r]efocus [its] small business policies and programs to prioritize mission and advance warfighting capabilities and capacities." Specifically, the Panel recommends that DoD undertake three objectives:

  • Establish the infrastructure necessary to create and execute a DoD small business strategy, ensuring alignment of DoD's small business programs with the agency's critical needs;
  • Build on the successes of the Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) and Rapid Innovation Fund (RIF) programs; and
  • Enable innovation in the acquisition system and among industry partners.

The Panel encourages DoD to "fully capitaliz[e] on small businesses' innovativeness," rather than focus its policies and programs "on acquiring goods and services based on meeting societal goals not related to mission," i.e., socioeconomic goals unrelated to DoD's warfighting capabilities and capacities. In particular, the Panel encourages DoD to develop more programs that will enable research, development, and innovation by members of the small business community.

Remarking on "DoD's slow acquisition system and ineffectiveness in engaging with small, innovative businesses," the Panel concludes that DoD has fallen behind in the competition for small business innovations and technology in the global marketplace. Since 2012, there has been a decline of nearly 100,000 small companies registered in the System for Award Management (SAM) database. Based on its research, the Panel found that because contracting officers and program managers are held accountable for ensuring small business requirements are met—rather than DoD's small business specialists—"[s]mall businesses disproportionately account for the acquisition of basic commodities and services," which offer a lower-risk mechanism for fulfilling the socioeconomic aspects of DoD's small business goals. However, this approach results in the underrepresentation of innovative small businesses in DoD procurements, and ultimately is not helpful to achieving the DoD's mission.

In order to fulfill its recommendations, the Panel suggests that DoD develop better infrastructure to encourage small businesses to enter into the DoD marketplace, including increasing the connectedness of Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy (DASD (MIBP)), the Office of Small Business Programs (OSBP), and the Procurement Technical Assistance Program (PTAP). The Panel suggests that DoD must "repurpose its small business assets to find and connect innovative small businesses with contract opportunities supporting DoD's strategic needs." In other words, DoD must improve communication with small businesses and provide clearer points of entry into the defense market. To foster such opportunities, the Panel suggests that DoD make better use of open innovations centers, as well as Procurement Technical Assistance Centers (PTAC) and mentor-protégé programs. The Panel urges DoD to increase investment in the Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) and Rapid Innovation Fund (RIF) programs, focusing on increasing the speed and flexibility of these programs to better assist small businesses. Finally, the DoD must "gain greater awareness of emerging technologies and quickly connect small businesses to DoD customers," using consortia and technology accelerators to prevent barriers to small businesses' entry into the defense market.

To implement its recommendations, the Panel recommends that Congress enact a Defense Small Business Act, which would consolidate all statutes pertaining to DoD's small business programs under Title 10. The Panel similarly recommends that the Executive Branch "introduce policy directing a refocus to working with small businesses to support and enhance DoD's warfighting capabilities and capacities." Together, these programs and policies will broaden the opportunities for small businesses to participate in the federal defense market and provide meaningful, sustained contributions to the DoD's mission.

Further Considerations

Federal contractors should continue to monitor developments in DoD acquisition reform and understand how these changes may impact their rights and remedies relating to DoD procurements. The Section 809 Panel's Volume 1 Report is lengthy, at nearly 650 pages. Nevertheless, contractors may wish to review this report, particularly its many legislative recommendations that may influence small business programs, and reforms to the defense acquisition system more broadly.

The Panel's Volume 2 and 3 Reports will be released in June 2018 and January 2019, respectively. We will provide further analysis at that time.