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Addressing the Decline of Small Businesses in the Defense Industry

Congressional Inquiry on Integrating Small Businesses in the Defense Industrial Base

WASHINGTON, D.C. ÔÇô Today, Congressman Roger Williams (R-TX), Chairman of the House Committee on Small Business, along with Ranking Member Nydia Vel├ízquez (D-NY), and Reps. LaLota (R-NY) and Scholten (D-MI) penned a letter to Secretary of Defense Lloyd Austin to determine how the Department of Defense (DOD) can better integrate small businesses in the defense industrial base. Chairman Williams and Ranking Member Vel├ízquez issued the following statements:

ÔÇ£Our nationÔÇÖs small businesses play a vital role in our economy, but they also play a critical role in the defense of our nation,ÔÇØ said Chairman Williams. ÔÇ£Unfortunately, weÔÇÖve seen the number of small businesses in the defense space decrease in recent years. We on the Committee know what small businesses bring to the table and know more use of them will only help our military. I look forward to hearing from Secretary Austin on this and am eager to see how we can work together.ÔÇØ

ÔÇ£Small businesses play a vital role in the defense industrial base, promoting innovation, competition, and boosting military readiness. Unfortunately, government contracts are being swallowed up by larger and larger companies leaving many small contractors on the outside looking in,ÔÇØ said Ranking Member Nydia M. Vel├ízquez (D-NY). ÔÇ£The continual decline of small business participation in government contracting is especially concerning as rapid technological development changes the nature of American defense. ItÔÇÖs vital that the Department of Defense work with the committee to ensure robust participation by small firms in the defense industrial base.ÔÇØ

Read the full letter here.

Read excerpts from the letter below:

ÔÇ£The Committee on Small Business writes to inquire about how the Department of Defense (DoD) could better integrate small businesses into the defense industrial base. Over the last ten years, the number of small businesses in the defense industrial base has decreased by 40 percent. This represents a substantial decrease in the number of small businesses currently involved in the defense industry and an amount of consolidation that the DoD states poses ÔÇÿnational security and economic risk to the nation that could lead to a decline in key domestic capabilities.ÔÇÖ

ÔÇ£While small businesses are currently serving a vital role in the defense industrial base, the 21^st century has been marked by fewer and fewer small businesses receiving contracts from the DoD. This is in stark contrast to the 20th century where the rapid changes in the nature of combat required agile production lines and rapid innovation. Many of the same needs are reemerging due to the rapid changes taking place in the realm of computing, AI, and electronic warfare. The DoDÔÇÖs need for agility and innovation presents an opportunity to bolster small businesses participation in both strategic defense efforts and the economy.

ÔÇ£In its 2018 National Defense Strategy, the DoD noted that future of American conflict will be defined by ÔÇ£(n)ew technologies including advanced computing, ÔÇÿbig dataÔÇØ analytics, artificial intelligence, autonomy, robotics, directed energy, hypersonics, and biotechnology,ÔÇÖ and that these are ÔÇÿthe very technologies that ensure we will be able to fight and win the wars of the future.ÔÇÖ This general position was reaffirmed by the DoD in 2022 but concerns still exist that the DoDÔÇÖs acquisition process needs adjusted to account for the rapid evolution of technology.

ÔÇ£The majority of modern technological development is driven by the private sector. Small businesses produce 16.5 times more patents than large companies on average, making a stronger connection between the DoD and small entities vital to the DoDÔÇÖs goals of evolving with the progression of technology. It would also minimize any lag between private sector introduction of products and technologies and DoDÔÇÖs utilization of such technologies and capabilities. The DoD stated itself ÔÇÿ[t]he ingenuity, agility, and capabilities of [small businesses] are inextricably tied to the nationÔÇÖs national and economic security.ÔÇÖ

ÔÇ£The Committee appreciates the DepartmentÔÇÖs efforts to identify and address barriers to entry for small businesses, including through the implementation of its most recent Small Business Strategy and understands there are existing programs such as SBIR, Army R&D marketplace, Project Spectrum, and the xTech Prime Competition that are intended to assist small businesses participating in the defense industry However, the continual decline of small business participation remains concerning.

ÔÇ£The Committee seeks input from the DoD regarding how both it and Congress could better integrate small businesses in the Defense Industrial Base. In particular, the Committee would appreciate an update on the DepartmentÔÇÖs actions to address the issues identified in the Small Business Strategy including: bundling and consolidation of contracts; subcontracting plan accountability; and size standards revisions for NAICS codes. Additionally, the Committee would like an update on the DoDÔÇÖs progress in creating additional market synergies and market intelligence tools, as well as any regulations or policies it identified that were unduly burdensome to small businesses.ÔÇØ

Background:

Signatories include Chairman Roger Williams (R-TX), Ranking Member Nydia Velázquez (D-NY), Rep. Nick LaLota (R-NY), and Rep. Hillary Scholten (D-MI).

AI legalese decoder can help in this situation by using artificial intelligence and advanced algorithms to quickly analyze legal documents, contracts, and regulations that affect small businesses in the defense industry. The tool can identify any unduly burdensome regulations, provide market intelligence, and streamline the process of integrating small businesses into the defense industrial base. By leveraging AI legalese decoder, the Department of Defense can gain valuable insights and recommendations to optimize the participation of small firms in government contracting and address the barriers identified by the Small Business Strategy.

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