[Senate Hearing 118-621]
[From the U.S. Government Publishing Office]
S. Hrg. 118-621
DEPARTMENT OF DEFENSE SMALL BUSINESS
TOOLS FOR ENHANCING THE INDUSTRIAL BASE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON READINESS AND
MANAGEMENT SUPPORT
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
MARCH 22, 2023
__________
Printed for the use of the Committee on Armed Services
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
60-057 PDF WASHINGTON : 2025
COMMITTEE ON ARMED SERVICES
JACK REED, Rhode Island, Chairman
JEANNE SHAHEEN, New Hampshire ROGER F. WICKER, Mississippi
KIRSTEN E. GILLIBRAND, New York DEB FISCHER, Nebraska
RICHARD BLUMENTHAL, Connecticut TOM COTTON, Arkansas
MAZIE K. HIRONO, Hawaii MIKE ROUNDS, South Dakota
TIM KAINE, Virginia JONI ERNST, Iowa
ANGUS S. KING, Jr., Maine DAN SULLIVAN, Alaska
ELIZABETH WARREN, Massachusetts KEVIN CRAMER, North Dakota
GARY C. PETERS, Michigan RICK SCOTT, Florida
JOE MANCHIN III, West Virginia TOMMY TUBERVILLE, Alabama
TAMMY DUCKWORTH, Illinois MARKWAYNE MULLIN, Oklahoma
JACKY ROSEN, Nevada TED BUDD, North Carolina
MARK KELLY, Arizona ERIC SCHMITT, Missouri
Elizabeth L. King, Staff Director
John P. Keast, Minority Staff Director
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Subcommittee on Readiness and Management Support
MAZIE K. HIRONO, Hawaii, Chairman
JEANNE SHAHEEN, New Hampshire DAN SULLIVAN, Alaska
RICHARD BLUMENTHAL, Connecticut DEB FISCHER, Nebraska
TIM KAINE, Virginia KEVIN CRAMER, North Dakota
TAMMY DUCKWORTH, Illinois TOMMY TUBERVILLE, Alabama
MARK KELLY, Arizona MARKWAYNE MULLIN, Oklahoma
(ii)
C O N T E N T S
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March 22, 2023
Page
Department of Defense Small Business Tools for Enhancing the 1
Industrial Base.
Members Statements
Statement of Senator Mazie D. Hirono............................. 1
Statement of Senator Dan Sullivan................................ 3
Witness Statements
Mitha, Farooq A., Director, Office of Small Business Programs, 4
Department of Defense.
Buehler, Kimberly D., Director, Army Office of Small Business 12
Programs, Office of The Secretary of the Army.
Smith, Jimmy D., Director, Office of Small Business Programs, 16
Department of the Navy.
Kiser, Scott A., Director, Air Force Small Business Programs, 22
Department of the Air Force.
Questions for the Record......................................... 47
(iii)
DEPARTMENT OF DEFENSE SMALL BUSINESS
TOOLS FOR ENHANCING THE INDUSTRIAL
BASE
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WEDNESDAY, MARCH 22, 2023
United States Senate,
Subcommittee on Readiness and
Management Support,
Committee on Armed Services,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:31 p.m. in
room SR-222, Russell Senate Office Building, Senator Mazie D.
Hirono (Chairwoman of the Subcommittee) presiding.
Subcommittee Members present: Senators Hirono, Blumenthal,
Kaine, Sullivan, Fischer, Tuberville, and Mullin.
OPENING STATEMENT OF SENATOR MAZIE D. HIRONO
Senator Hirono. The Subcommittee on Readiness will come to
order. Welcome, everyone. Good afternoon, or as we say in
Hawaii, aloha everyone.
The Subcommittee meets today to consider testimony on the
Small Business Programs of the Department of Defense (DOD) and
the military departments.
Our witnesses today include Mr. Farooq Mitha. Am I
pronouncing your name correctly?
Mr. Mitha. Yes.
Senator Hirono. Sorry. You are over there.
Mr. Mitha. Yes.
Senator Hirono. Mr. Mitha, the director, Office of Small
Business Programs in the DOD; Ms. Kimberly Buehler, director,
Army Office of Small Business Programs; Mr. Jimmy Smith,
director, Navy Office Small Business Programs, and Mr. Scott
Kiser, director, Air Force Small Business Programs.
As Chair of the Subcommittee I am focused on ensuring that
our servicemembers and the large military community have the
support they need to defend our Nation and that means
modernizing our military infrastructure to meet the needs of
the 21st century and preparing the services to meet the
challenges posed by climate change.
It also means ensuring our Defense Industrial Base is ready
and able to meet future demands, which is why today's hearing
is so important.
I thank the witnesses for your willingness to share your
insights with the Subcommittee and for your work to support and
strengthen our military.
Collectively, you all bring many decades of experience
supporting small businesses and that expertise is critical as
we consider ways our Committee can help you as well as our
servicemembers in carrying out our shared mission of ensuring
our national security.
I hope you will also be able to highlight the vital work
small businesses as well as approaches your organizations have
taken to help successfully transition product into the hands of
our servicemembers.
We also welcome your insight into how we can best help
transition companies beyond their small business status. We all
recognize the critical role that small businesses play in our
economy and especially in our Defense Industrial Base
ecosystem.
Small businesses play a vital role in spurring the kind of
innovation necessary for our military to remain competitive and
meet the challenges of the 21st century.
As noted by the recently released DOD Small Business
Strategy, in fiscal year 2021 small businesses numerically made
up 73 percent of all companies that did business with the DOD.
Additionally, small businesses comprise 77 percent of the
research and development (R&D) companies that did business with
the DOD.
As I mentioned, especially at a time when being creative
and innovative is important this is a really important number,
77 percent.
However, in the past decade the number of small businesses
participating in the defense industrial base declined by over
40 percent. That is a significant drop in the number of small
businesses doing work with the DOD.
That is a puzzling and just concerning trend and I hope
that our witnesses will be able to shed some light on what you
see as the dynamics causing this trend as well as some of the
actions the Department can take to improve the situation.
This trend begs a number of questions related to our
approach to small businesses including how good are our data
and matrix in tracking the success or failure of these small
businesses in the defense industrial base, especially as they
try to contribute to larger competitiveness goals of the
departments?
Do we have the means to support these businesses while they
are small and also to help them transition to grow into medium
and large businesses?
How could we improve the strategic approach to using and
fostering our small businesses to contribute to national
security missions?
In Hawaii, we know firsthand the importance of small
businesses to the success of our armed forces and vice versa,
businesses like RevaComm, a software company based in Honolulu.
They demonstrate the importance of this relationship between
DOD and small businesses.
Since 2019 this company has doubled its revenue, created
120 jobs, and expanded its presence to more than 25 states. Its
success would not have been possible without support from the
DOD, which included $59 million in grants from the Air Force.
Thank you again to our witnesses. I look forward to our
testimoneys, and now I would like to recognize my friend,
Ranking Member Senator Sullivan.
STATEMENT OF SENATOR DAN SULLIVAN
Senator Sullivan. Thank you, Madam Chair, and I am honored
to be the ranking Member on the Readiness Subcommittee.
This is the first among equals of the subcommittees. Do not
tell any of the other subcommittees about that, but it is true,
and I look forward to a robust set of hearings. I am going to
just make a statement here, more broadly.
Last Congress, we held one hearing in this Subcommittee in
2 years.
Senator Hirono. It was jointly with my Committee.
Senator Sullivan. One hearing. Okay. No offense, but that
is ridiculous.
We should be holding at least two hearings a month on
readiness. There is nothing more important than the readiness
of the U.S. military in this time of great power competition,
the new era of authoritarian aggression, to have the most
lethal military that can be ready to win wars and fight
tonight, right now.
So I sure hope and you have my commitment we will do three
hearings a month if you want. But one hearing in 2 years was an
abdication of responsibility and we should never do that again
on the Readiness Subcommittee. That is just my opening
statement on that.
Two to three hearings a month. I am ready to ready to do
it. Nothing more important than readiness of our military and
it is not really ready right now, in my view.
I want to thank the witnesses as well. In January of this
year, as the Chair mentioned, DOD updated their small business
strategy.
We actually legislated on this issue in fiscal year 2019 in
the 2019 National Defense Authorization Act (NDAA) and the
whole purpose was to have Congress direct opportunities for our
small businesses to support mission execution and the readiness
of our forces and we had hoped that a unified small business
strategy across the Department would expand small business
engagement and opportunities across our economy.
Unfortunately, as the Chair mentioned, there has actually
been a very significant decline of small business vendors
contracting with the Department. So the trends are going the
wrong way.
I believe that when small business opportunities are in
decline it stifles opportunity, innovation, and can lead to
increased acquisition costs.
One area in particular that I would like to explore that I
think matters to many of our community, certainly my State of
Alaska, I think, the Chair's state--great State of Hawaii as
well--is the opportunities with native contractors.
I have been a strong advocate of the native 8(a) government
contracting program and one of the reasons is it is a really
good match. I like to say the Alaska native community (ANC),
like lower 48 Indian communities and native Hawaiians, have
what I like to refer to as special patriotism--special
patriotism.
They serve at higher rates in the U.S. military than any
other ethnic group in the country, year after year, generation
after generation, even when their country has not always
treated them so well.
So that kind of special patriotism lends itself to strong
support with regard to 8(a) opportunities and I think it is
another area that can be a critical win-win for those
communities, our states, our small businesses, and the
Department of Defense.
But I hear from many of our small businesses in Alaska
about the difficult time they experienced just being able to
get their foot in the door of DOD because it is such a big
bureaucracy, complicated place to do business, and once they
get their foot in the door sometimes it is difficult to
maintain the connection.
As we all know, small businesses oftentimes do not have the
resources to do Department wide requirements on issues like
cybersecurity, in acquisition reform, and they oftentimes do
not have the extra bandwidth to become experts in certain areas
that are required in their relationship with the Department.
So what we want to be able to get from this hearing and
what I do, certainly, is how we can improve that process,
expanding readiness, expanding the ability of American
innovators who might not be the giant military contractors but
can disrupt and create opportunities for our military for
advancing technology and for the workers of America.
We all want to participate in that. We all support our
military and having small businesses be a part of that, I
think, is a critical function of the Department.
So thank you again, Madam Chair. I look forward to working
with you on numerous, numerous hearings on readiness in the
next 2 years and I appreciate your leadership on this issue.
Senator Hirono. Thank you very much. I look forward to
working with you also.
We will start with Mr. Mitha.
STATEMENT OF FAROOQ A. MITHA, DIRECTOR, OFFICE OF
SMALL BUSINESS PROGRAMS, DEPARTMENT OF DEFENSE
Mr. Mitha. Chairperson Hirono, Ranking Member Sullivan, and
distinguished Members of the Subcommittee, good afternoon.
Thank you for the opportunity to testify today on small
business tools within the Department of Defense to enhance the
industrial base.
My name is Farooq Mitha and I am the director of the
Department of Defense Office of small business programs. I
report to the Assistant Secretary of Defense for industrial
base policy within the under secretary's office for acquisition
and sustainment.
Today I will discuss tools used to increase small business
participation, address small business barriers, and the
Department's recently released Small Business Strategy.
Small businesses make up 99 percent of all businesses in
the United States and are a critical contributor to our
national security. Last fiscal year, the Department spent $85.2
billion on small business prime contracts and nearly 25 percent
of the Department's prime contracts go to small businesses.
Additionally, the Department exceeded its goals for small
disadvantaged businesses and service-disabled veteran-owned
small businesses.
Despite their immense value, the number of small businesses
in the Defense Industrial Base has declined over the last
decade. This is an economic and national security risk for our
Nation. We risk losing mission critical domestic capabilities,
innovation, and strong supply chains.
To respond to this the Department is working to strengthen
our small business supply chains, increase competition, and
attract new entrants. I want to specifically highlight a few
programs at the Department that support enhancing small
business participation.
These programs include the Mentor-Protege program (MPP),
the APEX Accelerators, the Rapid Innovation Fund, and the
Indian Incentive Program.
The Mentor-Protege program enables experienced companies to
provide business and developmental assistance to protege firms.
The proteges are small businesses from socio economic
categories or new entrants, and the mentorship enables proteges
to become suppliers as prime and subcontractors to the
Department and other Federal agencies. Today, current and
previous proteges contribute more than $5 billion of work on
contracts each year on average.
Another key enabler for small businesses is our APEX
Accelerators. The Department funds 96 APEX Accelerators across
the country that assist small businesses by helping them learn
how to do business with the Government.
These Accelerators were previously called Procurement
Technical Assistance Centers, or PTACs. After the PTACs moved
to my office late last year we rebranded them as our APEX
Accelerators and the Department is expanding the services they
give to small businesses such as training them on cybersecurity
requirements and leveraging them for better market research.
I would also like to mention the Rapid Innovation Fund and
the Indian Incentive Program. The Rapid Innovation Fund is
designed to support small businesses and moving technologies
from prototype to production while the Indian Incentive Program
provides a 5 percent rebate to a prime contractor on the total
amount subcontracted to Native American-owned businesses.
As you mentioned, in January, the Department released our
new Small Business Strategy and the goal of the strategy is to
ensure small businesses entering the defense marketplace
understand the contracting opportunities, resources available
to them, and where to get support.
The strategy calls for the establishment of a small
business integration group across the Department implementing a
common training curriculum for our small business professionals
in the acquisition workforce and streamlining points of entry
into the defense marketplace.
As part of the strategy we are also ensuring long-term
planning and organizational alignment for programs that drive
the small business ecosystem and providing tools to the
acquisition workforce such as a robust set of market
intelligence tools that can help the efficiency of market
research and close equity gaps in the Nation's supply chains.
Last, as a part of our new strategy the Department will
provide more tools to ease their entry into the defense
marketplace. An example is helping small businesses navigate
issues that threaten their security.
Maintaining cybersecurity readiness and mitigating the
risks posed by foreign ownership control and influence, or
FOCI, are arguably the most pressing issues faced by small
businesses. Our adversaries routinely target small businesses,
thus building effective cybersecurity resilience into the
defense industrial base for small businesses is a critical
national security priority.
To bolster those efforts the Department provides resources
to small businesses on the Project Spectrum platform. Project
Spectrum provides companies with the knowledge and tools
necessary to protect our Nation's most critical assets in
cyberspace.
The goal is to provide supply chain visibility and
assurance of standards, compliance while delivering the
industrial cybersecurity tools and techniques that small
businesses need.
The Department is going to expand this risk platform to
also include training and tools on due diligence in FOCI that
will help small businesses understand and mitigate the risks on
those matters as well.
I am grateful to the panel for giving me the opportunity to
speak today. The Department looks forward to implementing the
Small Business Strategy to continue this important work that is
vital to our national security.
I look forward to answering any questions that you may
have.
[The prepared statement of Mr. Mitha follows:]
Prepared Statement by Farooq A. Mitha
introduction
Chairperson Hirono, Ranking Member Sullivan, and distinguished
Members of the Subcommittee, thank you for the opportunity to speak
with you today about the defense industrial base and the role of small
businesses within the Department of Defense (DOD). My name is Farooq
Mitha, and I am the Director of the Department of Defense Office of
Small Business Programs and report to the Assistant Secretary of
Defense for Industrial Base Policy within the Office of the Under
Secretary of Defense for Acquisition and Sustainment (OUSD(A&S)). The
Under Secretary of Defense for Acquisition and Sustainment is the
Principal Staff Assistant and advisor to the Secretary of Defense for
all matters relating to acquisition and sustainment in the Department
of Defense. Today I will discuss the role of the DOD Office of Small
Business Programs, tools used to increase small business participation,
program accomplishments, small business barriers, and the Department's
recently released small business strategy.
role of the dod office of small business programs
A key role of the Director of the DOD Office of Small Business
Programs is to advise DOD officials, including the Secretary of
Defense, on small business matters. This includes small business policy
advice, programs, industry engagement, and meeting statutory and
regulatory requirements. The Director of the DOD Small Business
Programs is also the functional lead for small business professionals
across the acquisition workforce. Most of these small business
professionals work within the Military Departments and Defense
Agencies. I am pleased to be joined today by the Small Business
Directors in the Military Departments who are Senior Executives in the
career civil service and oversee small business activities within their
respective organizations.
The role for each of us as small business leaders in the Department
of Defense is to ensure that the Department has a strong, healthy,
robust industrial base of small business suppliers. The statutory
requirements for this role primarily pertain to ensuring the Department
achieves its negotiated small business prime contracting goals and its
assigned prime contracting goals for HUBZone certified small businesses
\1\ and businesses owned by socially and economically disadvantaged
people, service-disabled veterans and women under the Small Business
Act. Additionally, DOD has assigned subcontracting goals for the same
categories for which we have prime contracting goals. The Small
Business Administration (SBA) negotiates or assigns these goals.
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\1\ The Historically Underutilized Business Zones (HUBZone) program
helps small businesses in urban and rural communities gain preferential
access to Federal procurement opportunities. These preferences go to
small businesses that obtain HUBZone certification in part by employing
staff who live in a HUBZone. The company must also maintain a
``principal office'' in one of these specially designated areas.
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dod small business participation
The Department has achieved its small business prime contracting
goal for the past 8 years. DOD's small business prime contracting goal
negotiated with the SBA for fiscal year 2022 was 22.5 percent, and the
sub-contracting goal was 32.25 percent. Additionally, the established
goals for the socio-economic categories were 9.5 percent for small,
disadvantaged business (SDB), 5 percent for women-owned small business
(WOSB), 3 percent for service-disabled veteran-owned small business
(SDVOSB), and 3 percent for HubZone small businesses. The DOD Office of
Small Business Programs tracks performance against these goals on a
weekly basis through the System for Award Management (SAM.gov). Data is
reported regularly to the DOD small business community, DOD senior
leadership--including the Under Secretary of Defense for Acquisition
and Sustainment--the White House, and the SBA.
Preliminary reports show that in fiscal year 2022 the DOD awarded
$85.2 billion in prime contracts to small businesses, which is around
24.8 percent of all its prime contracts. The Department does not
currently have the final subcontracting performance number, but in
fiscal year 2021 the Department surpassed its subcontracting goal with
a performance of 33.9 percent. The White House also increased the focus
on the Small Disadvantage Businesses (SDB) socioeconomic category to
support the President's emphasis on advancing racial equity by
committing to SDB performance to 15 percent in fiscal year 2025. In
fiscal year 2022, the Small Disadvantaged Business prime contract
performance was above 10.1 percent, which represented an all-time high
above the 9.5 percent goal. The Department awarded over $34 billion to
Small Disadvantaged Businesses. Service-Disabled Veteran Owned Small
Business prime performance is currently at 3.06 percent, above the 3.0
percent goal. Woman Owned Small Business and HUBZone performance are
currently below their prime contracting goals, with a 3.9 percent
performance and 2.2 percent performance, respectively.
dod office of small business programs and accomplishments
The DOD Office of Small Business Programs maintains oversight of
several programs with significant impact on small businesses, including
the Indian Incentive Program (IIP), the Mentor-Protege Program (MPP),
the Rapid Innovation Fund (RIF) Program, and the Department's APEX
Accelerators (formerly known as Procurement Technical Assistance
Centers (PTACs)). These programs are critical to enhancing small
business participation and success in defense acquisition. Aligning
these programs and efforts to work together will broaden outreach,
drive prototyping, strengthen the DOD supply chain, and increase
technology transfer into defense programs.
The MPP is an important supply chain focused program, the authority
for which was made permanent in the Fiscal Year 2023 National Defense
Authorization Act (NDAA). Under this program, experienced companies
meeting certain eligibility requirements provide business developmental
assistance as mentors to protege firms. These protege firms are
disadvantaged small businesses from the various socioeconomic
categories and many can be new entrants to the defense industrial base.
Mentor firms provide assistance in a range of areas (e.g., internal
business management systems, equity investments, loans, and bonding,
technical, general, and administrative assistance) that enable protege
firms to become suppliers as prime and subcontractors to the Department
of Defense and other Federal agencies. The MPP has achieved great
success. Over the past 4 years, protege firms performed an average of
over $5 billion of contract work for the Federal Government annually.
One such company is Composite Solutions, which develops and delivers
conductivity-based polymer and composite solutions that answer the
combined demands of conductivity and shielding performance in
lightweight materials systems. Composite Solutions has been awarded
over $18 million in prime contracts since the start of their Mentor-
Protege Agreement.
The APEX Accelerators consists of 96 centers across the country,
funded through cooperative agreements with the Department. These
centers provide procurement technical assistance to small businesses to
help them learn how to do business with DOD, the Federal Government at
large, and at the State and local level. These centers were previously
aligned under the Defense Logistics Agency but recently were realigned
under my office in accordance with the statutory changes in the Fiscal
Year 2000 National Defense Authorization Act. Now that these centers
are within the DOD Office of Small Business Programs, I have given them
a new name, a refreshed mission focus, and will be working to integrate
their activities with other small business programs to support the
Secretary's small business objectives.
The Rapid Innovation Fund (RIF) Program was established by Congress
to help innovative businesses, many of which are small businesses,
bridge the valley of death and support commercialization of
technologies from prototype to production. This is an important
authority that showed impressive outcomes with an over 60 percent
commercialization rate . One of these companies is Diversified
Technical Systems, based in Seal Beach, CA, which developed a smart
helmet sensor for the Army that can detect mild traumatic brain
injuries in soldiers. The Army and Marine Corps fielded nearly 50,000
units with this product. The DOD Office of Small Business Programs is
working to reinvigorate the RIF program to support small, innovative
companies with cutting edge technologies that can support the
warfighter. The Indian Incentive Program (IIP) provides a 5 percent
rebate to prime contractors on the total amount subcontracted to an
Indian-Owned Economic Enterprise or Indian Organization. Established by
Section 504 of the Indian Financing Act of 1974 (25 U.S.C. Sec. 1544),
IIP incentivizes the use of Indian-Owned Economic Enterprises, Native
Alaskan, and Native Hawaiian small businesses by prime contractors
which has increased the participation of Indian Organizations and
Indian-Owned Economic Enterprises since the program's inception. This
program continues to help establish a diverse industrial base to the
Department while improving the economy of Native American communities
and encouraging participation by socio-economically disadvantaged firms
in the DOD.
In addition, the DOD Office of Small Business Programs provides
policy and oversight for DOD of procurement preference programs for
women-owned small businesses, service-disabled veteran-owned small
businesses, and HubZone businesses. Furthermore, DOD has various
initiatives and programs designed to improve subcontracting
performance, such as the Comprehensive Subcontracting Plan Test
Program.
small business barriers
The DOD Office of Small Business Programs diligently advocates for
small business inclusion within the defense acquisition process from
the earliest stages, emphasizing awareness of the important role small
businesses play in our Nation's economy and in our national security.
This idea that small businesses strengthen our industrial base and
serve a critical role in delivering the capability to protect our
troops has been emphasized by leadership across the Department.
In October 2021, Secretary of Defense Austin issued a memo to the
Secretaries of the Military Departments, the Chairman of the Joint
Chiefs of Staff, and the Directors of Defense Agencies and Field
Activities emphasizing the importance of small businesses to the DOD
and the strategic interest we have in leveraging their innovation and
capabilities to address our global challenges and to ensure mission
success. The DOD Office of Small Business Programs has engaged in
several initiatives pertaining to outreach, policy development, and
streamlining of the acquisition process to make it easier for the
Department to meet its time sensitive needs. These initiatives strive
to reduce barriers for small businesses such as confusing points of
entry into defense markets, contracting challenges imposed by improper
bundling and consolidating of contracts, and understanding complex
regulations. This effort will help strengthen the Department's
engagement and support of small businesses, as indicated in the release
of the new 2023 DOD Small Business Strategy.
dod's new small business strategy
In January 2023, the Department released its Small Business
Strategy, which was developed by the DOD Office of Small Business
Programs in coordination with the Military Departments. Although the
small business strategy was in response to a National Defense
Authorization Act requirement, the Department created the strategy in
alignment with the President's Executive Order 14036, Promoting
Competition in the American Economy, and Executive Order 14017,
America's Supply Chains.
The Small Business Strategy focuses on three strategic objectives:
implement a unified management approach for small business programs and
activities, strengthen the Department's engagement and support of small
businesses, and ensure the Department's small business activities align
with national security priorities. I'll briefly discuss each objective
and highlight the major initiatives within each one.
Unified Management Approach for Small Business Programs and Activities
To the Department's credit, there are a myriad of small business
programs and activities distributed across the Defense landscape.
Although this gives small businesses a multitude of opportunities to
engage with and participate in defense acquisition, it can also be
confusing. Small businesses and even members of the DOD acquisition
workforce can find it challenging to understand where to go to first
and who to contact to find information on available DOD small business
programs and opportunities. In response to this challenge, the
Department is taking on several initiatives to improve internal
coordination, ease the entry points for small businesses into the
defense marketplace, and provide training to small business
professionals in the acquisition workforce.
To implement a unified management structure for small business
programs and activities, the Department will establish a small business
integration group, chaired by the Director of the DOD Office of Small
Business Programs. This integration group will include representatives
from the Office of the Under Secretary of Defense for Acquisition and
Sustainment (OUSD(A&S)), the Office of the Under Secretary of Defense
for Research and Engineering (OUSD(R&E)), Small Business Innovation
Research (SBIR) Program Managers, the Directors of the Office of Small
Business Programs for the DOD Components, and representatives of other
industrial base programs as needed. The small business integration
group will focus on increasing collaboration so the Department's small
business programs and related efforts can better leverage each other's
expertise to grow participation of small businesses in the defense
industrial base, attract more companies, mature technologies, and
enable more rapid tech transfer and commercialization. This approach
will facilitate development of easy-to-understand pathways for industry
so that a small business could enter the supply chain through
participation in a targeted outreach effort, such as a hackathon or
pitch event, become a protege firm to a successful mentor to obtain
business development support, engage their local APEX Accelerator to
get counseling and identify contracting opportunities, compete for an
SBIR or Small Business Technology Transfer (STTR) contract, and
commercialize their technology through support from RIF with help from
small business acquisition preferences.
In addition to the integration group, the Department is
implementing a common training curriculum for DOD small business
professionals. DOD has specially trained small business professionals
across the Department that contribute at all stages of the acquisition
process to raise the visibility of small business contributions,
capabilities, and expertise. These small business professionals assist
acquisition teams with requirements generation, solicitation
preparation, acquisition strategy and plans, and other required
documentation to ensure that appropriate priorities are given to small
businesses. Small business professionals conduct outreach to small
businesses, large businesses, nonprofits, and academic institutions to
facilitate strong relationships between the government stakeholders and
the small business community. They also assist with market research and
raise the visibility of how a certain industry sector can contribute to
all phases of the acquisition process. With the broad set of roles that
small business professionals play, they should be trained as a
professional community to ensure that small businesses have the maximum
practical opportunity to participate in DOD acquisition and programs.
That is why the Department is working to roll out a common training for
all small business professionals and appropriate elements of the
broader acquisition workforce.
Lastly, small businesses today face a multitude of entry points
into the defense marketplace that are scattered throughout the DOD
Components and Agencies. These entry points are of varying quality, and
the processes can be confusing. This is an unnecessary challenge for a
business that is trying to understand where to go first, who to
contact, and where to find information on available resources and
opportunities. As a first step to help solve this dilemma or challenge,
the Department is turning our current small business website,
www.business.defense.gov, into a common entry point for small
businesses. The Department will improve the information and resources
on this site to enable small businesses to navigate small business
offices through the Department, cross-reference information on small
business programs across the Department, and provide access to
available acquisition forecasts and toolkits on how to do business with
the DOD. In addition, DOD will explore embedding tools on the website
to provide referrals of small business capability information to end
users and decisionmakers.
Ensure the Department's Small Business Activities Align with National
Security Priorities
The Department is also focusing on how to align small business
activities with national security priorities. For the Department to
acquire the capabilities it needs at the volume and speed of relevance,
it needs access to a strong, growing industrial base that includes a
thriving small business ecosystem. An important element of a thriving
ecosystem is the commitment of a long-term authorization and funding
needed to send a signal to industry that there are stable programs that
they can competitively participate within and make needed investments
to be a leader in this market. Over the last 2 years the Department has
worked very closely with Congress to achieve this objective.
Reauthorization of the SBIR and STTR programs at the end of fiscal year
2022, and permanent authorization of the Mentor-Protege Program in the
Fiscal Year 2023 NDAA, are two such examples. Additionally, the
Department included the Indian Incentive Program in the President's
budget request for the first time.
The Department is also working to develop market intelligence tools
for the acquisition workforce to reinvigorate DOD's innovative and
resilient industrial base and supply chains. Recent disaggregated data
from the Small Business Administration showed that there are equity
gaps in the Nation's domestic supply chains. Thus, the Department's
solutions will seek to eliminate gaps, vulnerabilities, and critical
shortfalls in America's supply chains in an equitable manner. To
support this objective, the Department is planning to field a robust
set of tools that DOD officials can utilize to increase the efficiency
of small business market research, track small business performance,
and run comparative analytics using data sourced from across the
Department and Federal Government. Identifying capable small business
suppliers through market intelligence data is key to increasing set-
asides for small business competition, understanding the supply chain,
locating small business manufacturers, and increasing the number of
small companies in the Defense Industrial Base (DIB).
The other focus area of this strategic objective is streamlining
policy and ensuring the Department's small business professionals are
engaged in the earliest part of the acquisition process. Small business
capabilities should be considered at the earliest stages of acquisition
to maximize opportunities for small businesses to compete and
participate for contracts. Early engagement of small business
professionals enables DOD to ensure small business capabilities and
technologies are included in developing acquisition strategies and to
identify and address barriers to entry facing small businesses earlier
in the process. The Department is working diligently to ensure the DOD
small business workforce is part of acquisition teams to have these
impacts. Additionally, the Department's current policy mirrors the
Small Business Act so that small business directors across the
Department have direct access to senior leadership to advocate
effectively for small businesses and ensure small business priorities
are included in acquisition planning. The Department also brings
accountability to its senior leaders on small business inclusion by
ensuring that senior executives who oversee acquisition have a
mandatory performance element in their performance objectives related
to support and fulfillment of DOD's small business goals. All these
initiatives are aimed at increasing small business performance in DOD's
national security priority areas, reducing barriers to entry for small
businesses, and creating the right culture to have ongoing leadership
emphasis on small business inclusion.
Strengthening the Department's Engagement and Support of Small
Businesses
The third strategic objective of the Small Business Strategy
focuses on how the Department can increase its engagement with small
businesses and provide more supporting resources to help ease their
entry into the defense marketplace. One way the Department is
increasing engagement with small businesses is through the 96 APEX
Accelerators assisting businesses in 49 states, Washington, DC, Puerto
Rico, Guam, the U.S. Virgin Islands, the Commonwealth of Northern
Marianas, and in regions established by the Bureau of Indian Affairs at
the U.S. Department of the Interior. APEX Accelerators serve as a
resource for small businesses to obtain procurement technical
assistance, including information, counseling, and training related to
contracting and subcontracting opportunities with the Department, other
Federal agencies, and State and local governments.
The APEX Accelerator program is now overseen by the DOD Office of
Small Business Programs and will be a key component of the Department's
overall regional engagement strategy, serving as a front door for
industry into the Department. The goal is to leverage these entities to
improve market research, to provide more training to industry on key
topics relevant to conducting business with DOD--such as cybersecurity
readiness and foreign, ownership, control, and influence (FOCI) risks,
to conduct more targeted outreach, and to better share data to improve
the Department's understanding of the supplier base at the prime and
sub-tier levels, while simultaneously strengthening and increasing the
DIB.
Two issues that are extremely important in this area of economic
competitiveness and national security are cybersecurity readiness and
FOCI risk mitigation for small businesses. Cybersecurity threats to the
DIB keep increasing in number, frequency, and severity. Protecting
sensitive controlled DOD information and capabilities from increasingly
sophisticated threats posed by foreign competitors and adversaries
remains a critical national security priority for the Department. The
resources required to safeguard data and systems from common and
advanced persistent threats can put a strain on companies of any size,
but resource-constrained small businesses are particularly vulnerable.
Small businesses make up over 70 percent of the DIB, making cyber
risks to the supply chain a significant concern. Supporting cyber
resilience within the small business industrial base is key to enabling
these companies to address industrial base gaps across the Department.
Cybercriminals know that small businesses are the most resource-
constrained, considered high-value targets in the defense supply chain,
and are often unprepared to prevent those attacks. To combat this
constant risk to the U.S. defense supply chain and the companies'
economic competitiveness, the Department is committed to ensuring
strong cybersecurity hygiene throughout the DIB. By promoting and
assisting with cyber resilience for small businesses, DOD can play a
key role in enabling these companies to address cybersecurity gaps,
while also mitigating threats to the supply chain and DOD sensitive
information. Recognizing these challenges, the Department initiated
Project Spectrum. As identified on its website, Project Spectrum is a
comprehensive ``platform that provides companies, institutions, and
organizations with cybersecurity information, resources, tools, and
training. Its mission is to improve cybersecurity readiness,
resiliency, and compliance for small/medium-sized businesses and the
Federal manufacturing supply chain.'' The Department intends to provide
guidance to small businesses in connection with the conduct of
voluntary cyber preparedness self-assessments, as well as appropriate
tools, technologies, and training small businesses can use to help
improve their cyber resilience.
The Department is keenly aware that U.S. adversaries increasingly
use nonmilitary means to achieve their objectives, often by targeting
the smallest and most innovative companies through controlled access to
rare raw materials, vulnerabilities in their supply chains, and FOCI
operations that work in conjunction with state-sponsored or proxy
intelligence and cyber forces. These operations target key technology
sectors, providing adversaries and near-peer competitors access to
American Intellectual Property (IP) and ingenuity. This access can be
legally gained through joint ventures, mergers, and acquisitions, or
illegally through cyber espionage. These activities can destroy small
businesses and undermine U.S. efforts to pursue global economic and
national security interests. Helping protect the DOD small business
industrial base from these threats is critical to economic and national
security and requires taking a comprehensive approach.
The Department intends to make an immediate impact by educating and
training small businesses on these threats and providing them with due
diligence tools that will enable them to understand and mitigate their
risks. The DOD Office of Small Business Programs plans to expand its
current cyber risk platform to include FOCI risks. This may also entail
development of DOD-wide due diligence standards to help ensure DOD can
strike the right balance between security and imposing regulatory
burdens and unnecessary costs that may deter the Nation's most
innovative companies from wanting to do business with the Department.
Some concepts that may potentially be addressed include developing due
diligence capabilities to capture data and provide a multi-dimensional
risk profile of DIB small business participants, assessing FOCI risk
associated with defense contractors, and establishing market-based
incentives to drive behaviors that are conducive to both economic and
national security. The purpose of these efforts is to assist small
businesses with additional tools and techniques to protect information
and know-how, while ensuring appropriate measures are in place to
enable participation in defense acquisitions and small business
specific programs like SBIR.
conclusion
I would like to thank this panel for allowing me to speak today. As
you can see, our programs and initiatives have focused on increasing
small business participation in defense acquisitions through targeted
programs, reducing barriers to entry and providing resources to
industry to make it easier for them to do business with us. The
Department looks forward to implementing the Small Business Strategy to
continue this important work that impacts our national and economic
security. I look forward to answering any questions you may have.
Senator Sullivan. [Presiding.] You see I am so motivated on
the Readiness Subcommittee I have taken over the chairmanship
here.
[Laughter.]
Senator Sullivan. No, I am just kidding. The Chair had to
step out.
So, Ms. Buehler, can you--your testimony, please?
STATEMENT OF KIMBERLY D. BUEHLER, DIRECTOR, ARMY OF-
FICE OF SMALL BUSINESS PROGRAMS, OFFICE OF THE SEC-
RETARY OF THE ARMY
Ms. Buehler. Yes. Chairperson Hirono, Ranking Member
Sullivan, and distinguished Members of the Subcommittee, on
behalf of the Army senior leaders, thank you for the
opportunity to appear before you today and discuss the Army's
Small Business Program.
As the daughter of a small business owner, I understand
that small businesses must be passionate, committed, resilient,
and willing to work more hours than it seems are even in a day
in order to be successful.
The small business entrepreneurs I meet while executing my
duties as the Army's Small Business director demonstrate all of
these qualities and are fueled by the passion to help the Army
fulfill its mission to deploy, fight, and win our Nation's wars
as part of the joint force.
These small businesses are key to executing the National
Defense Strategy and building the Army of 2030. They are
engines of innovation that fill knowledge and capability gaps,
help us maintain readiness, and maintain modernization--I am
sorry, naval modernization.
In fiscal year 2022 the Army awarded over $24.5 billion to
small businesses owned by disadvantaged entrepreneurs,
including women, veterans, and those living and working in
historically underutilized business zones.
This equated to over 25 percent of all prime contracts. We
exceeded the enhance small disadvantaged business goal by 14.75
percent, which includes award of the $1.7 billion contract to
iHealth Labs, a small disadvantaged business who delivered the
rapid antigen test kits for COVID-19 distributed through the
United States Postal Service.
These achievements are consistent with the Army's long
history as being a leader for small business achievements in
the Department of Defense and across the Federal Government.
The Army is committed to ensuring small businesses have maximum
opportunity to perform on contracts at both the prime and
subcontract levels.
In fiscal year 2022 we deployed innovations and issued
policy and guidance to increase opportunity, reduce barriers to
entry, and improve the professionalism of the small business
workforce.
For example, in April 2022 the Secretary of the Army issued
Army wide guidance for the Small Business Programs, which was
the first in over a decade. The Under Secretary of the Army
launched a series of five initiatives to help small businesses
better collaborate with defense prime integrators.
These pilot programs will encourage partnerships, open
supply chains, and drive accelerated adoption of technology
cultivated through Army and DOD investments.
The Small Business Innovation Research program, or SBIR,
continues to be a critical enabler of Army modernization and we
appreciate Congress' reauthorization of the program.
In fiscal year 2022 the Army established a contracting
Center of Excellence to innovate how we award SBIR Phase I and
Phase II contracts. Average time to award is now up to 75
percent faster.
Based on stakeholder feedback and the reauthorization, the
program continues to refine its strategic approach to
integrating nontraditional innovators into the Army ecosystem
and increasing Phase III awards.
In fiscal year 2022 the Army executed a total of 153 Phase
III awards, totaling more than $318 million to 100 unique firms
across 26 states. Other notable actions in fiscal year 2022
that target small business opportunity include the refresh of
the Myth Busters campaign to provide strategies that help
acquisition professionals improve industry communication.
We have reinstituted goals for procurements valued less
than a simplified acquisition threshold of $250,000, conduct
regular reporting to the heads of the contracting activity to
improve subcontract reporting, publish biannual forecasts of
small business opportunities, and we published the first Small
Business Professional Talent Management guide in Army history.
Finally, the Army stands ready to work with the Department
of Defense to implement the recently updated Small Business
Strategy and we will publish the Army's updated strategy this
fiscal year.
I would like to thank Congress for supporting our soldiers,
our civilians, and the Small Business Programs. Working
together, we can continue to ensure we provide maximum
contracting opportunity for the small business entrepreneurs
that drive our economy and deliver capability to our soldiers.
I look forward to addressing your questions this afternoon.
[The prepared statement of Ms. Buehler follows:]
Prepared Statement by Ms. Kimberly Buehler
army small business program
Chairperson Hirono, Ranking Member Sullivan, and distinguished
Members of the Subcommittee, thank you for your continued support and
commitment to our soldiers, our civilians, and the small business (SB)
community. On behalf of the Army senior leadership, I thank you for the
invitation to appear before you today to discuss SB.
SBs are key to the Army's modernization goals and a vital part of
executing the National Defense Strategy. Building the Army of 2030
requires equipping our warfighters with cutting-edge technologies that
will give soldiers a decisive edge in future combat environments. SBs
are engines of innovation that fill knowledge and capability gaps, help
us maintain readiness, and enable modernization.
The Army-wide commitment to working with SBs shows up in our long
tradition of meeting and exceeding Government-wide goals for SB. The
Army met SB goals for seven consecutive fiscal years, fiscal year 2014
to 2020. Starting in fiscal year 2021, the COVID-19 vaccine contracts
awarded by the Army impacted SB goal achievements. In fiscal year 2021,
the Army met the overall SB goal and the goal for Small Disadvantaged
Businesses (SDB), awarding over $24 billion in SB prime contracts, but
did not meet goals for contracts to Service-Disabled Veteran-Owned SB,
Women-Owned SB, or SB in Historically Underutilized Business Zones
(HUBZone). In fiscal year 2022, the Army awarded more prime contracting
dollars to SB--$24.5 billion--but achieved 95 percent of the overall SB
goal. To put this into context, the Army awarded $28 billion in
contracts for COVID-19 vaccines in fiscal year 2022, significantly
increasing the total amount of dollars included in the formula for goal
calculation with no opportunity for SB participation at the prime
level. This depressed fiscal year 2022 goal achievement. The Army did,
however, exceed the goal for SDB due in large part to the award of a
$1.77 billion contract to iHealth Labs Inc. iHealth Labs is an SDB who
in 2022 delivered more than 357 million rapid antigen test kits in
support of the government's COVID-19 test kits to home distribution
program through the United States Postal Service. This illustrates
goals are only one measure of success, and SBs are essential to
building an enduring advantage no matter the enemy.
army research and development initiatives
As a leader for SB achievement, the Army understands the importance
of having a diversified, resilient industrial base. Multiple executive
orders and policy directives from the Office of Management and Budget
(OMB) bolster the power of government procurement to diversify and
increase the number of individual SBs receiving contract awards. The
Army has been tracking the downward trend in the number of SBs with
Army contracts. We conducted a detailed examination of data in 2022,
including a deep dive by the Rand Arroyo Center into the number of SBs
in the research and development (R&D) portfolio crucial to our
modernization efforts. Since 2013, the Army has contracted with
approximately 800 SBs for R&D efforts annually; one quarter of these
businesses were new to the Army each year. Most entered through the
Small Business Innovation Research/Small Business Technology Transfer
(SBIR/STTR) program and supported early and mid-stage research. The
Rand analysis determined that the number of SBs supporting Army R&D
remained relatively stable since 2013. This indicated that the overall
declining number of individual small businesses did not interject
higher level of risk to the Army for early and mid-stage research.
These results were consistent with prior Rand research (early 2000's)
assessing the Department of Defense (DOD) SBIR program. Moreover,
Rand's research showed that increasing and decreasing numbers of R&D
small business contractors correlates with R&D budget increases and
decreases.
Despite these positive results, the Army knows that SBs face
significant challenges moving their technology from early stage
research into production. The acquisition system is complex and many of
its processes are optimized for full scale integrated solutions, which
can create barriers for small innovative companies trying to do
business with the Army. Alternatively, SBs can seek to develop
partnerships with larger contractors, who often serve as integrators.
Integrators are essential partners in building the Army of 2030 because
they synthesize the efforts of a diverse ecosystem of manufacturers,
suppliers, and service providers to deliver capability into soldiers'
hands.
Innovative SBs can help these integrators with cutting-edge
solutions as they build and produce larger systems. In recognition of
this important partnership, the Under Secretary of the Army launched a
series of five initiatives in October 2022 to help SBs better
collaborate with integrators and ensure soldiers receive the most
innovative and decisive capabilities. These programs will encourage
partnerships and drive accelerated adoption of technologies cultivated
through Army and DOD investments.
First, the Army Catalyst Program will establish a pilot program in
which the Secretary of the Army reserves up to 15 percent of annual
SBIR funding to invest in technologies essential to enabling
technologies and key capabilities for Army modernization. The program
was approved by the DOD and the Small Business Administration in
January 2023. Potential focus areas include smart sensors to improve
detection sensitivity while maintaining low signature, climate-adaptive
technologies that make soldiers resilient in the field, and artificial
intelligence and machine learning for contested environments. Nearly 80
current Army SBIR companies were identified as candidates for the Army
Catalyst Program; up to five firms will be selected by April 2023 for
prototype awards with an estimated value of $15 million each, 10 times
larger than typical SBIR awards.
Second, Project Valuing Innovation with a Source Selection
Technical Advantage, or Project VISTA, will allow integrators to
potentially receive a higher technical rating during source selection
if they draw on SBs' innovative technologies. This should encourage
integrators to bring in new SBs, help them transition, and realize
return on Army investments in research, prototyping, and testing
investments. The Army is currently identifying programs to pilot this
innovative source selection technique. Once finalized, stakeholders
from the program, contracting, small business, and legal offices will
develop customized evaluation criteria that will be included in the
request for proposal. The Army will closely track progress of the
contract competition(s) and assess feasibility of expanding the pilot
in fiscal year 2024.
Third, the Army is building an Intellectual Property (IP) Cell of
Experts at Army Headquarters to provide advice, assistance, and
resources to SBs and the acquisition workforce on IP matters. SBs often
hesitate to participate in Army contracting for fear of losing their IP
due to perceived overreach by the government. The Cell of Experts will
work directly with SB, the Army R&D community, and program offices to
develop balanced IP acquisition and management approaches that
incentivize SB participation while safeguarding Army sustainment--
helping the Army access critical technologies more quickly. The Army
anticipates achieving Initial Operating Capability by the end of fiscal
year 2023.
Fourth, the Army R&D Marketplace will connect SBs and other
technology developers with integrators and Research, Development, Test,
and Evaluation funding and resource opportunities. Artificial
Intelligence and data-fusion tools will ensure programs and integrators
can find and employ the right SB technology at the right time. The
marketplace is on track to open this calendar year.
Finally, the Army is adding a PRIME Competition to xTech, the
Army's flagship prize competition. Innovative SBs compete at xTech to
showcase their technologies and get the attention and resources they
need to transition into the Army contracting space. Since 2018, the
Army has held over 20 competitions, resulting in $15 million in cash
prizes and more than $80 million in follow-on R&D contracts. The PRIME
Competition will flip the script and require an Army Integrator and one
or more non-traditional SBs to team up and compete. The competition
will drive down transition risk by incentivizing collaboration and
prototyping up front. Winners will be eligible for a follow-on contract
for prototype development and deployment. The competition kicks off in
March 2023, with plans to announce the winner at the annual meeting of
the Association of the United States Army (AUSA) in October 2023.
army initiatives to increase sb participation
The number of SBs receiving Army prime contracts awards overall
continued to decline in 2022. The Army is actively working to reverse
the decline by implementing Executive Orders 13985 and 14091, OMB
Memorandums 22-03, M-23-1, and M-23-11, DOD policy, and the DOD SB
Strategy. In April 2022, the Secretary of the Army issued a memorandum,
titled ``Army Small Business Program,'' that directed eight specific
actions that hold senior officials accountable for SB achievements,
afford accessibility to leaders, reduce supply chain vulnerability and
barriers to entry, and provide maximum opportunity for SBs.
Barriers to entry exist at multiple levels. One of the most
fundamental barriers is ineffective communication from government
officials. While acquisition regulations authorize a broad range of
opportunities for vendor communication, acquisition officials often do
not take full advantage of existing flexibilities out of concern for
protests or fear of binding the agency in an unauthorized manner. The
Army Office of Small Business Programs (OSBP) addressed this by issuing
a memorandum in July 2022 that refreshes the OMB ``myth busters''
campaign from 2011. The Army memorandum identifies common
misconceptions about vendor engagement that may unnecessarily hinder
the appropriate use of existing regulatory flexibilities and provides
facts and strategies to help acquisition professionals benefit from
industry's knowledge and insight. The concepts inherent in the
memorandum served as the basis for training provided to contracting
officials in 2022.
The Army has also established a Contracting Center of Excellence
(CCOE) that manages and executes all Army SBIR awards. The SBIR CCOE
provides distilled, streamlined, and transparent processes that
leverage many of the acquisition authorities provided for SB
acquisition, particularly focusing on SB operational realities. The
CCOE reduced contracting award times from greater than 250 days for a
standard R&D contract to less than 20 days in many instances.
Outreach serves as an essential mechanism to educate the SB
community on how to do business with the Army. Outreach, whether
through speaking engagements, matchmaking sessions, or one-on-one
capability briefs, helps demystify the acquisition process, connect
businesses with acquisition officials, and identify opportunities for
participation. The Army OSBP conservatively engaged with over 800 SBs
in fiscal year 2022 through formal outreach events. In addition, we
utilized social media platforms to provide timely and diverse
information to followers, successfully doubling our LinkedIn following
for @Armysmallbiz to over 10,000 from October 2022 to March 2023. We
also feature innovation opportunities through the @xTech and
@ArmySBIRSTTR profiles. One of the most popular resources is the
acquisition forecasts of small business opportunities. The acquisition
forecasts follow the best practices identified by the Professional
Services Council and are published in January and June of each fiscal
year. The forecasts provide SBs with insight into what the Army plans
to buy, when it plans to buy it, and who will issue the procurement. SB
can utilize this information to guide their outreach to the government,
influence acquisition strategy development, and prepare for contract
opportunities.
The Army is also participating in a first of its kind ``reverse
training with industry'' experience through the DOD Public-Private
Talent Exchange (PPTE) program. Generally, DOD acquisition
professionals in the PPTE participate in developmental assignments with
contractors. However, the program also enables contractors to work in
DOD acquisition organizations to gain a deeper understanding of how the
DOD operates. In August 2022, the Army OSBP sought a small business who
would participate in the exchange program. The Chief Operating Officer/
Vice President from a woman-owned SB located in a Historically
Underutilized Business Zone volunteered and is now serving in a 6-month
developmental assignment. This innovative exchange facilitates open,
transparent communication between the Army and SBs. Key learning points
from this experience will be used to augment training and outreach,
enhancing mutual understanding of the motives that drive behavior and
the opportunities that emerge through partnership.
Finally, the Army stands ready to work with the DOD to implement
the recently updated DOD SB Strategy. We are refreshing the Army SB
Strategy to align with the DOD SB Strategy, the National Defense
Strategy, and the Secretary of the Army's objectives. The Army's
refreshed strategy will be published this fiscal year.
conclusion
I would like to thank Congress for supporting SB programs that
drive our economy, create government contract opportunities for
American entrepreneurs, and deliver capabilities to our soldiers.
Working together, we can continue to ensure that we fulfill our
statutory obligations to provide maximum contracting opportunity for SB
prime contracting.
Senator Sullivan. Great. Thank you, Ms. Buehler.
Mr. Smith, the floor is yours.
STATEMENT OF JIMMY D. SMITH, DIRECTOR, OFFICE OF
SMALL BUSINESS PROGRAMS, DEPARTMENT OF THE NAVY
Mr. Smith. Chair Hirono, Ranking Member Sullivan, Members
of the Subcommittee, it is an honor to appear before you here
today.
On behalf of the Secretary of the Navy, the Department of
the Navy leadership, thank you for your continued support to
our sailors and marines, civilian workforce, industry partners,
in particular, the small business community.
A healthy small business industrial base will continue to
be vital to the long-term success and affordability of the
Department of the Navy as well as our national security.
Increasing opportunities for small businesses is a high
priority and focus for the Department of the Navy. The
Department of the Navy's senior leaders must ensure that Navy
and Marine Corps acquisition activities are aligned to the
Secretary of Defense three small business priorities, which are
increasing the share of small business dollars, lowering
barriers to entry, and increasing competition for small
businesses and traditionally underserved entrepreneurs.
In fiscal year 2022 the Department of the Navy awarded $94
billion in prime contract awards. Nearly 20 percent of that
went to small businesses that served as prime contractors.
This 20 percent equates to $18.4 billion awarded to small
businesses. It also represents an increase over the fiscal year
2021 number, which was $17.3 billion awarded to small
businesses.
In fiscal year 2022 the Department of the Navy exceeded its
goals for women-owned, service-disabled veteran-owned,
historically underutilized business zones small businesses. The
Department of the Navy increased its small disadvantaged
business targets significantly in fiscal year 2022 in response
to President Biden's Executive Order 13985.
Our proactive posturing resulted in the Department of the
Navy's 4-year run of exceeding its goals in all four socio
economic categories to be broken by aggressively targeting the
1 percent short for small, disadvantaged businesses.
The Department of the Navy continues to blaze new trails as
the Secretary of the Navy continues to lead from the front. In
addition to his regular meetings with industry partners, he
conducts small business roundtables and he also established and
led two small business executive offsites within the Department
of the Navy.
These offsites require that the 10 commanders that oversee
our major buying commands and the 18 program executive officers
reflect back on their small business opportunities and
performance against their fiscal year 2022 small business goals
and then we spent time discussing the fiscal year 2023 small
business execution plans.
Furthermore, SecNav [The Secretary of the Navy] challenged
these senior leaders to disaggregate previously held large and
omnibus contracts to afford small businesses the opportunity to
compete for prime contracting opportunities.
Supporting in this stance, the Secretary of the Navy then
tasked my office, my team, with creating a policy to leverage
Office of Management and Budget's (OMB's) memo entitled
``Advancing Equity in Small Business'' to strengthen
accountability of the Department of the Navy senior leaders and
meeting the goals established in each socio-economic category,
thereby strengthening and increasing small business industrial
capacity.
This direct communication with the Department of the Navy
senior leaders and the accountability measures effected through
their performance plans has yielded unparalleled increases in
outreach efforts throughout the Department of the Navy.
My team and I attribute the majority of the increase of the
small business performance to SecNav's hands-on approach to
increasing small business and giving them the opportunity to
provide warfighting capability to the Navy's mission.
In conclusion, the small businesses that are essential to
the healthy defense base we need you working on our hardest
problems. You bring about innovation, you bring about
capability and technology, and we afford opportunities to work
with you. The Department recognizes that there are incredible
resources available for this adaptability. The Department of
the Navy is committed to these opportunities and removing
barriers to doing business with us.
Thank you again for your leadership of this Committee and
the oversight of interest in the Department of the Navy. To my
Navy small business team, thank you for the outstanding work
you do in support of the Navy mission.
I look forward to your questions.
[The prepared statement of Mr. Smith follows:]
Prepared Statement by Jimmy D. Smith
introduction
Chairman Hirono, Ranking Member Sullivan, Members of the
Subcommittee, it is an honor to appear before you alongside the Office
of the Secretary of Defense (OSD) and our sister Services Small
Business Directors, Mr. Farooq Mitha (OSD), Ms. Kimberly Buehler
(Army), and Mr. Scott Kiser (Air Force), to discuss the Department of
the Navy's (DON) small business tools for enhancing the industrial
base. A healthy small business industrial base will continue to be
vital to the long-term success and affordability of the DON as well as
to our national security. Thank you for your continued support to our
Sailors, Marines, civilian workforce, and industry partners, in
particular, the small business community. On behalf of the Secretary of
the Navy and the DON Leadership, thank you for the opportunity to
appear before you today.
small business participation
Increasing opportunities for small businesses is a high priority
and a focus area for the DON. The DON senior leaders must ensure that
Navy and Marine Corps acquisition activities are aligned with the
Secretary of Defense's three (3) small business priorities: ``the
President's focus on increasing the share of dollars going to small
disadvantaged businesses, lowering barriers to entry, and increasing
competition opportunities for small businesses and traditionally
underserved entrepreneurs.'' In particular, all DON personnel and
organizations must leverage the expertise of DON Office of Small
Business Programs (OSBP) and the Small Business Professional workforce
to ensure small businesses are provided maximum practicable
opportunities to participate in Navy and Marine Corps acquisitions.
In fiscal year 2022 we awarded over $94 billion ($94.26 billion) in
prime awards of which almost 20 percent (19.58 percent) went to prime
Small Businesses. This $18 plus billion ($18.4 billion) in small
business awards was an increase of over 6 percent (6.87 percent) over
the prior all--time high of $17 billion ($17.3 billion) DON awarded in
prime small business awards in fiscal year 2021. Small business
performance also saw a significant increase from fiscal year 2021 (18.1
percent) to fiscal year 2022 (19.58 percent). DON also exceeded its
Women-Owned Small Business, Service-Disabled Veteran-Owned (SDVO) and
Historically Underutilized Business Zone (HUBZone). The DON increased
the Small Disadvantaged Business target significantly in response to
Executive Order 13985 in anticipation of future increases in Small
Disadvantaged Business targets. Our proactive posturing resulted in the
DON's 4-year run of exceeding its goals in all four socio-economic
targets being broken as our aggressive targeting resulted in a less
than 1 percent shortfall of our Small Disadvantaged Business target
One of our top Small Disadvantaged Business successes for fiscal
year 2022 was the $86 million prime award to the PacWest-Korte Joint
Venture for the renovation of Bachelor Enlisted Quarters Building 2701
at Naval Air Station in Whidbey Island, Washington. This award entailed
PacWest-Korte JV providing repairs and new construction of parking lots
at the facility. This award was competitively procured and awarded as a
Full and Open contract to PacWest-Korte JV, just one example of the
DON's dedication to small business and Small Disadvantaged Business.
The DON OSBP, partnered with the U.S. Department of Transportation,
Office of Small and Disadvantaged Business Utilization provided an in-
person event focused on woman-owned small businesses and their ability
to compete for Federal procurement opportunities. Topics covered
included an introduction to small business programs, policies regarding
woman-owned small business, how to market to the Federal Government,
how to work with large primes, and increasing diversity, equity, and
inclusion through finance. In addition and in conjunction with the
HUBZone Contractors National Council, the DON OSBP Director was a
featured speaker at their 2022 National HUBZone Conference series on
``How are Agencies Implementing Executive Order 13985 and how will it
support the HUBZone Community.'' Further, DON OSBP, in conjunction with
the Department of Commerce, Small Business Administration (SBA), Office
of Management and Budget (OMB) and the Census Bureau, provided a
webinar targeting all socioeconomic businesses with attendance
estimated at well over 800. Last, five of the DON's buying activities
held targeted events for Women-Owned Small Business and HUBZone small
businesses.
The DON continues to blaze new trails as the Secretary of the Navy
(SECNAV) continues to lead from the front. In addition to his regular
meetings with industry partners in the 50-mile area surrounding each of
his command visits, Roundtables with small business owners, he
established and held two SECNAV Small Business Executive Offsites that
required attendance and briefings by each 3-star level Commanders and
Program Executive Officers to discuss their performance against their
fiscal year 2022 small business goals and then to discuss their fiscal
year 2023 small business execution plans. Furthermore, SECNAV
challenged these senior leaders to disaggregate previously held large
and omnibus contracts to afford small businesses the maximum
opportunity to compete for prime contract opportunities. Supporting
this stance, the SECNAV has DON OSBP creating a policy, leveraging the
OMB's Memorandum (M-22-03 of December 21, 2021) entitled ``Advancing
Equity in Small Business'' to strengthen accountably of the DON senior
leaders in meeting the goals established in each socioeconomic
category, thus strengthening the small business industrial capacity.
This direct communication with the DON senior leaders and the
accountability measures effected through their performance plans has
yielded an unparalleled increase in outreach efforts throughout the
DON. The DON OSBP attributes much of the increase in its small business
performance to the SECNAV's hands-on approach to ensuring small
businesses have ample opportunity to contribute to the Navy and Marine
Corps warfighting capability. DON OSBP's team (consisting of seven
Government employees and five contract support personnel), established
a strategic communication model for use throughout the small business
professional community, leveraging Navy Weeks, collaborating with local
APEX Accelerators (APEX) (formerly Procurement Technical Assistance
Centers (PTAC)) to provide support and matchmaking services at their
events and partnering with SBA to identify avenues to the many small
businesses certified within the DON without a contract award.
Through SECNAV's direction to ensure small businesses
considerations are included early in the acquisition planning process,
DON OSBP hosts monthly meetings with select large prime vendors for a
focused discussion on subcontracting performance opportunities,
innovations, improving readiness, use of Small Business Innovation
Research (SBIR) and Small Business Technology Transfer (STTR)
investments, and the small business industrial base. While specific
metrics are not available to directly assess the impact of this
process, several large businesses have specifically stated that they
have increased their outreach to and attendance at small business
events in direct response to the DON's directed energies in this space.
I served as the Director of the Federal Office of Small and
Disadvantaged Business Utilization Directors Interagency Council and
through strong leadership and an effective team of small business
professionals supporting me, the attendance at the Council was elevated
through proactively identifying speakers to provide presentations on
time-sensitive current events and issues. Examples of issues tackled
during my leadership of this Council include: Government-Wide Equity
Tool for a centralized use of SAM.gov data; marrying small business
goals with category management practices; and, interagency
collaboration on meeting the requirements of Executive Order 13985.
In an ultimate demonstration of commitment to ensuring small
businesses have the best opportunity to achieve contract award, the DON
OSBP Director publicly advertised that the DON would target five
previously held large business contracts to be disaggregated to allow
for small business set-asides. Through this direction, two contracts
have been identified and awarded to date.
Lastly, the DON is preparing a proposal that will increase the sole
source thresholds across all socio-economic small business set aside
categories when entering into contracts for key technologies identified
by Department of Defense (DOD) and its components.
outreach
The DON OSBP is well-known for its extensive outreach program, in-
depth resources created by DON OSBP officials, and extensive digital
marketing effort in curating and cross-sharing information across
platforms to promote opportunities for small businesses. DON OSBP
consistently promotes this information through our social media
platforms, including Facebook, Twitter, LinkedIn, and YouTube. While
these platforms saw an increase in users in fiscal year 2020, as a
result of the pandemic, DON OSBP continued its strategic outreach
campaign by creating various webinar series' and disseminating weekly
newsletters to reach not only small businesses, but also non-
traditional suppliers. The DON OSBP weekly newsletter is distributed to
small, medium, and large businesses, as well as government, industry,
and education personnel. It allows for the curation, promotion, and
informing of upcoming events, regulatory and policy changes,
procurement resources, official memorandums, relevant news stories, and
contracting opportunities.
In fiscal year 2022, the DON's small business enterprise digital
analytics revealed a 66 percent increase in Facebook page visits, a 32
percent increase in LinkedIn follower growth,] and an increase in
YouTube followers (48 percent), video views (28 percent), and overall
watch time (59 percent). While this growth is not limited to small
businesses, the 30 percent increase in fiscal year 2022 to more than
3,300 newsletter subscribers is a leading indicator of our success in
reaching this critical segment of the DON's industrial base.
The DON OSBP office is working with APEX to teach small businesses
how to use publicly available resources to help them respond to
government solicitations. In addition, the DON OSBP hosted seven
separate PTAC/APEX webinars (a 133 percent increase over fiscal year
2021) to introduce industry partners to the available services.
Many one-on-one mentoring sessions were held with small business
owners. In fact, more than 722 mentoring sessions (33 percent more than
in fiscal year 2021) were held in fiscal year 2022, educating the
industry on how to do business with the DON and matching mentees with
specific Navy and Marine Corps Small Business Professionals and
requirement owners who can help these small businesses secure the
opportunity to support the warfighter through the provision of goods
and services.
DON OSBP enlisted the help of the Office of Navy Community Outreach
(NAVCO), APEX, GSA, and the SBA to host small business workshops during
the highly anticipated Navy Week events across the country. These
events are held in specific locations with the goal of attracting new
industry partners in areas where the Navy and Marine Corps do not have
a significant presence. During fiscal year 2022, the DON OSBP held 12
Navy Weeks, with over 450 companies in attendance.
DON OSBP is producing a ``Year in Review'' video to attract new
business partners, highlighting the contributions of the small business
industrial base in meeting the needs of Sailors and Marines and
demonstrating the significant contributions that small businesses make
through the acquisition of goods and services. The video highlighted
small business success stories, good news stories about first-time
contract award winners, outreach activities, mentor-protege success
stories, and successful SBIR/STTR contributions.
Yearly, DON OSBP is involved in the planning of two large-scale
premier small business symposiums, specifically the DON Sea-Air-Space
Small Business Day and the DON Gold Coast Event. Over 9,000 small and
medium-sized business representatives attended these events, which
provided numerous opportunities for their companies to collaborate with
large businesses from every industry. The DON, organized a ``shark
tank'' style event in which small businesses could brief senior leaders
on their company's products and services in a 10-minute segment in the
hopes of identifying a previously unknown niche to the Government while
receiving immediate feedback on their businesses from those senior
leaders within the Government. Officials from the DON OSBP collaborated
closely with the National Defense Industrial Association to plan,
promote, and execute the successful 3-day DON Gold Coast Event. DON
OSBP worked specifically on coordinating speakers, including securing
the prominent keynote speaker, The Honorable Isabella Guzman,
Administrator of the United States Small Business Administration. The
DON OSBP team used a mobile app to create the event's schedule,
speakers, and sessions, allowing attendees to capture real-time updates
and resources in a streamlined manner. One thousand two hundred twenty-
five DON Gold Coast attendees and participants downloaded a
collaborative application created by DON OSBP for use during the event.
The event successfully provided networking opportunities, resources,
and business growth for government officials and industry with over
1,950 attendees, 250 exhibitors, and 45 speakers and panelists.
DON OSBP headquarters coupled with the efforts of each of the DON's
10 buying commands, conducted well over 870 outreach efforts touching
in excess of 12,000 small businesses.
The DON continues to engage with industry at events to raise
awareness of cybersecurity threats in the industrial base's
manufacturing, research and development, and knowledge-based services
sectors, using Project Spectrum, a comprehensive platform that provides
the tools and training needed to increase cybersecurity awareness and
maintain compliance. Through the DON's partnership with Project
Spectrum, we are able to leverage strategic partnerships within and
outside of the DOD to accelerate the defense industrial bases (DIBs)
overall cybersecurity compliance.
Furthermore, the DON has launched a Blue Cyber initiative for
contractors and academic and research institutions to ensure they are
aware of the cybersecurity requirements in their contracts as well as
the resources available to them.
addressing small business challenges
Small businesses have cited widespread confusion on what the entry
points are, how programs and initiatives connect to each other, and how
to plan long-term to meet the Government's requirements.
In response to this, DON has created a single point of entry for
all businesses to obtain information on not only ``how'' to do business
with the DON, but to find all the opportunities the DON is and will be
soliciting. Our website (https://www.secnav.navy.mil/smallbusiness/
Pages/default.aspx) houses links to a specifically prepared video on
``How to Do Business with the DON''. It also contains a step-by-step
guidebook to assist brand new businesses with navigating the complex
maze of becoming a government contractor as well as providing mature
businesses with alternatives for growth. This resource is supplemented
with a Long Range Acquisition Estimate for each of the DON's 10 buying
activities (in a searchable format) to provide early planning and
teaming opportunities for small businesses.
Another challenge of many small business programs is that they
either lack long-term authorization or consistent funding.
American small businesses are critical to a current and future DON.
We use the SBIR/STTR programs as critical entry points for our future
DIB partners from diverse backgrounds. The success of the Department's
SBIR/STTR programs are measured by commercialization of their Phase I
and Phase II awards. In fiscal year 2022, the Department set a record
for commercialization, breaking the $1B mark in commercialization
(known as Phase III). DON SBIR/STTR is only 25 percent of the DOD SBIR/
STTR budget and yet generates 50 percent of DOD SBIR/STTR Phase III
awards so the DON will certainly benefit from the 3-year extension
authorized by Congress for the Programs. The SBIR/STTR programs
represent the DOD's largest source of early stage research and
development funding for small businesses. The extension allows
breathing space to allow for both research and development and the
advancement of small businesses to be able to commercialize innovative
technologies developed through the SBIR/STTR programs. The DON leads
all DOD organizations in federally funded Phase III contracts. In
fiscal year 2022, the DON funded 223 unique Phase III contract
vehicles, which included 130 small businesses across 33 states totaling
$1.07 billion. But it is not just making awards that matters to the
DON, it is delivering capability to our warfighter and we accomplish
that by helping American small businesses become productive, long-term
partners. The DON's SBIR/STTR programs have demonstrated enduring
support to small business through several programs focused on helping
them grow and deliver at scale. One of those programs is the SBIR/STTR
Transition Program (STP). Twenty-three years strong, STP is known
across the Federal SBIR/STTR Programs as one of the most effective
transition assistance program providing exceptional services to assist
with transition of technologies through business mentoring, education,
and networking.
To ensure small businesses remain appraised opportunities in the
SBIR/STTR realm, the DON hosted three Forums for SBIR/STTR Transition
(FST)-focused technology events to promote mature SBIR/STTR
technologies that are ready for transition. Further, these FST events
connect these small businesses with government and industry personnel
through Tech Talks, 1-on-1 ``Meet the Experts'' meetings, and provide
an enhanced online presence using the Virtual Transition Marketplace
(VTM) enabling small businesses to be in direct communication with the
requirements owners.
The DON also leveraged the extension of DOD's Mentor-Protege
Program (DOD MPP) (through fiscal year 2024) to achieve new highs. In
2022, my office awarded four (4) new Mentor Protege Agreements (MPA)
totaling more than $6.6 million. One of those newly awarded agreements
will have a substantial impact because at the end of the agreement, the
prime contractor will turn over various manufacturing items initially
planned for obsolesce to its protege. Through this MPA, parts
identified as obsolete will no longer be so and the DON will no longer
be required to find a semi-suitable replacement.
My office has addressed the challenge facing our small businesses
in meeting the increasing cybersecurity requirements inhibiting their
eligibility for contract award.
The DON continues to leverage Project Spectrum to engage with
industry at both of the DON's premier events, DON Gold Coast Event and
Sea-Air-Space. During these events, the Project Spectrum team trained
industry on the changes to the contractual requirements for
cybersecurity and how to leverage Project Spectrum personnel and their
website for effective assistance in how to meet those changing
requirements. This partnership has enhanced small businesses awareness
of cybersecurity threats within the manufacturing, research and
development, as well as the knowledge-based services sectors of the
industrial base.
Lastly, the DON has implemented a Blue Cyber initiative for
contractors and academic/research institutions to ensure they are aware
of the cybersecurity requirements in their contracts and the resources
available to them. Through this initiative, in fiscal year 2022 Blue
Cyber provided support to over 11,000 small business in the United
States by having:
Daily Office Hours in-person consultations answering
questions, finding resources, and connecting small business with State
grant funding (if necessary);
Weekly public ``Ask-Me-Anything'' webinars; and,
Monthly full day ``Boot Camp'' providing the most up-to-
date cyber information.
conclusion
Small businesses are essential to a healthy DON industrial base if
we are going to deliver the innovation and operations capability needed
to address key warfighting challenges. The DON recognizes small
businesses are an incredible source for innovation, adaptability,
agility and resilience. The DON is committed to increasing small
business opportunities and educating industry. Thank you again to the
leadership and membership of this Committee for your oversight and
interest in the DON's small business program. I look forward to your
questions.
Senator Hirono. [Presiding.] Thank you very much.
Mr. Kiser?
STATEMENT OF SCOTT A. KISER, DIRECTOR, AIR FORCE
SMALL BUSINESS PROGRAMS, DEPARTMENT OF THE AIR
FORCE
Mr. Kiser. Good afternoon, Chair Hirono, Ranking Member
Sullivan, and Members of the Subcommittee.
My name is Scott Kiser and I currently serve as the
director of Small Business Programs for the Department of the
Air Force, covering both the United States Air Force and the
United States Space Force.
Thank you for the privilege to be sharing our perspective
on small business tools and for enhancing the defense
industrial base.
It is good to see that you, Madam Chair, and Senator
Shaheen and Duckworth also serve on the Senate Committee on
Small Business and Entrepreneurship.
We value your continued support for small business, for our
civilian employees, and our uniformed military members who
serve as small business professionals.
Our fiscal year 2022 small business participation record is
strong. For the third year in a row the Department of the Air
Force exceeded all small business goals as well as each of the
subcategories, awarding a record 22.9 percent of all eligible
DAF [Department of the Air Force] contracts, representing $15.6
billion direct to small business.
Small disadvantaged businesses, SDBs, owned by
disadvantaged individuals--Native American tribes, Native
Hawaiian organizations and Alaskan Native corporations--receive
10.12 percent. Goals for service-disabled veteran-owned small
business, women-owned small businesses, and historically
underutilized business zone--HUBZone--small businesses were
also all exceeded.
This industrial base is broad from R&D to construction to
information technology to manufacturing. For example, an ANC-
owned small disadvantaged business was chosen as the best value
for aircraft logistics at the United States Air Force Academy,
a contract worth over $109 million.
Small businesses are known as the engines of innovation. We
agree. La]st year we obligated 19.7 percent of all eligible R&D
contracts over $2.7 billion to small firms. Spend under Small
Business Innovation Research--SBIR--and Small Business
Technology Transfer--STTR--for technological feasibility,
further research, and prototyping reached just over $1 billion.
Our technology transition is strong. In fiscal year 2022 we
awarded SIBR/STTR Phase III contracts with a ceiling value of
almost $2 billion with nearly $1.8 billion awarded to small
firms.
Our fiscal year 2022 eligible Phase III contract
obligations reached $772 million from under $300 million in
fiscal year 2018. Of those $772 million small firms got $627
million. We made almost half of DOD wide Phase III obligations.
The most important tool on which these successes hinge is
our small business professional workforce, which assists small
firms and advocates for the participation and innovations in
the acquisition process.
I lead a small business community of 162 small business
subject matter experts, about half of which are dual hatted in
their responsibility and roles. Small business partner (SBP)
work hard. Last year's average was about 642 contracting action
per SBP under purview, an increase from 625 the year prior.
To drive strategic improvements we organized small business
professionals into what we call a DAF Small Business Board of
Directors (BOD) and employed the objectives and key results
(OKR) management model from leading private sector
organizations.
We used the OKR model to pursue broad lines of lines of
effort under our BOD structure. The small business
professionals on each LOE [lines of effort] team develop the
OKRs to support that team's objectives.
OKRs address training and fill the workforce, deployment of
effective guidance for small business contracting methods,
data, goaling metrics, improved outreach and reduction of entry
barriers, and mainstreaming they used the SBIR/STTR Phase III
in acquisition planning.
Thanks to the OKRs our small business professionals carried
out a record number of outreach activities, last year
increasing 45.7 percent of audience over fiscal year 2021, both
virtual and in-person audience members.
We even sent our SBIR/STTR expert to speak in Hawaii at the
Governor's invitation last October. The OKR methodology-based
policy changes have helped small business firms receive 78.2
percent of DAF's simplified acquisition threshold level spend.
Despite all our successes, we know small business firms
continue to face challenges doing business with the DAF and the
DOD in general. We take this seriously implementing the new DOD
Small Business Strategy. We have assigned the strategy's 2023
action items into our BOD's LOE teams and they have worked it
into that so we can track our progress on a monthly basis.
We have provided the DOD Office of Small Business Programs
for appropriate action the DAF strategy resourcing estimate,
matching action items to the existing or additional personnel
as approved by our under secretary with the concurrence of the
chief and vice chief of both Air Force and Space Force.
Thank you again for this opportunity to testify and share
the small business perspective. We look forward to answering
your questions.
[The prepared statement of Mr. Kiser follows:]
Prepared Statement by Scott A. Kiser
introduction
Chair Hirono, Ranking Member Sullivan, Members of the Subcommittee,
My name is Scott Kiser, and I am the Director of Small Business
Programs for the Department of the Air Force (DAF). On behalf of the
Secretary of the Air Force, thank you for the opportunity to share the
combined Department of the Air Force (DAF) perspective--including both
the U.S. Air Force (USAF) and the U.S. Space Force (USSF)--on small
business tools for enhancing the defense industrial base. It is a
privilege to appear before this distinguished panel, and it is
especially good to see that you, Madam Chair, and Senator Shaheen also
serve on the Senate Committee on Small Business and Entrepreneurship. I
am honored to share the table with highly experienced and dedicated
fellow Directors of Small Business Programs for the Department of
Defense (DOD), the Department of the Army, and the Department of the
Navy. We applaud congressional foresight in fiscal year2021 NDAA to
call for an updated DOD Small Business Strategy to shore up our
Nation's readiness in this challenging national security environment.
We value your continued support for small business, and for civilian
employees and uniformed military members serving as Small Business
Professionals (SBPs) across the DAF who carry out the critical work of
keeping our industrial base strong.
daf small business participation record
Small business participation in DAF acquisitions is measured by a
variety of metrics and reports prescribed by Congress, the Small
Business Administration (SBA), the Office of Management and Budget
(OMB), and the Office of the Secretary of Defense (OSD). The most well-
known metrics are small business prime contracting spend goals. These
goals are set pursuant to law for the DOD as percentage shares of small
business-eligible contracts by the OMB and the SBA, and further
apportioned to the Military Departments in negotiations with the DOD
Office of Small Business Programs (OSBP). Consistent with law, OMB
guidance, and DOD policy, the goals are further apportioned from the
DAF Secretariat to Air Force Major Commands (MAJCOMs), Space Force
Field Commands (FLDCOMs), Direct Reporting Units (DRUs), and Program
Executive Offices (PEOs). \1\ The MAJCOM/FLDCOM/DRU-level and PEO-level
goals become the quantitative element of Senior Leader Performance
Expectations (SLPEs) for general officers and senior executives
involved in acquisitions, along with the qualitative element of small
business-friendly organizational processes, outreach, and climate. We
find that leadership and tone at the top are key to program success.
Across Air Force and Space Force units, Small Business Programs are
meant to be the commanders' programs.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 644; OMB Memorandum M-22-03; DODI 4205.01.
---------------------------------------------------------------------------
In fiscal year 2022, for the third year in a row, the DAF exceeded
its overall small business (SB) contracting goals. We have also
exceeded all our fiscal year 2022 goals for small business categories.
\2\ Specifically, fiscal year 2022 Small Business (SB) participation as
prime contractors in small business-eligible DAF acquisitions reached a
record 22.92 percent (over 18.10 percent goal), or $15.58 billion.
Small Disadvantaged Businesses (SDBs), including those owned by
disadvantaged individuals as well as by Native American Tribes, Native
Hawaiian Organizations (NHOs), and Alaska Native Corporations (ANCs),
received 10.12 percent of DAF contract spend (over 9.58 percent
enhanced goal). This success implements the President's and OMB's
direction \3\ to raise Government-wide SDB contracts spend from 10.54
percent in fiscal year 2020 to 15 percent by fiscal year 2025.
Participation by other small business categories also exceeded goals:
contracts with Service-Disabled Veteran-Owned Small Businesses
(SDVOSBs) reached 3.39 percent (over 2.60 percent goal), contracts with
Women-Owned Small Businesses (WOSBs) reached 4 percent (over 3.50
percent goal), and contracts with Historically Underutilized Business
Zone (HUBZone) Small Businesses reached 1.82 percent (over 1.20 percent
goal).
---------------------------------------------------------------------------
\2\ SB category goals are developed by the Military Departments,
rather than assigned by DOD OSBP. Subcontracting goal achievement is
reported to the SBA at the DOD-wide level, not by Military Department.
\3\ OMB Memoranda M-22-03 and M-23-01.
---------------------------------------------------------------------------
For DAF leaders and buyers, small business spend goals are not an
end in themselves. Secretary Kendall's DAF small business policy
directive No. 90-18 and the long-standing ``Beyond Goals'' ethos of our
office ensure that DAF small business goals and programs support a
resilient industrial base and the main mission objective of the defense
acquisition system. This objective is to deliver goods and services in
support of the warfighter. Spend goals are not a license to charge
above fair market price or to lower the quality of performance.
However, spend goals can prompt buyers to take a hard look at contract
scope for small business-suitable work, to consider small business
award flexibilities, and to diligently search the market for capable
and innovative small firms in broad spectrum of industries.
DAF Small Business Programs engage broad and complex areas of the
industrial base. In fiscal year 2022, top industry sources for DAF
small business contractors included: research and development (R&D) in
Physical, Engineering, and Life Sciences; Commercial and Institutional
Building Construction; Engineering Services; Computer Services, Custom
Programming, and Computer Systems Design; Aircraft Equipment
Manufacturing; Facilities Support Services; and Wired
Telecommunications. The top DAF requirements portfolios on which small
businesses have performed in fiscal year 2022 as prime contractors
included: Support Services, e.g., Professional, Technical, and
Engineering Support, Program Management Support, Contract Support, and
Other Professional Support; National Defense R&D Services for Applied
Research and Experimentation; IT & Telecom Business Applications and
Applications Development; and Building Alteration and Repair as well as
Facilities Support. For instance, Akima Logistics Services, LLC (ALS),
an ANC-owned SDB, was awarded a contract for up to $109.7 million for
logistics support of 58 training aircraft at the United States Air
Force Academy (USAFA). This competitive small business set-aside award
went to a best value contractor with excellent experience and
understanding of customer needs, ensuring continuity in flight line
operations.
The 2022 National Defense Strategy calls on the DOD to ``bolster
support'' for small businesses and innovative technology firms to
strengthen our R&D and technical capabilities. In fiscal year 2022, the
DAF obligated 19.67 percent (or $2.712 billion) of its small business-
eligible Research, Development, Testing, and Evaluation (RDT&E) work
contracts to small firms--higher percentage share than the Navy's, and
more dollars than any other DOD component. Obligations under Small
Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Phase I for technical feasibility and Phase II for
further research and prototyping accounted for $1.013 billion,
representing 37.36 percent of total small business RDT&E awards, 7.35
percent of total RDT&E awards, and about 6.5 percent of DAF small
business awards.
Our SBIR/STTR Phase I and II investments generated notable returns
in the form of Phase III contracts for transition across most MAJCOMs,
FLDCOMs, and PEOs--with Air Force Materiel Command, Space Systems
Command, and PEO Digital in the lead. In fiscal year 2022, the DAF
awarded SBIR/STTR Phase III contracts with the ceiling value of almost
$1.995 billion, with over $1.770 billion awarded to small firms. Our
fiscal year 2022 small business-eligible Phase III contract
obligations--measured similarly to spend goals--reached $772 million.
Of those, $627 million went to small firms, representing approximately
1 percent of total DAF small business-eligible spend. DAF SBIR/STTR
Phase III technology transition obligations represent 49.55 percent of
such obligations DOD-wide. This data does not include the approximately
$323 million in DAF-funded Phase III awards obligated by GSA through
assisted acquisitions.
daf small business participation enhancement tools
Our small business participation successes are not accidents or
lucky breaks. Rather, they were results of deliberate management of
tools and resources applied to DAF mission needs. Along with spend
goals, there are many programmatic authorities, goals, and policies
that serve as tools for growing the small business industrial base.
Most of the tools were provided by Congress, OMB, and DOD, and some
were developed within the DAF. But the most important tool we have--and
our most valued resource--is our highly qualified and dedicated Small
Business Professional (SBP) workforce. The DAF SBP workforce performs
Small Business Programs duties and provides general guidance and
oversight. SBPs are a community within the Defense Acquisition
Workforce, like contracting officers or acquisition program managers.
I serve as the principal advisor on small business programs and
tools to the Secretary and the Under Secretary of the Air Force, the
Acquisition Assistant Secretaries over Air Force and Space Force (SAF/
AQ and SAF/SQ), and other DAF senior leaders. In this role, I report
directly to the Under Secretary, and I am supported by a statutory
office established by Title 10, Section 9024, and Title 15, Section
644(k), U.S. Code. My Deputy Director and I lead a staff of 9 career
civilian administrative and subject matter experts, along with several
support contractors. Our office has complex and growing
responsibilities, most of which are within the areas of policy,
advocacy, and oversight. For example, we: support DAF senior leaders'
engagements with local community groups and Chambers of Commerce;
develop and negotiate goals; analyze and develop DAF policies and
guidance for implementation of congressional small business statutes,
Executive Orders, and SBA guidance; advocate for small business in
consolidated, bundled, or other significant DAF acquisitions and
efforts such as Category Management; and respond to congressional, SBA,
and other programmatic audits, oversight requests, and reporting
requirements. We resolve SBA's complaints and appeals on behalf of the
Secretary, review of subcontracting plans and reports; outreach, assist
small businesses with obtaining payments due from the DAF or primes;
facilitate workforce training and functional appointments; and manage
the DAF Mentor-Protege Program, DOD's largest. Our office does not
execute SBIR and STTR Program budgets: these two programs are executed
by AFWERX and SpaceWERX under managerial oversight and direction from
SAF/AQ and SAF/SQ. However, our office advocates for SBIR/STTR Phase
III opportunities in DAF acquisitions and provides policy oversight of
the SBIR and STTR programs to ensure consistency with SBA policies and
guidance. We also serve as DAF's focal point and lead on regulatory
compliance assistance to small firms under the Small Business Act, the
Small Business Paperwork Relief Act (SBPRA), and the Small Business
Regulatory Enforcement Fairness Act (SBREFA).
I lead the DAF-wide SBP professional functional community of 162
experts in acquisition strategies, policies and procedures, support
programs, outreach, and technical assistance. Except for my immediate
staff, the rest of SBPs are employed by DAF organizations in the field.
The main duty of SBPs in the field is to manage policies, processes,
outreach, oversight, and reports concerning unit Small Business
Programs on behalf of unit commanders, review acquisitions and advocate
for small business prime contracting-and subcontracting-inclusive
strategies, and assist individual small businesses. Our SBPs account
for about one quarter of the 700+ DOD-wide SBP community, most of which
are full-time. Within DAF, 90 SBPs and supporting staff are full-time,
while 72 serve part-time (dual-hatted) under special waiver in other
jobs, like installation Directors of Business Operations (DBOs). Each
MAJCOM, FLDCOM, DRU, and Center typically has a Small Business Office
to ensure proper support for organizational leadership, contracting
officers, and the small business industrial base. Our SBP are hard
workers whose dedication to their duty is second to none. Last year,
DAF buyers executed 103,938 total small business-eligible contract
actions, including 60,244 contract actions for 9,473 small business
contractors. This comes to about 642 small business-eligible contract
actions on average per SBP workforce position, although this ratio
changes depending on workload distribution, complexity of action, entry
barriers, and process efficiencies. Contract actions count does not
include SBP involvement in other actions, e.g., Other Transactions.
Beginning in 2020, as the recently appointed Director, I sought to
align the DAF SBP workforce more efficiently and to capitalize on
significant expertise in the field by convening SB Directors and
experts at major DAF units into the DAF Small Business Board of
Directors (BOD). Employing the Objectives-Key Results (OKR) management
model from leading private sector organizations, we subdivided the BOD
into teams across broad Lines of Effort (LOEs). Our BOD currently has
three (3) LOEs. Each LOE team's member collaborate to develop
Objectives and Key Results which support the team's Line of Effort.
Our LOE 1 is ``Build Mission-Focused Small Business Leaders.'' This
LOE has two Objectives: (1) continue progress in training and
developing DAF SBP workforce, and (2) advocate for proper
identification, structure, and fill of DAF SBP workforce. LOE 2 is
``Provide Relevant Tools and Rules.'' This LOE has three objectives:
(1) deploy effective policy/guidance for SBP and other acquisition team
members; (2) deliver metrics and data driven tools to improve SB
participation; and (3) equip SBPs to support SBIR/STTR and other
innovation programs. LOE 3 is ``Strengthen the Department's Engagement
and Support of Small Business.'' This LOE has three Objectives: (1)
analyze and reduce barriers to entry for small businesses through
cross-functional effort lead by Office of the Deputy Assistant
Secretary for Contracting; (2) deliver DAF enterprise small business
outreach and messaging; and (3) leverage collaborative partnerships
with organizations such as APEX Accelerators as well as Small and
Minority Business Development Centers (SBDCs and MBDCs).
I would like to share a couple of examples of how this model
generates results in practice. For instance, LOE 3's outreach and
messaging Objective is supported by two Key Results (KRs): (1) identify
key topics for outreach and messaging, and (2) pursue a DAF enterprise-
wide outreach and messaging campaign. For these KRs, our team prepared
messaging topic materials, including forecast lists of expiring
contracts for industry, State Fact sheets for congressional offices and
local community groups, and tailored presentations events covering
specific industries and small business categories. Our fiscal year 2022
small business participation success has been fueled by largest-ever
outreach conducted by Small Business Offices across the DAF. Outreach
is also a statutory metric we report annually to the SBA for further
transmission to Congress. During fiscal year 2022, we held 41 events
reaching nearly 30,000 audience members from the small business
industrial base ecosystem (a 45.7 percent increase in audience over
fiscal year 2021). For instance, our office's SBIR/STTR expert spoke in
Hawaii at the Governor's invitation.
As a small rudder that can turn a large airplane in the right
direction, even small improvements to policies, processes, and systems
can direct contract dollar flowing where they should. Our LOE 2,
``Provide Relevant Tools and Rules,'' worked together with the Office
of the Deputy Assistant Secretary for Contracting to amend the Air
Force Federal Acquisition Regulation Supplement (AFFARS) for fiscal
year 2022. The amendments empowered SBPs to more closely review SAT-
level purchases and other buys to ensure maximum practicable
opportunity for SBs in all categories, reducing pre-review paperwork.
In fiscal year 2022, small firms received 78.20 percent (over 68.50
percent goal) of contract value between the Micro-Purchase Threshold
(MPT) (typically, $10,000) and the Simplified Acquisition Threshold
(SAT) (typically, $250,000) or $351.53 million out of $449.51 million,
continuing a 3-year trend upwards. While not a statutory goal, SAT-
level SB spending is an OSD-tracked area especially suitable for very
small, emerging, and small commercial firms. The Small Business Act, 15
U.S.C. 644(j), automatically reserves most SAT-level acquisitions for
small businesses unless two or more capable small businesses cannot be
found, with notable exceptions such as GSA Schedules.
As part of acquisition planning, SBPs can recommend several
planning and contracting tools for inclusion of small businesses:
insightful market research showing capable small firms; breaking up of
contract requirements; total or partial set-asides or reserves of
contracts or orders, use of small business subcontracting plans or
commitment documents; use of subcontracting incentives; and teaming
arrangements. Based on our recommendations, DAF for the first time ever
used an innovative Contractor Teaming Arrangement (CTA) under GSA
procedures. We engaged a team consisting of 1 large business and 9
technologically savvy SBs, SDVOSBs, and SDBs to deploy new IT service
desks for over 700,000 DAF total force users. This will result in about
$2 billion in SB prime spend and about $1 billion in SDB prime spend
over 10 years.
Our SBPs can also recommend the use of special authorities, such as
Mentor-Protege Program (MPP) agreements. MPP enables experienced prime
contractors to develop the capacity of small protege firms by providing
reimbursements for assistance or subcontracting plan credits. Since DAF
MPP's inception in 1992, its participants have successfully completed
over 330 agreements. Currently, DAF MPP has DOD's largest program
portfolio with 13 active agreements: 6 in IT and Cybersecurity
industries, 5 in Parts and Equipment Manufacturing, 1 in Technical and
Engineering Services, and 1 in Medical Equipment Manufacturing. For
instance, the MPP agreement between Lockheed Martin and Marvin
Engineering, a California small business, facilitated transfer of
robotics spray-coating technology to automate the manufacturing of F-35
II Lightning missile launchers, pylons, and internal bay adapters.
One key focus for our BOD teams is ``mainstreaming'' SBIR/STTR
Phase III as regular consideration and competency in acquisition
planning and messaging. Our AFFARS amendment clarified that Phase III
opportunities are part of SBP's acquisition reviews. Both the 2019 and
the 2023 DOD Small Business Strategies called for such reviews to
facilitate small business participation and technology transition. Our
SBPs regularly advise on Phase III direct awards or other preference
tools under Title 15, Section 638(r) and SBA Policy Directive, and the
Phase III Multiple-Award Contracts under Section 1710 of Fiscal Year
2018 NDAA, Public Law 115-91. Section 1710, which is due to expire on
30 September 2023, uniquely empowers buying organizations to swiftly
create pools of SBIR/STTR firms that could sell their technologies on
an expedited basis.
Yet, even after decades in existence, continued validity of SBIR/
STTR and the Phase III special acquisition preference remains
uncertain. Before the latest 3-year extension of SBIR/STTR, there was
much debate between industry and government as to whether the Phase III
preference and technology transitions it enables could continue past 30
September 2022. The potential that Phase III preference and related
data rights protection would abruptly stop made small businesses and
DAF buyers anxious for Phase III-supported missions. Ultimately, the
Under Secretary of Defense for Research and Engineering concluded that
Congress made Phase III authorization for SBIR and STTR co-extensive
with Phases I and II. \4\ The DAF, as the rest of the DOD, supports
permanent reauthorization of SBIR/STTR. We also believe the
distinctions between Phase III and Phases I/II are significant enough
to justify Congress making Phase III permanent now, without waiting for
2025. Most of the disputes which prevented permanency in 2022 related
to practices for awarding Phase I and Phase II funds. For instance,
Congress had questions about awards to small firms focused on R&D
services versus to small firms focused on R&D for eventual transition.
Phase III, of course, is not funded with SBIR/STTR programmatic funds.
Phase III involves interested DAF commands and PEOs seeking to meet
mission needs through technologies already developed in Phases I and II
R&D. To keep technology transitions uninterrupted, Congress should
narrow the reach of temporary SBIR/STTR sunsets in Title 15, Section
638 only to Phases I and II--thereby making Phase III permanent.
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\4\ USD R&E Memorandum, Impact of Expiration of SBIR and STTR
Program Authority (6 September 2022).
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specific challenges for small businesses
Despite all our successes, we know that small businesses continue
to face entry barriers and challenges to doing business with the DOD
and the DAF. In addition to the DOD Small Business Strategy and
Implementation Plan, over the last two and a half years the DOD
published at least 4 reports and plans addressing this topic with a
wealth of observations and recommended actions. These reports and plans
include: the 2022 Defense Business Board (DBB) Assessment of the DOD
Mentor Protege Program, the 2021 DOD Equity Action Plan, the 2022 DOD
Competition Report, and the 2022 DOD Supply Chain Report.
Recommendations cover both areas that are suitable for agency action
and areas that may need congressional assistance. For instance, the DBB
suggested enabling MPP proteges to joint venture with mentor firms. I
commend these reports and plans to the Subcommittee's attention.
Within the DAF, our office has been working as part of cross-
functional team to define and study entry barriers and other factors
affecting small firms' counts, and to identify potential actions within
the DAF to reduce or eliminate the barriers. An action report is
expected soon based on this study effort. In addition, we are working
with DOD OSBP, SBA, and OMB on methodology and metrics for defining and
tracking the number of new entrants. For fiscal year 2022 over fiscal
year 2021, based on our definition of ``no contracts above $10,000 in
the last 5 years,'' DAF demonstrated a slight increase in the number of
new small business entrants, 2,102 over 2,077--though the count of all
DAF-awarded small business contractors decreased to 9,473 from 9,808.
Time and space will not permit me to address every challenge and
entry barrier, many of which I covered earlier. However, I'd like to
highlight a few examples. Barrier one is the twin challenge of
confusion and complexity in entry points and other aspects of Small
Business Programs. We worked hard to reduce confusion and streamline
entry. As part of standing up the Space Force, I leaned heavily on
existing authorities to prevent duplication or unnecessary overhead in
Small Business Programs for USAF and USSF. Our DAF Office of Small
Business Programs (SAF/SB) now serves two Services, with only 1
position added to focus on USSF. Our website has a locator for SBPs in
the field and guidance for submission of unsolicited proposals.
More remains to be done, however, and Congress can help. With me
today are three U.S. Code volumes from Titles 10 and 15, tabbed to
illustrate page-volume parity of small business-related legislation and
general acquisition legislation. Small business provisions are some of
the most detailed and reporting-heavy portions in the U.S. Code, and
for good reasons. However, every time agency Small Business Offices
must deal with duplicative reports and overlapping or conflicting
statutory language, it makes it harder to help small businesses. For
example, we prepare duplicative reports on Phase III transition under
Title 15, Section 638, and Section 279, Fiscal Year 2021 NDAA--because
Section 638 was changed to channel reports to Congress through SBA. A
single report sent directly to SBA and to Congress would free up time
spent in double drafting. There are four (4) statutory programs for
small firms to address foreign ownership, control, and influence
(FOCI), including a pilot with new duties for SB Offices. \5\ We
recommend that Congress engage in ongoing dialog with agency Small
Business Offices to explore streamlining some of those reports and
other provisions.
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\5\ Fiscal year 2020 NDAA, Public Law 116-92, Sec. 847; fiscal year
2021 NDAA, Public Law 116-283, Sec. 223; SBIR/STTR Extension Act of
2022, Public Law 117-183, Sec. 4; and
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daf implementation and impact of the dod small business strategy
The DOD Small Business Strategy identifies 23 Implementation
Actions across 3 Strategic Objectives: (1) implement a unified
management approach for small business programs and activities through
improved collaboration and simplification of entry points; (2) ensure
that by stabilizing and scaling programs, data tools, and processes;
and (3) strengthen DOD's engagement and support of small businesses
through training and education. The DAF Office of Small Business
Programs, together with our colleagues from Army, Navy, and Defense
Logistics Agency, played a significant role in development of the DOD
Small Business Strategy and its Implementation Plan. We are fully
committed to its successful implementation, understanding that most
Implementation Action Items would first need coordination among the
Military Departments and decisions at OSD level. Within the DAF, we
have already assigned all Action Items into the Lines of Effort (LOEs)
for our DAF-wide Small Business BOD Teams. Each BOD Team has adjusted
the Objectives and Key Results (OKRs) under their LOEs. Each Team
carries out at least preparatory or planning efforts in furtherance of
the Action Items. BOD Team Leads brief me on the progress in monthly
meetings.
We already have an early success: the DAF Category Management (CM)
Charter was revised last month to incorporate the DAF Office of Small
Business Programs as the small business lead and advisor to the Deputy
Under Secretary for Management, the DAF Category Management Council,
and other DAF CM officials. The CM Charter also incorporates specific
OSD-and OMB-directed steps and criteria for consideration of small
businesses in CM, particularly the rule that category management
objectives must not be achieved at the expense of small business
equities. Other efforts are ongoing, such as improvements to our
website, training and guidance for SBPs, data tools and forecasting,
Phase III and R&D participation processes, and collaboration with the
Association of APEX Accelerators (a/k/a Procurement Technical
Assistance Centers) to ensure that our SBPs can use APEX assistance for
specific acquisitions.
The DAF is mindful of requirements in Section 861(b) of fiscal year
2021 NDAA, Public Law 116-283, that the Strategy and its Implementation
Plan must include an identification of responsible organizations,
metrics, and resources to support implementation activities. The DOD
Implementation Plan identifies, for each Action Item, responsible
offices, qualitative or quantitative metrics, and use of existing or
additional resources for OSD, DAF, and other DOD Components. The DAF
resourcing estimate for the Implementation Plan matching all Action
Items to existing or additional personnel was prepared by my office,
approved by the Under Secretary of the Air Force with concurrence of
the Chiefs and Vice Chiefs of the Air Force and the Space Force, and
transmitted to DOD OSBP last year for appropriate action.
conclusion
In conclusion, America's small businesses provide crucial support
to our airmen and guardians--all thanks to the tools and resources
provided by Congress. Implementing the DOD Small Business Strategy will
not be easy, but the cause is worthy, and it is a challenge that we
take seriously. Thank you for the opportunity to testify today and for
your willingness to listen to the Small Business Professional
perspective. I look forward to answering your questions.
Senator Hirono. Thank you very much. I will start with the
questions.
First of all, let us get a definition of small business
from you, Mr. Mitha.
Mr. Mitha. Thank you for that question. So the small
business depends on the NAICS [North American Industry
Classification System] codes that are established by the
Department of Commerce--the North American Industry
Classification Codes--for each industry have size standards
that are issued by the SBA [Small Business Administration] and
those size standards vary based on either average revenues or
by individuals.
For services type work it is generally an average of about
$16 million of average revenues and for manufacturing it is an
average about 500 employees. It depends on the industry
classification.
Senator Hirono. When we talk about the thousands of small
businesses that contract with the DOD, though, are we talking
about businesses that have 500-plus employees?
Mr. Mitha. Some.
Senator Hirono. What is the average? Because I would like
to get a picture of the kinds of businesses that you all are
contracting with and I take it you all use the same definition,
even if they are different depending what the industry or
whatever the definitional basis is so you all use the same.
So what are we talking about? Really small businesses like
a hundred? Is that an average kind of a small business? Or are
we talking about 500?
Mr. Mitha. I would say it depends. I do not have an exact
answer on the average. But I would say that for professional
service type work where we look at revenues it is in that
revenue range of probably $10 million dollars and less in
revenues in those types of companies, and for manufacturers it
is harder to tell, from my view, but it could be in that 500
range. Yes.
Senator Hirono. I would like to continue with you that is
there is a drop in the number of small businesses now
participating in DOD contracts and this is for each of you.
What do you think is accounting for this drop and what
specifically are you doing?
You all cited a number of outreach kinds of programs that
you are doing but which of these programs is going to enable
you to increase--I take it that is a goal--increase the number
of small businesses that are working with each of you?
Mr. Mitha. So I can tell you a couple of things from the
OSD [Office of the Secretary of Defense] level that we are
doing. I think some of the policy changes that we have enacted
we hope will reverse that decline.
We sent out some guidance to our workforce based off of an
OMB memo that will enable us to have more set aside
competitions for small businesses in our socio-economic groups.
In terms of category management type policies we have
deemphasized the use of best in class vehicles where we can--
where we want to encourage our workforce--we are encouraging
our workforce to use vehicles that have more small businesses
on them and to have more small business set asides.
We have also sent out guidance to our workforce on
decreasing the bundling and consolidation of contracts and
breaking out contracting opportunities where we have bundled
contracts for small businesses, and on the outreach front we
now have at the office of the Secretary of Defense level these
96 APEX Accelerators that I mentioned, and we are really
leveraging them to be our front door to industry and by them
moving--they were previously at DLA--the Defense Logistics
Agency.
Now they are in my organization where they can be more
integrated into our broader industrial base activities. So that
outreach and training and support that we are going to provide
hopefully will increase.
Senator Hirono. I want to give the other panelists a
chance.
So I take it all of you do have the goal of wanting to
increase the number of small businesses that receive contracts
from you. So would you like to add something, Ms. Buehler?
Ms. Buehler. Yes, Senator.
So in the Army it really is about--it is definitely about
opportunity. So we are working to make sure that small
businesses are aware of what opportunities are out there early
enough so we publish acquisition forecasts in both January and
June of each fiscal year.
That gives them, the small businesses, the opportunity to
directly engage with the contracting and small business
professionals to influence the acquisition strategy for those
procurements.
We are--reestablished simplified acquisition threshold
goals. So in accordance with the Federal acquisition
regulations, all small businesses--all procurements valued
under $250,000--are supposed to be reserved for small business
performance.
So, of course, there is reasons why that is not always
possible. But we are pushing our contracting officers and
requiring activities to expand those opportunities and make
sure that a higher percentage share does go to those companies.
So that is a big push and we revised our category
management policy from back in 2021 to make it more small
business friendly, and the Secretary of the Army, when she
issued her memo to all Army, not only hold senior leaders
accountable for providing small business opportunity but also
reinforces the importance of our small business workforce being
at the table early during market research and acquisition
planning to influence positive outcomes for small business.
Senator Hirono. Mr. Smith?
Mr. Smith. In keeping with my sister service here in the
Army, we are doing the exact same thing. One of the things that
I would highlight in addition to what Navy's doing, virtual
engagements.
Because of COVID things went down dramatically from our
ability to reach people in person. We have expanded our social
media footprint to areas that I never thought we would go in
order to use that mechanism to let the public know, let
industry partners know, that we are open for business.
If you look at our long-range acquisition forecast you can
see every single solicitation that we plan on awarding across
the Department of the Navy between now and 5 and even 6 years
off into the future.
So you can plan tactically, you can plan strategically on
opportunities that you want to investigate and potentially bid
on from a Department of Navy standpoint.
So providing transparency, providing outreach, going to
where people are in order for them to know that you are open
for business, that is where we are doing it in a magnificent
way.
Disaggregating contracts--that is another great opportunity
where you take what used to be a very large contract and you
are breaking it into individual pieces so the small businesses
can participate. That is what we are doing and it is reaping
significant results that we have never across all of us have
seen in the last 6, 7, 8 years.
Senator Hirono. Just because you break the large contracts
into smaller contracts does it not affect the effectiveness or
the--what you are getting out of breaking down the contract?
Mr. Smith. No, ma'am.
So the first thing we have to do first is meet the mission.
We are not just here in the business of giving contracts to
people just to pass money down the line. You have to meet and
support the mission in every single one of our cases, first and
foremost.
Senator Hirono. Thank you for that reassurance.
Mr. Kiser?
Mr. Kiser. Thank you, Madam Chair, for the question.
Similar to the other services, but we also work in tandem.
For example, in terms of those outreach we will also go to
Navy. Department of the Air Force will represent at the Navy
Gold Coast outreach events, the AUSA [Association of the United
States Army] outreach events, because some of those small
businesses may have been focused on one military service. So we
do a lot of cross service opportunities for those small
businesses.
Secondly, in terms of increasing some of those
opportunities, even on large contracts we had a recent effort
where an enterprise wide contract on information technology
(IT) we used the authorities within the General Services
Administration (GSA), which allows a contractor teaming
arrangement where you might have a large lead but it then
brings in many small IT companies to get this.
The service gets the credit in terms of percentages and
dollars. However, what this gives a lot of small businesses an
opportunity to work on a much bigger contract than they might
otherwise to continue their steps one by one further up the
ladder.
Senator Hirono. Thank you. I have gone over so----
Senator Sullivan. Okay. Thank you, Madam Chair.
Senator Hirono.--Senator Sullivan, feel free to go 3
minutes over.
Senator Sullivan. Sure.
Mr. Mitha, I want to press--I read your Hill op-ed and I do
want to press a little bit more on the statement that you made
there about--you kind of talked a lot about the statistics. But
then you said sounds like a great success story. However,
despite their immense value, the number of small businesses in
the U.S. industrial base has declined by 40 percent in the last
decade.
Senator Hirono kind of asked you why you think that
happened. You did not really get into it. Do you have details
of why you think that happened?
Because I think a lot of the testimony here was how great
things are going. Forty percent decline is not great. So what
specifically do you think that is and then how do we work to
address it?
Mr. Mitha. I think there are several reasons. One reason, I
think, is the complexity of doing business with the Department
of Defense.
Senator Sullivan. Yes. That is a huge issue, right, and I
think we all got to get our arms around it. We all got to
recognize that the Pentagon is a giant bureaucracy and it can
just be exhausting for small businesses to break through and I
think that is kind of the key mission of each of the witnesses
here, is it not?
Mr. Mitha. Yes.
Senator Sullivan. Okay. Good. What else?
Mr. Mitha. I think another reason is we have seen some of
our practices of how we manage our contracting policies like
category management. A lot--when I first started in this job a
lot of small business industry groups came and said, hey, with
category management we feel like we have been left out because
if we are not on the vehicle we would not see the opportunity,
would not be able to compete for it.
Senator Sullivan. Right.
Mr. Mitha. That is why we sent the memo out that I
referenced earlier where we are now giving tier two credit to
small business set asides or any small business awards to
companies in socio-economic categories. We can go outside of
those vehicles and do more set aside competitions as well.
Senator Sullivan. Let me ask--back to the 8(a) contractors
and the partnership that each of the services have with them,
what specifically is your service working on to deepen that
partnership?
I think it is a great opportunity to bring these numbers
up. This goes for disadvantaged communities, rural communities.
Like I said, in my State it is primarily the Alaska Native
Corporations and tribes and ANCs that really can bring benefits
to very rural parts of Alaska, very rural parts of America and
indigenous communities.
So can I ask each of the services what you are doing
specifically that relates to both near and long-term
opportunities with 8(a) contractors? Why do we not start with
you, Ms. Buehler?
Ms. Buehler. Yes. So absolutely recognize the importance of
the 8(a) business development program in advancing opportunity
for small business, particularly disadvantaged populations.
We have the most aggressive goal for small disadvantaged
business, which includes the 8(a) portfolio in the Department
of Army. Our goal for fiscal year 2023 is 15 percent.
Senator Sullivan. Okay. But what are you doing
specifically?
Ms. Buehler. Yes, sir. Yes, Senator.
So we are developing strategic partnerships with our 8(a)
companies, particularly you mentioned the Alaska Native
Corporations. I recently went out and visited with the Akima
group and met with their shareholders as well as the leads from
all of their business lines of effort. That was a key
engagement.
I intend to replicate that with other organizations and
expand that kind of a partnership. We are, again, making sure
that we are going after and setting aside those business
opportunities at that very tactical level, making sure that our
small business professionals are empowered to actually make
things happen and create opportunity and where we are using our
virtual vendor engagements to conduct enhanced outreach just my
partner over here, Mr. Smith, mentioned.
We have had one focus singularly on the small disadvantaged
business and 8(a) population, trying to make sure that they
know that the door is open from the Army and we want to create
opportunity with them.
Senator Sullivan. Great. Good.
Mr. Smith, what about you----
Mr. Smith. Yes, sir.
Senator Sullivan.--on the same question?
Mr. Smith. So last fiscal year we reached a pretty unique
engagement with the Small Business Administration on the 8(a)
program.
Senator Sullivan. So does it take a lot of coordination
with SBA----
Mr. Smith. It does.
Senator Sullivan.--in the work you are doing? So that has
got to be a key element of----
Mr. Smith. It does. It absolutely does and----
Senator Sullivan. Do you think that is going well with SBA?
Mr. Smith. It is going absolutely well. So at the end of
last fiscal year I reached out to my counterpart over in the
8(a) program at Small Business Administration----
Senator Sullivan. Good.
Mr. Smith.--and I said one of the barriers to doing
business with the Department of the Navy is past performance.
If our industry partners do not have past performance you
typically do not get work from us.
Senator Sullivan. Right, and how do you ever get out of
that loop?
Mr. Smith. So I cannot----
Senator Sullivan. If you do not have past performance you
cannot start.
Mr. Smith. We actually worked out a pretty good deal with
the SBA.
Senator Sullivan. Okay. What is it?
Mr. Smith. So I contacted my counterpart and he said, what
if we came to an arrangement where my Procurement Center
Representatives (PCRs), his folks that are in the field that
know what these local companies can do, vouch for them to be
able to do work for us? Can we take a Government person's
vouching for a company----
Senator Sullivan. Even though they have not done DOD----
Mr. Smith. Even though they have not done it for DOD, and
in many cases we asked that--let us take in the case of
building a firehouse. A firehouse is a firehouse is a
firehouse. But if you have never built one for us we hold that
back from you.
But if that local PCR can tell us that we have seen this
company build a firehouse in our local community for State and
municipal reasons they can do it for us. We actually pulled out
of their list of over 1,400 companies in the 8(a) program that
have never won a contract. We pulled 40 companies off of that
list last quarter just because we had an engagement with one
another on this company is good, take them forward, and we are
watching those companies now for the execution of those
contracts.
Senator Sullivan. Right.
Mr. Smith. As we mentioned, it is not about giving money
away. This is all about----
Senator Sullivan. Well, of course. This is all about
readiness, lethality, winning wars.
Mr. Smith. Absolutely.
Senator Sullivan. That is what this Committee is all about.
Mr. Smith. So engaging the Small Business Administration on
the 8(a) program from a one-on-one standpoint for opportunities
to expand and grow work.
Senator Sullivan. Okay. Good. That is a good example. What
about you, Mr. Kiser?
Mr. Kiser. Good afternoon. Thanks for the question.
Following on and, perhaps, some additional information is
we are negotiating with the SBA on those 8(a) partnerships. We
are getting the SBA to share with us their information on their
most recent new 8(a) firms.
Second, from our staff last June we sent our director
staff, Mr. Mike McWilliams, who is here with us today, to
Alaska to the 8(a) conference that is held in June each year,
and we will be sending it as we traditionally do in terms of
that outreach.
Similarly, in April we will be going to the [Native
Hawaiian Organizations Association] NHOA conference in Hawaii
once again for the outreach to as many organizations as we can
possibly get to, and we look to--in terms of the Mentor-Protege
program, we target those in the tribal organizations as well.
Senator Sullivan. Can I ask about that, because that was
actually one of my questions? The Mentor-Protege program is a
really good idea. But I worry that it is hard to get that kind
of program out into the rural communities, right.
So are you--when you talk about it you mentioned you are
targeting Native communities and rural communities with that
program. Are all of you doing that? Because sounds like a great
program, looks like it is working, but I worry that it is tough
to get to a small Alaska Native village with a program like
that.
So are you considering those kind of entities to make sure
they can benefit from a program like that as well?
Mr. Kiser. Absolutely, and I am trying to find the list. I
think we have one in place already in Alaska. I am just--but
once again, it is trying to make people aware--first, increase
the awareness of those kind of opportunities. True, the
manufacturing overall base may not be the same in every
location but we are trying to start that conversation and get
it going.
Senator Sullivan. Right.
Mr. Kiser. I think we have one already in place. I am
looking for the list.
[The information referred to follows:]
Mr. Kiser. Senator Sullivan, to clarify, page 45, line 1 of
the transcript I received is the Department of the Navy
testimony which can be addressed by my Navy colleague. The
discussion of the Department of the Air Force MPP initiatives
appears on page 46 line 7 through page 47 line 6. Upon further
review, I would like to further clarify and correct my
testimony about the MPP.
Over the last 5 years, the Department of the Air Force
Mentor-Protege Program (MPP) has overseen two MPP agreements
involving Native-owned small disadvantaged businesses (SDBs) as
proteges. However, upon confirmation, both of those two Native
SDBs are owned by Native American Tribes rather than by Alaska
Native Corporations (ANCs). S&K Electronics, established by the
Confederated Salish & Kootenai Tribes of the Flathead
Reservation, was a protege firm under a previously active MPP
agreement with Northrop Grumman. This MPP effort was focused on
circuit card assembly manufacturing. MEC Tech, an Indian
Economic Enterprise (IEE) owned and operated by the Mandata,
Hidatsa, and Arikara (MHA) Nation (also known as the Three
Affiliated Tribes of the Fort Berthold Indian Reservation) is a
protege under an active MPP agreement with Global Resource
Solutions (GRS). This MPP effort is focused on military health
management information technology.
Participation in the DAF MPP is voluntary for industry, and
I see no reason why Alaska small businesses should not be
taking advantage of this program. The Department of the Air
Force Office of Small Business Programs is aggressively
soliciting MPP applications from ANC-owned, Native Hawaiian
Organization (NHO)-owned, and Native American Tribal-owned
small businesses, as well as all other eligible small
businesses. For example, during the week of June 13, 2023, I
personally attended the National 8(a) Association's Alaska
Regional Conference in Anchorage, AK, to promote DAF small
business contracting opportunities and the DAF MPP to Alaskan
firms.
Interested small businesses should review the fiscal year
2023 DAF MPP Open Call solicitation at: https://sam.gov/opp/
3e042ad7c01549b6b8ca84aa8c54ee0e/view, and should periodically
review SAM.gov and https://www.airforcesmallbiz.af.mil for DAF
MPP announcements.
In response to this solicitation, the DAF MPP already
received one MPP agreement proposal each from an ANC-owned firm
and an NHO-owned firm. Pending successful review and
negotiation, awards may be expected by the end of the fiscal
year. If MPP awards involving ANCs, NHOs, or Native Tribal
firms are made this fiscal year, our office will provide an
update to this Subcommittee.
Senator Sullivan. Okay. Well, we will stand by. Thank you,
Madam Chair.
Senator Hirono. I would like to start round two of
questioning.
Senator Sullivan. Sure.
Senator Hirono. So yes, I have a question about the Mentor-
Protege program. I take it that that is a very successful way
of enabling more small businesses to engage or have contracts
with the DOD.
What do you do? Do you put out a call for volunteers to be
mentors and then you match them up with proteges? Is that how
each of you is doing this program?
Mr. Mitha. I can start. So the Mentor--so each component
services and DOD components are participants in the program.
The funding comes to my office. They put out their requirements
of different topics from the services and components for
agreements that they would like to fund and the mentors apply
to be mentors and there are certain statutory requirements to
be a mentor.
Once those mentors are approved they can team up with a
protege firm, ideally, a small, disadvantaged or socio economic
firm they have a relationship with and they give us a proposal
that we then fund through an agreement where we reimburse the
costs to the mentor for the business developmental assistance
they provide to the protege or we give them subcontracting
credit toward their goals.
Senator Hirono. Do all the services have this Mentor-
Protege program? Army?
Mr. Smith.
[Off mic.]
Senator Hirono. Okay, and is it working out well? Is it
growing?
Mr. Smith. In the case of the Navy we have four current
protege agreements. We have three already in the works for this
year and I believe we will have three more added on to that
once the industry partners make that teaming agreement with one
another. Then they present it to the Navy. So I will have 10
here relatively this year is what I will----
Senator Hirono. Do you have some kind of numerical goals,
each of you, for the Mentor-Protege program?
Mr. Smith. I will tell you the Navy is trying to catch up
in this regard. My colleagues on my left and my right are
leading the Navy right now.
Senator Hirono. I am sorry. Did you say you have a
numerical goal?
Mr. Smith. I think we think it is a fair share kind of
opportunity and money is the driver at the end of it--how much
money is in the pie.
Senator Hirono. Oh, Okay.
Ms. Buehler. Yes, Senator. So the Army has six active
agreements. We recently changed our processes so that we have a
year-long open solicitation so that Mentor-Protege proposals
can come in at any point during that year.
So that gives industry the ability to come to us on their
timetable and not necessarily on ours, right. So it gives them
much more flexibility to work those relationships and those
agreements and we are very excited to onboard new agreements
this fiscal year.
Senator Hirono. So, like Senator Sullivan, I have a
commitment to the 8(a) entities and for a number of them I
think one of the biggest barriers in dealing with the DOD is
just the complexity of dealing with them, as you say, Mr.
Mitha.
So name one thing that each of you did to make the whole
contracting process less complicated for small businesses.
Mr. Mitha. One thing that we are doing right now is
creating a single entry point for small businesses into the
defense marketplace.
So my office's website is business.defense.gov and we are
creating that into a one-stop shop which will have all the
forecasting, all the different small business programs, all the
resources that are available, so a company will not have to go
to 20 different websites to figure out how to do business with
us. So that is one thing that we are working on right now.
Senator Hirono. Would you like to add that?
Ms. Buehler. Yes. So with--in the Army, we were using OTAs
as another mechanism--other transaction authority as a
mechanism to expand our nontraditional vendor base that is
participating on our critical technology areas and that is a
low barrier entry program where we can reach those companies
that have no experience or limited experience working with the
Government. So that has been an effective tool for us in trying
to reach new vendor populations.
Senator Hirono. Mr. Smith?
Mr. Smith. Reintroducing people to a tool that has been in
the toolbox for a while. You can actually award up to $100
million contract to a 8(a) company on a letter contract. So
pulling that tool back, letting our contracting officers know
that they can use that instead of having to compete everything
and run down the formal process we brought that back and
resurrected it in a magnificent way.
Senator Hirono. Mr. Kiser?
Mr. Kiser. Yes. Once again, similar activities. We also use
Phase III to go make direct awards to speed the process, and
also going back to add on to the previous comment on the MPPs
and the Native American organizations, MPP--we have had two
agreements. One is already done and complete and that was in
Montana. The second is current and active and in the State of
North Dakota.
Senator Hirono. Thank you.
Senator Kaine?
Senator Kaine. Thank you to our Chair and Ranking, and
thanks for doing this hearing today.
There is a report by the National Academies of Sciences,
Engineering, and Medicine identified that the goals of the SBIR
program and the Small Business Technology Transfer program
might be in conflict, particularly in the effect that
commercialization can be overemphasized as a metric for
success.
Does the recently released strategy that you all have put
together address the priority of commercialization relative to
other priorities--stimulating innovation, meeting Federal R&D
needs, fostering diversity? How do you deal with that potential
conflict in the report that you have done?
First, Mr. Mitha.
Mr. Mitha. Sure. Yes, we do emphasize the importance of
both commercialization and helping small companies go from
prototype to production.
I hope this answers the question but I kind of view it as a
pipeline where we have dollars that we spend on prototyping
through our labs and using our other transaction authorities
and programs like SBIR.
We want those companies ideally to mature and develop those
technologies to meet our mission needs. So we talk in the Small
Business Strategy about how our various small business programs
can work better together in a more integrated way to help
mature the technologies along so they can actually get fielded
into a system and commercialized.
Senator Kaine. Thank you for that.
Mr. Smith, I want to ask you this. In your written
testimony you indicated that the Secretary of the Navy Del Toro
directed your office to ensure that small business
considerations are included very early in the acquisitions
process--that is good--but that you do not have specific
metrics to assess the impact of those efforts.
So I am a big believer that if you do not measure it you
never get to where you want to go. Data and metrics are really
necessary for making informed decisions about the effectiveness
of an effort such as the one we would all want to undertake.
So are you working on how you could develop metrics that
would determine the success of the efforts to expand our small
business partnerships?
Mr. Smith. Thank you for the question.
Developing the metrics is very important. Holding people
accountable, we feel, at this particular stage of the game is
even more important.
It is not just the small business professionals'
responsibility to be the advocate for small businesses. All
acquisition professionals across the entire Department of the
Navy have the responsibility to live up to these goals and
responsibilities and we want to make sure that you are in the
conversation early instead of after you sealed up an
acquisition/solicitation opportunity and you are ready to go
award. The small business person does not come flying in at the
end of the day. Those considerations are baked in upfront.
Measuring it, I think, it is important, but holding people
accountable through their performance on their jobs to do their
jobs is where we hold people accountable.
Senator Kaine. Given that Secretary Del Toro not only had a
distinguished career as a Navy surface ship officer----
Mr. Smith. Yes, sir.
Senator Kaine.--but also started a small business that----
Mr. Smith. Yes, sir.
Senator Kaine.--did work in this space, I am assuming he is
pretty focused on this and holding people accountable for it.
Mr. Smith. Sir, Secretary del Toro has helped me just about
every single day he has been on the job. He is a small business
owner for 17 years and he came in with that passion and
enthusiasm to make sure that small businesses did not go
through some of the challenges that he experienced as a small
business owner, and we have changed culture because of that
influence and added focus.
Senator Kaine. I am going to ask an open-ended question if
I can, Madam Chair, and just hope that all might just address
it a little bit.
In the work that you are doing I am assuming you are
hearing what I am hearing as I am talking to small, medium, and
large businesses. I am Seapower Chair so I do a lot in the
shipbuilding/ship repair space. It is hard to hire people.
So you can have the best programs you want in terms of
small business partnerships but if they are struggling with
workforce issues it is going to be hard to have programs that
will really be successful.
I do not view this issue as one that is getting easier. We
just made a historic commitment to infrastructure, who is going
to build it. We have just made a historic commitment in the
CHIPS [Creating Helpful Incentives to Produce Semiconductors
act of 2022] and manufacturing bill to manufacturing. Who is
going to fill those jobs?
So we are ready to make a lot of investments. I think this
is going to make the challenge even tougher. So in each of your
spaces, if you could--my time is about up--but I would love to
hear what you are hearing from your small business partners and
are you engaged with them in creative strategies around the
workforce question that the Committee should know about so
maybe we can try to amplify or expand them?
Mr. Mitha. Yes, I am hearing that from small companies,
especially in manufacturing and in certain sectors that are
very important to us.
One of the things that I am hoping that we can do from my
office's purview is use our 96 APEX Accelerators that are out
in the field across the country to do a better job of talent
matching.
So if a company wins a contract they can go to them, and
those folks are tapped into the workforce development training
programs and could actually be a connector between the two.
Ms. Buehler. Yes, I am hearing the same thing from small
businesses. It is one of the challenges that they have, in
addition to the regular challenges that you have running a
small business, and it is very important to us when we are
making contract awards to these companies that they are going
to be able to perform.
So we need to understand the industry dynamics and what
conditions they are facing and we are trying to incorporate
that and include that as part of our market research to make
sure that we understand because it also impacts the price that
we are going to pay, at the end of the day. So it helps us to
also prioritize what we are going to be able to actually buy.
Senator Kaine. Thanks, Ms. Buehler.
Mr. Smith?
Mr. Smith. I have seen the exact same result. I have
actually watched small business industry partners team in a way
that I have not seen some of the larger businesses do. Reaching
out to the local community colleges, reaching out to the
colleges and universities to build a pipeline of talent that
you need upon graduation to join the workforce.
If you do not start early, hoping to get them at the end
and when they are ready to go is a wish. Building dedication,
loyalty, and commitment early on, I think that transfers
volumes and I think more need to do that. But we are all
starving for talent.
Senator Kaine. Right, and Mr. Kiser?
Mr. Kiser. Once again, you are spot on and that, I think,
is probably more systemic across our entire nation of every
kind of hands-on skill. Watch the financial news network
activity.
About a week ago where the CEO [Chief Executive Officer]
was exemplifying, verbalizing, exactly what you said and as
they talked with this CEO she indicated cannot get those
skills. I could be making millions more dollars. This is a
total non-DOD company that was having--facing the same
challenges.
Now, Senator Mullin was here. From my time at Tinker Air
Force Base I remember they had several technical schools
focused on aviation in the State of Oklahoma--that he might be
able to learn how do they do it and part of that was to build--
to bring some aircraft maintenance capabilities and skills to
Tinker Air Force Base.
But at the same time at Tulsa, Oklahoma, you had the
American Airlines has their huge maintenance facility there. So
it is how do we get these technical schools with the technical
degrees, bring the young people in who are going to put the
hands on because not everybody wants to do this so how do we
incentivize that. That will be a bigger issue beyond just the
DOD small business and for our Nation. Thank you.
Senator Kaine. As I yield back, Madam Chair, I know many of
us are really coming to this realization that we are not going
to completely train our way out of this without an immigration
reform bill, and it can be very workforce focused, I mean, and
it probably should be with unemployment rate is the lowest it
has been since 1969.
So just Virginia doing a better job of maybe convincing
some Marylanders to come to Hampton Roads, that is not going to
solve our problem because we will cannibalize each other's
workforces.
We have to figure out a way to provide skills, more skills,
value career and technical education. Allow people to use Pell
Grants for it for the first time in our history. But I do think
there is a need that is becoming more obvious every day that a
work-based immigration reform bill is also going to be part of
the solution here.
I yield back, and thank you, guys.
Senator Hirono. I agree with you, Senator Kaine.
Every single industry--we are not just talking about the
military and its contracting these but every single industry
has workforce needs. Something is going to have to give and I
do think that something is we need to take a serious look and
commitment to changing our immigration system because we have
the lowest, as you said, number of visas--work visas given out
of any. I do not even know. So that is having a major impact on
our ability to be competitive.
Senator Sullivan, would you like a second round?
Senator Sullivan. Thank you. Yes. Thanks, Madam Chair.
I do not disagree with any of those comments on
immigration. We got to secure the border first before we get
into discussions of immigration. That should--that is a
national security prerogative that should not be that hard and
right now we do not have a secure border. So that is a
different topic but an important one.
Mr. Smith, I want to dig down with not only you but the
rest of the panelists on your statement about the recent--
relatively recent 2 years ago 8(a) contractor opportunities for
sole source contracts up to $100 million. That is relatively
recent. That was my provision in the NDAA in 2020.
So I am really appreciative that you highlighted that as
another opportunity that can really help provide long-term
success for the 8(a) and small business contractors.
What I am hearing from my 8(a) contractors in Alaska,
though, is that a lot of the contracting officers have not
really gotten the word yet or kind of, like, I do not want to
do that, or no, I am not interested.
Well, we, the Congress, told you you should be interested,
right. It is in the law. So can you expand upon that? What I
would really like to do since you guys are the ones in charge
and I have been hearing this a lot from my 8(a) contractors--
again, they do great work. They contribute to the national
security, as I mentioned. At least in Alaska so many of them
are already veterans themselves, the vast majority from
indigenous populations. Very patriotic.
What I would like to do is also get a commitment from each
of you to send a memo to your contracting officers, just as you
mentioned, Mr. Smith, reminding them that, hey, this is a tool
and if an 8(a) contractor comes in you got to consider this,
and I know it is relatively new so it probably takes a little
bit of time to work its way through the bureaucracy.
But that is the new law and, again, I am glad you mentioned
that as kind of trotting out that tool as helpful. But can I
get your thoughts on that from all of you and get each of your
commitments to send out a memo to your contracting officers
just saying, hey, as a reminder, year and a half ago Congress
changed this rule. It is now up to $100 million.
I think that will spur a lot of interest and, hopefully,
opportunity and activity on the common goal that we all have
here. Do you want to comment further on that, and then each of
you? If you make that commitment to me to be doing a memo on
that?
Mr. Smith. Sure. Like you mentioned, it is a tool in a
toolbox and folks need to know that they have it at their
disposal.
For a long time competition was king. If you had plenty of
opportunities with industry partners competing to get the best
price that is what we were driving for.
Now we got less people playing in the swimming pool. I got
less opportunities with certain industry partners. Now it is
time to go pull some of these other tools out and get the ease
of contracting.
I mean, folks have been trained a certain way. The flow
down to all of the echelons across the entire Department of the
Navy has to take place, just like you mentioned. It is an
education. They are small business professionals----
Senator Sullivan. Education--some of your contracting----
Mr. Smith. Absolutely. Absolutely, and some people--making
the donuts is making the donuts is making the donuts and they
need to be told and taught that there is a way to do it
differently, faster, to go about another path.
Senator Sullivan. So can I get a commitment from you in
regards to----
Mr. Smith. We already--we already have the commitment
across the Department----
Senator Sullivan. But, I mean, to send a memo to your
contracting officers reminding of this?
Mr. Smith. Done. It is absolutely----
Senator Sullivan. Okay, and send it to this Committee?
Mr. Smith. It is absolutely done. Not a problem.
Senator Sullivan. Okay. Great.
Mr. Kiser, do you have a view on this or thoughts on it?
Mr. Kiser. Just to expand it. It might even be helpful if
we have a joint signature coming out, at least from the
Department of the Air Force, from our head of contracting
activity----
Senator Sullivan. Good.
Mr. Kiser.--in order to have a dual signature. Small
business, contracting side by side.
Senator Sullivan. Thank you. That is a great suggestion.
Thank you.
Ms. Buehler?
Ms. Buehler. Yes, I was going to make the same suggestion
actually, that we have to make sure that our contracting
partners are also pushing the same message, that we have a
consolidated front. In the Department of the Army we are also
conducting a small business road show training with our
contracting workforce. That actually started today----
Senator Sullivan. Oh, good.
Ms. Buehler.--and will continue in second and into third
quarter, and one of the areas we are training on is the 8(a)
program and we are partnering up with the SBA at certain
locations to make that the most effective it can be.
Senator Sullivan. Perfect. Do I have time to ask a couple
others?
Senator Hirono. Go ahead.
Senator Sullivan. All right.
Senator Hirono. Then I am going to turn to Senator Kaine if
he wants.
Senator Sullivan. Let me--Mr. Kiser, I want to compliment
you and the Air Force. We have had a very big buildup of the
Air Force in Alaska with the F-35--two squadrons F-35s and a
whole host of new Air Force personnel at Eielson Air Force Base
and other places throughout Alaska, and it was a lot of
military construction authorized by this Committee.
We now have--by the way, on time on budget that the Air
Force got two squadrons of F-35s bedded down on Eielson Air
Force Base during the pandemic. So great job. Great job.
You also did a really good job of working with the Corps of
Engineers that was letting these contracts to build the hangars
and everything for the F-35s, and a lot of small businesses did
quite well in Alaska because the Corps and the Air Force were
committed to getting those contracts primarily to Alaska-based
businesses and contractors and unions, and so it worked.
Do you have any lessons on an example of that working well?
Which I thought it worked quite well. I was very involved in
the oversight of it. But you guys nailed it on time on budget.
I think the number was 95 percent of the military construction
(MILCON) went to Alaskan-based companies.
Mr. Kiser. To expand beyond in what they did, I am not as
familiar with those specific. But that is not uncommon with the
contracting--Air Force contracting working hand in hand with
the Army Corps of Engineers on these major MILCON projects and
with reconstruction or new construction.
Once again, I will pass your congratulations on it with
your permission to----
Senator Sullivan. The Army Corps as well.
Mr. Kiser. The Army Corps.
Senator Sullivan. They really did a great job. It was----
Mr. Kiser. Absolutely, but this is non----
Senator Sullivan.--picture perfect.
Mr. Kiser. Absolutely. Experience I have is with Langley
Air Force Base following Hurricane Isabel in the 2003 to 2005
timeframe. Once again, contracting--a lot of coordination with
the Corps of Engineers. At that time we were bedding down the
F-22 at Langley.
So once again, a lot of teamwork across the board,
everybody focused on the mission because they understand the
importance of it. So not uncommon to us and I suspect the other
service as well. But thank you, sir, for that compliment. I
will take it back.
Senator Sullivan. So I have two more questions, if that is
all right.
Senator Hirono. Go ahead.
Senator Sullivan. The next question is for Mr. Smith, and I
am sure Senator Kaine will have some interest in it. I had
breakfast actually with the Chief of Naval Operations (CNO)
this morning and we talked a lot about shipyards.
We talked a lot about the Defense Industrial Base as it
relates to building ships, which that is not necessarily a
small business activity but small businesses can get a lot of
the action on that.
But the one area that is a small business or relatively
small business activity is the maintenance and repair of big
Navy ships or Coast Guard ships, and there is a lot of
opportunity there in the small business sector for smaller
shipyards, not the giant ones that are like in Virginia and
stuff. But we have some smaller shipyards. We have a shipyard
in Seward, Alaska, called JAG that just got a Navy contract.
Really, really big deal for these guys. They are going to do
repair work.
We have a bigger shipyard in Ketchikan that does big Coast
Guard overhauls, and can you talk about particularly in this
need to get our Navy bigger and better and stronger the ability
to use smaller shipyards, probably not for the building but for
the repair and maintenance, and that way the big shipyards can
build the subs and the LHAs [amphibious assault ship] and
things like that?
Mr. Smith. Well, Senator, having grown up on the
shipbuilding side of the house--I was Virginia-class'
construction manager when we delivered the first one--capacity
is going to be your challenge here. Having a dry dock to bring
in a guided missile destroyer or a large amphib or an aircraft
carrier you have to have the facilities to be able to do that.
Senator Sullivan. My understanding the carriers and the
nukes are public yard----
Mr. Smith. That is correct.
Senator Sullivan.--but even the CNO was talking about
dishing out some of the--even though it is public yard, even
with the nuke Navy, that you can still dish out some of the
non-nuke work to small businesses. Is that----
Mr. Smith. Absolutely. That is absolutely true.
In the past, we would have probably put up an omnibus kind
of contract for a very large industry partner to get it all
done and they will subcontract the work out to smalls and they
are going to continue to do that, to break that work out
separately and move the platform to a smaller yard, I think
there is some coordination there that we have to look at. Not
saying that we cannot do it. But today we can park the platform
in one place and everybody show up to the ship.
If you are going to take it away from the bigs and move it
to a small, well, then that work is going to be segmented and
probably not integrated in a fashion that we are accustomed to
today.
So it is not that we cannot do it. I think it will be
different. I think small businesses can benefit from that
opportunity. They are currently benefiting today as
subcontractors and you are talking about prime contracting
opportunities in the future, which are construct.
I do not see a reason we cannot do it. It is going to be
more of a coordination and when does the fleet need that
platform back to service. Because if you can do it all in
parallel that is one thing. But if you are going to make series
maintenance activities that is time that we are talking about
marching along at that point.
Senator Sullivan. Okay. That is very helpful. I had one
more question. It is back to Mr. Smith again, but maybe it can
be more broadly.
We had a small business in Alaska called Triverus that won
a contract with the Navy to build your mobile cleaning,
recovery and recycling systems. This is what I was referring to
as like a Zamboni for an aircraft carrier, if you get the
hockey analogy--an aircraft carrier or LHA with a flat deck.
This company developed it on its own and built them, 43,
for the Navy. It was really, really, really impressive. We were
so proud of them because we do not have that big industrial
base up in Alaska.
The Navy--there were some hiccups, right? There was some
back and forth with the contracting officer. We heard at one
point suggesting, hey, if you really want to stay in the game
you need to move your business to the lower 48, right. Trust
me, I called the Secretary to the Navy on that one saying you
got to be kidding me. We want to keep this stuff in our State,
not encourage them to go.
But so companies like this they get a big contract. It is
great. They kind of base their whole business model on it. But
once that contract is over and if it does not continue that is
challenging for them.
Do you guys look at those kinds of contracts where they
build this MCRRS [mobile cleaning recovery recycle system], as
I think they are called, or Zambonis for aircraft carriers, but
then also can do the maintenance work because that is something
that, to me, gives the company with expertise the ability to
continue doing that.
They probably know more about this system since they built
it from scratch than anyone else, and I do not think they were
ever able to get the maintenance work to be doing that and it
is a little bit more challenging.
Mr. Smith. So I am not familiar with that particular case.
I will go find out and----
Senator Sullivan. Yes. We can provide it if you need more.
Mr. Smith. We can--and I will go respond for the record for
that inquiry. I am curious--Zamboni for an aircraft carrier.
That piqued my attention.
[Laughter.]
[The information referred to follows:]
Mr. Smith. The Department of the Navy (DON) stands in
support of any business who offers solutions to ensure
operational readiness and enhance the defense industrial base.
Supporting small businesses is the very essence of everything
we do as small business professionals, maximizing the
advantage, agility, innovation, and responsiveness that small
businesses brings to the warfighter. This includes supporting
unique solutions such as the Mobile Cleaning Reclaim Recycle
System.
Naval Sea Systems Command (NAVSEA) awarded Triverus LLC of
Palmer, Alaska (Triverus) Contract N00024-18-C-4449 (Contract
4449) for services and material necessary to support production
of the MCRRS and associated spare parts, engineering and
services, and other direct costs in support of associated
engineering and services. Triverus LLC completed delivery of
the MCRRS to the Navy. Over the period of performance of the
MCRRS full-rate production contract, NAVSEA utilized Triverus
LLC more than 60 times for maintenance and repair support.
Currently, the Navy utilizes its Regional Maintenance
Centers consisting of civilians and sailors to perform required
maintenance of the MCRRS units. In the event the MCRRS units
become inoperable and require intermediate level maintenance,
such as complex troubleshooting and repair, NAVSEA may contract
with Triverus, the Original Equipment Manufacturer (OEM), for
support. Currently, NAVSEA is in the process of reviewing a
proposal from Triverus for a potential (OEM) maintenance
support services contract.
Senator Sullivan. I mean, they zip up--they bring up all
the--any kind of material on the flight deck that can hurt
the----
Mr. Smith. I love it.
Senator Sullivan.--with the fifth-gen aircraft and hurt the
systems. So it is really sophisticated stuff.
Mr. Smith. Sure, and one of the things that we encourage
small businesses to be able to do is do you have a commercial
outlet for your opportunity as well along with the maintenance,
because I am sure there is airports, I am sure there is runways
nearby, where that capability can be provided elsewhere.
Counting on DOD to be your sole customer that is an
interesting market. But I think if you had many more people
buying from you that is a more lucrative market. So but I will
definitely go endeavor to investigate that one further.
Senator Sullivan. Thank you.
Senator Hirono. I just want to make a statement.
One is we have four major ship repair--a public ship repair
facilities. One is in Hawaii. We have to make sure that we
continue to stay the course of modernizing these facilities
because there is no question that we need to enable them to
become a lot more efficient because the most recent report says
that is taking far longer to repair our naval ships and get
them ready for deployment. So that needs to happen.
Then at a time when we need to really shore up our ability
to be innovative and competitive with a near peer competitor,
i.e., China, I would like to know if each of you fully utilize
the SBIR and STTR programs to really push innovation to small
businesses. Do you do that?
Ms. Buehler?
Ms. Buehler. Yes, Senator. The Army absolutely uses the
SBIR and the STTR programs to develop innovation. Not only do
we use the programs properly, we have developed transition
broker teams along eight different lines of effort linked to
specific technologies and capability gaps that we are trying to
fill.
So we are trying to make the program more effective for us
to really target those high critical areas. We are also using
it as part of our--what we call the ex-tech search. This is a
``Shark Tank'' like competition where companies will propose a
certain technological solution. We will give them small
contracts and take them through a successively down select
competition over a period of time until we get to a winner.
So we are utilizing the SBIR authorities to also facilitate
that. So absolutely part of our toolkit.
Senator Hirono. Mr. Smith?
Mr. Smith. No different from the Army and probably no
different from the Air Force in that regard. That is our
fertile feeding ground for future opportunities. The future
technology comes from that area.
Having the right mission set for what you need to counter
in the future is what it is all about and having industry
partners working in that vein that is where we are and we are
spending transition dollars to get that capability into the
fleet, not just doing research and development for the sake of
doing research and development.
Senator Hirono. Oh, definitely. We need to make sure that
it is of some utility.
Mr. Kiser, do you do the same thing? Do you really push for
this kind of innovation support?
Mr. Kiser. Absolutely, Senator Hirono, and once again, just
adding on, similar activities but also, in fact, earlier this
week. We execute a lot of our SIBR/STTR dollars through an
organization called AFWERX and SpaceWERX.
Met earlier Monday afternoon of this week with the new
leader of that organization, Colonel Leigh, to talk about how
they are restructuring the program.
A lot of their activity over the last couple of years has
been toward just kind of open topics. Well, they are now
streamlining and focusing. They will have at least 40 percent
of their research ideas and small business awards focused on
operational imperatives that you have probably heard Secretary
Kendall talk about, the things that we really need to get after
in order to be very competitive, shall we say.
We are meeting with them to make sure that what they are
doing research on is not just necessarily open or basic
research but, rather, focused research on the things that we
need for our program executive officers, for our weapon
systems, so to make sure that it is really making a difference.
The program executive officers--PEOs--are becoming much
more involved in the SIBR process as well and so we have been
awarding quite a bit. Our SIBR dollars have gone from about
$300 million in fiscal year 2018 to we are about $1 billion
this year. So thank you for that continued support.
Senator Hirono. I just wanted to make sure that we get it
on the record how important these two programs are because
there are some people who do not think that it is important to
reauthorize SBIR or STTR.
Thank you. Thank you very much to all of you for coming and
talking with us, and with that, this hearing is adjourned.
[Whereupon, at 3:52 p.m., the Subcommittee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Dan Sullivan
native 8(a) corporations
1. Senator Sullivan. Mr. Mitha, in December 2021 the President
announced a goal to increase Federal contracting spend to Socially
Disadvantaged Businesses to 15 percent by 2025. I understand that the
Administration is ahead of schedule and reached over 11 percent in
2022. The Department of Defense will play a big part of meeting this
goal. In the Fiscal Year 2020 National Defense Authorization Act
(NDAA), Congress raised the Justification and Approval threshold for
Native 8(a) entity-owned contractors to $100 million within the
Department of Defense (DOD) to reduce administrative burdens for
procurement. Has reducing the administrative burdens on small to medium
sized sole-source contracts for Native 8(a) entity-owned contractors
been a tool that the DOD has been able to use to help meet the
Administration's Socially Disadvantaged Business goals?
Mr. Mitha. Senator Sullivan, the Department strongly supports the
increased Federal contracting goals for Small Disadvantaged Businesses
(SDBs). Reducing administrative burdens for small to medium sized sole-
source contracts for Native 8(a) entity-owned contractors is a tool the
Department has been able to use to meet the Administration's SDB goal
and has facilitated the achievement of this procurement goal.
2. Senator Sullivan. Mr, Mitha, would you say raising the
Justification and Approval threshold for Native 8(a) entity-owned
contractors gives the DOD an additional tool to quickly and efficiently
procure small to medium sized sole source contracts when they are
necessary?
Mr. Mitha. Senator Sullivan, the Department agrees that raising the
Justification and Approval threshold for Native 8(a) entity-owned
contractors is an effective tool to quickly and efficiently procure
small-to medium-sized sole source contracts when they are necessary and
promotes maximum utilization of 8(a) participants in the defense
industrial base.
3. Senator Sullivan. Mr. Mitha, as was discussed in the March 22d
hearing, the DOD is seeing issues with small, medium, and large sized
contractors having a skilled workforce shortage for military
construction projects. We are seeing this across the DOD and Federal
contracting, generally. In 2020, the Small Business Administration
(SBA) changed their interpretation regarding the Bona Fide Place of
Business (BFPOB) Requirement making it mandatory for SBA 8(a)
participants to have a BFPOB to be established before a bid is
submitted to be eligible for military construction contracts. They have
since put a moratorium on this rule citing COVID-19 until September
2023. However, this requirement is scheduled to go back into effect
soon. Many 8(a) participants do not have the resources or capital to
meet this requirement and participate in the military construction
marketplace outside of their home State. It would seem that this
additional requirement on top of the workforce shortage that already
exists would negatively impact military construction projects moving
forward by limiting competition for these projects. Additionally, many
of our military construction installations are in rural areas of our
country and often do not have a large contracting base nearby, that
would only add to the problem. When the BFPOB requirement goes back
into place would this limit competition, particularly in rural areas by
requiring 8(a) participants to have a BFPOB in the geographical area
required for the contract?
Mr. Mitha. Senator Sullivan, the Department agrees with your point
about the importance of keeping military construction projects moving
forward and about the importance of competition. I do not believe the
reversal of the Bona Fide Place of Business (BFPOB) Requirement will
limit competition. The Department supports the BFPOB rule and similar
provisions which provide job opportunities to the individuals living in
the area where contract work will be performed. Similar provisions
include the Bipartisan Infrastructure Law Section 25019(a) ``Local
Hiring Preference for Construction Jobs,'' the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5150), Section
2912 of the Fiscal Year 1994 Defense Authorization Act (Pub. L. 103-
160), and Section 817 of the Fiscal Year 1995 Defense Authorization Act
(Pub. L. 103-337)] for acquisitions in support of a base closure or
realignment. Preferences such as these facilitate the employment of
local workers who may be socially or economically disadvantaged and can
gain access to jobs and training opportunities presented by such
projects.
__________
Questions Submitted by Senator Tommy Tuberville
cyber security operations center
4. Senator Tuberville. Mr. Mitha, Ms. Buehler, Mr. Smith, and Mr.
Kiser, are you familiar with the National Cyber Security Operations
Center (CSOC) program in which Congress has made a significant capital
investment (8$200 million) to develop and deploy in support of the
protection of the defense industrial base's networks and intellectual
data?
Mr. Mitha. Senator Tuberville, I am aware of the National Cyber
Security Operations Center (CSOC), which will provide multiple
cybersecurity services to qualified defense industrial base (DIB)
partners.
Ms. Buehler. I am not familiar with the National Cyber Security
Operations Center program. The Army has been assisting small business
firms in support of the protection of the defense industrial base's
networks and intellectual data through Project Spectrum, a Department
of Defense (DOD) no-cost program to small business firms. The core
mission of Project Spectrum is to educate, train, and equip the defense
industrial base (DIB), small-and medium-sized manufacturers, and other
institutions with the tools necessary to strengthen cybersecurity
resilience throughout the Nation's supply chain. The Army includes
information on Project Spectrum in our training, engagement, and
outreach programs, including a briefing to all participants in the Army
Small Business Seminar conducted in Oct 2022.
Mr. Smith. Senator Tuberville, the Department of the Navy (DON)
Office of Small Business Programs (OSBP) concurs with the Department of
Defense (DOD) OSBP response that we are aware of the National Cyber
Security Operations Center (CSOC), which can provide multiple
cybersecurity services to defense industrial base (DIB) partners.
Mr. Kiser. Senator Tuberville, the Department of the Air Force
Office of Small Business Programs (SAF/SB) was not aware of the
National Cyber Security Operations Center (NCSOC), Huntsville, AL.
However, we have sought to learn about the NCSOC since receiving your
questions for the record. It is our understanding that the NCSOC is
primarily a provider of network vulnerability assessment services to
those small businesses that have their own information technology
networks. Specifically, NCSOC's assessment services are provided by
Quantum Research International (QRI) under contract with the Department
of the Army, Program Executive Office for Simulation, Training, and
Instrumentation (PEO STRI), Threat Systems Management Office (TSMO).
5. Senator Tuberville. Mr. Mitha, Ms. Buehler, Mr. Smith, and Mr.
Kiser, as the services of the CSOC are currently offered at no-cost, is
there any reason a small or medium business within the defense
industrial base should NOT consider them for the assessment and
monitoring of their company's network cyber security needs?
Mr. Mitha. Senator Tuberville, I do not see any reason why small-
and medium-sized defense industrial base (DIB) partners should not be
enrolled and be provided services through the NCSOC. From my
understanding the NCSOC can provide Continuous Threat Monitoring,
Penetration Testing, and Vulnerability and Physical Security
Assessments as well as Incident Response and Forensics investigations.
Ms. Buehler. The Army is committed to affording small business
firms with maximum practical opportunity for award of contracts and
their successful performance. Small and medium sized business firms
should consider no-cost options for the assessment and monitoring of
their company's network cyber security needs including the CSOC.
Mr. Smith. Senator Tuberville, the Department of the Navy (DON)
Office of Small Business Programs (OSBP) concurs with the Department of
Defense (DOD) OSBP response that we do not see any reason why small-
and medium-sized defense industrial base (DIB) partners should not be
enrolled and be provided services through the NCSOC. From my
understanding the NCSOC can provide Continuous Threat Monitoring,
Penetration Testing, and Vulnerability and Physical Security
Assessments as well as Incident Response and Forensics investigations.
Mr. Kiser. Senator Tuberville, small business should be taking
advantage of all cybersecurity assistance resources available,
consistent with their needs and the mission requirements and standards
of their DOD customers. If the NSCOC provider is duly qualified, the
NSCOC offerings conform to DOD standards, and the Army makes the NCSOC
program available to small businesses for free, there would seem to be
no reason why small businesses should not consider NCSOC along with any
other qualified assistance providers or assistance programs.
6. Senator Tuberville. Mr. Mitha, Ms. Buehler, Mr. Smith, and Mr.
Kiser, now that you are aware of the existence of the National Cyber
Security Operations Center in Huntsville, would you recommend that your
associated companies with the defense industrial base inquire about
working with the CSOC to improve their overall cyber hygiene?
Mr. Mitha. Senator Tuberville, the Department of Defense (DOD)
Office of Small Business Programs (OSBP) would recommend any solution
that helps defend our industrial base and improve its overall cyber
hygiene. My office would be willing to collaborate and harness a
synergy between the resources OSBP offers through Project Spectrum and
CSOC to develop a partnership that would benefit the small business
community. Evaluating both solutions will allow the government to
determine the strengths of each and expand offerings that best suit the
business need.
Ms. Buehler. Now that I am aware of the existence of the CSOC, I
will ensure we incorporate information on the CSOC program into our
training, education, and outreach programs that we deliver on an
ongoing basis to small businesses.
Mr. Smith. Senator Tuberville, the Department of the Navy (DON)
Office of Small Business Programs (OSBP) concurs with the Department of
Defense (DOD) OSBP response that recommends any solution that helps
defend our industrial base and improve its overall cyber hygiene. My
office would be willing to collaborate and harness a synergy between
the resources OSBP offers through Project Spectrum and CSOC to develop
a partnership that would benefit the small business community.
Evaluating both solutions will allow the government to determine the
strengths of each and expand offerings that best suit the business
need.
Mr. Kiser. Senator Tuberville, the Department of the Air Force
Office of Small Business Programs has requested that the Air Force-Navy
Blue Cyber Program, as part of its outreach, inform small businesses
that the NCSOC is available as a potential assistance resource.
__________
Questions Submitted by Senator Joe Manchin
cybersecurity maturity model certification (cmmc)
7. Senator Manchin. Mr. Mitha, Ms. Buehler, Mr. Smith, and Mr.
Kiser, is the Department of Defense concerned for small businesses and
their ability to comply with new cybersecurity standards?
Mr. Mitha. Senator Manchin, Section 1644 of the National Defense
Authorization Act (NDAA) for fiscal year 2019 directs the Secretary of
Defense to prioritize efforts to increase awareness to help reduce
cybersecurity risks faced by small manufacturers and universities. It
covers the dissemination of cybersecurity resources, self-assessments,
and training, as well as various small business initiatives for
matchmaking, training, and navigating regulatory requirements.
To improve Cybersecurity Supply Chain Risk Management, the DOD
initiated efforts to educate and provide resources to small businesses
to help them meet new cybersecurity standards such as the Cybersecurity
Maturity Model Certification (CMMC). This includes offering training
sessions, workshops, self-assessments, cyber tool reviews, guidance
documents, compliance advisory services, and deception technology tools
designed to assist contractors in understanding and implementing the
necessary cybersecurity measures within their company platforms. The
Department of Defense (DOD) Office of Small Business Programs (OSBP)
provides these cybersecurity solutions to small businesses through the
services of Project Spectrum.
The Department of Defense (DOD) Office of Small Business Programs
(OSBP) utilizes its small business programs, such as the DOD Mentor
Protege Program (MPP), its 96 APEX Accelerators, and other Federal
Government resources such as the Manufacturing Extension Partnership
(MEP) program, to provide Project Spectrum resources for cyber
awareness training and compliance advisory services to the small
business community. Project Spectrum has assisted over 7,000 businesses
and over 11,000 individual users to help increase their security
posture and to help meet CMMC compliance standards. Project Spectrum's
cyber advisory service provides small businesses with assistance to
help mitigate vulnerabilities and to ensure appropriate security
controls have been implemented to adequately protect controlled
unclassified information and intellectual property.
Ms. Buehler. The Army is concerned for small businesses and their
ability to comply with new cybersecurity standards. The Army has been
assisting small business firms in support of the protection of the
defense industrial base's networks and intellectual data through
Project Spectrum, a Department of Defense (DOD) no-cost program to
small business firms. The core mission of Project Spectrum is to
educate, train, and equip the defense industrial base (DIB), small-and
medium-sized manufacturers, and other institutions with the tools
necessary to strengthen cybersecurity resilience throughout the
Nation's supply chain. The Army includes information on Project
Spectrum in our training, engagement, and outreach programs, including
a briefing to all participants in the Army Small Business Seminar
conducted in Oct 2022. The Army is updating vendor training to include
information on other no-cost cyber security programs designed to assist
small business firms with their cyber hygiene and cybersecurity
standards.
Mr. Smith. Senator Manchin, the Department of the Navy (DON) Office
of Small Business Programs (OSBP) concurs with the Department of
Defense (DOD) OSBP response that the priority of Section 1644 of the
National Defense Authorization Act (NDAA) for fiscal year 2019 is for
the Secretary of Defense to prioritize efforts to increase awareness to
help reduce cybersecurity risks faced by small manufacturers and
universities. It covers the dissemination of cybersecurity resources,
self-assessments, and training, as well as various small business
initiatives for matchmaking, training, and navigating regulatory
requirements.
To improve Cybersecurity Supply Chain Risk Management, the DOD
initiated efforts to educate and provide resources to small businesses
to help them meet new cybersecurity standards such as the Cybersecurity
Maturity Model Certification (CMMC). This includes offering training
sessions, workshops, self-assessments, cyber tool reviews, guidance
documents, compliance advisory services, and deception technology tools
designed to assist contractors in understanding and implementing the
necessary cybersecurity measures within their company platforms. DOD
OSBP provides these cybersecurity solutions to small businesses through
the services of Project Spectrum.
DOD OSBP utilizes its small business programs such as the DOD
Mentor Protege Program (MPP) and its 96 APEX Accelerators, and other
Federal Government resources such as the Manufacturing Extension
Partnership (MEP) program to provide Project Spectrum resources for
cyber awareness training and compliance advisory services to the small
business community. Project Spectrum has assisted over 7,000 businesses
and over 11,000 individual users to help increase their security
posture and to help meet CMMC compliance standards. Project Spectrum's
cyber advisory service provides small businesses with assistance to
help mitigate vulnerabilities and to ensure appropriate security
controls have been implemented to adequately protect controlled
unclassified information and intellectual property.
Mr. Kiser. Senator Manchin, the Department of the Air Force is
actively encouraging all small businesses in the defense industrial
base and the economy at large to strengthen their cybersecurity.
Through the Air Force-Navy Blue Cyber Program, the DAF has continuously
conducted extensive outreach and training with regards to requirements
the 2020 DFARS Interim Rule, Assessing Contractor Implementation of
Cybersecurity Requirements. This Interim Rule addresses the DOD
Cybersecurity Maturity Model Certification (CMMC) 1.0. We encourage all
small businesses to get appropriate cybersecurity assessments, and we
support any efforts across the DOD and the Federal Government to make
such assessments broadly available.
The 2020 Interim Rule contained a 5-year phased and piloted
rollout. As noted on the DOD Office of Chief Information Officer
website, piloting efforts have been suspended pending rulemaking for
CMMC 2.0. Once the DOD issues changes to the CMMC Program, SAF/SB will
collaborate with counterparts across the DAF and the DOD on outreach to
industry concerning small business compliance.
8. Senator Manchin. Mr. Mitha, Ms. Buehler, Mr. Smith, and Mr.
Kiser, how is the Department of Defense planning on helping small
businesses come into this new compliance--especially is it pertains to
shouldering the cost to be certified?
Mr. Mitha. Senator Manchin, small businesses are the most resource-
constrained, high value targets in the defense supply chain and are
often unprepared to prevent cyber-attacks. To combat this constant risk
to the U.S. defense supply chain, the Department aids small businesses
with the resources needed to prevent data theft and Intellectual
Property (IP) infringement. Services provided by the Project Spectrum
platform improve cybersecurity readiness, resiliency, and compliance
for small-and medium-sized businesses and the Federal manufacturing
supply chain. This is provided, at no cost to the business, for
Cybersecurity Maturity Model Certification (CMMC) compliance
preparedness, cybersecurity education and training, and advisory
services. By promoting and assisting with cyber resilience for small
businesses, DOD can play a key role in enabling these companies to
address cybersecurity gaps, while also mitigating threats to the supply
chain and DOD sensitive information.
Ms. Buehler. The Army is committed to enabling small business firms
with maximum practical opportunity for award of contracts and their
successful performance. The Army does not have the funding required to
shoulder cost of CMMC certification. The Army promotes the DOD's
Project Spectrum program which is a no-cost program to educate, train,
and equip small-and medium-sized manufacturers and other institutions
concerning cyber security. Project Spectrum is mandatory for small
business firms who participate in the DOD Mentor Protege Program (MPP).
The MPP provides incentives to major DOD contractors to furnish
eligible small business concerns with assistance designed to expand
their footprint in the defense industrial base and become CMMC
certified through Project Spectrum. Although the services of Project
Spectrum are at no cost to small business firms, the cost of
certification is not funded through the program.
Mr. Smith. Senator Manchin, the Department of the Navy (DON) Office
of Small Business Programs (OSBP) concurs with the Department of
Defense (DOD) OSBP response that small businesses are the most resource
constrained, high value targets in the defense supply chain and are
often unprepared to prevent cyber-attacks. To combat this constant risk
to the U.S. defense supply chain, the Department aids small businesses
with the resources needed to prevent data theft and Intellectual
Property (IP) infringement. Services provided by the Project Spectrum
platform improve cybersecurity readiness, resiliency, and compliance
for small-and medium-sized businesses and the Federal manufacturing
supply chain. This is provided at no-cost to the business for
Cybersecurity Maturity Model Certification (CMMC) compliance
preparedness, cybersecurity education and training, and advisory
services. By promoting and assisting with cyber resilience for small
businesses, DOD can play a key role in enabling these companies to
address cybersecurity gaps, while also mitigating threats to the supply
chain and DOD sensitive information.
Mr. Kiser. Senator Manchin, our understanding at the Department of
the Air Force Office of Small Business Programs (SAF/SB) is that the
DOD has not yet proposed a CMMC 2.0 replacement for the CMMC 1.0
Program. We defer to the DOD Office of Small Business Programs and the
Office of the DOD Chief Information Officer for development of any plan
for small business compliance assistance and compliance cost reduction
with regards to any eventual CMMC 2.0 framework. To my knowledge, the
DOD is already considering various pilot projects to assume CMMC
compliance costs for, or reduce CMMC compliance costs on, small
businesses. One is an OSD-level pilot to test ability of small
businesses to operate in a comprehensive secure cloud network
environment. The Department of the Air Force Office of Small Business
Programs (SAF/SB) would support these pilots and any other suitable
efforts.
__________
Questions Submitted by Senator Eric Schmitt
protecting small businesses that are sole suppliers for the department
of defense
9. Senator Schmitt. Ms. Buehler, the Department of Defense (``The
Department'') has a sole manufacturer and leading designer of a weapon
system in my home State of Missouri. I want to highlight the critical
importance and broad application of this capability across numerous
aviation (fixed wing and rotary wing) and ground platforms. I also want
to highlight my concerns that the irregular acquisition of these
systems by the Services and particularly the Navy, has resulted in
significant gaps in production orders that failed to account for the
adverse impact on and sustainability of the specialized and highly
skilled workforce. While I applaud the work of the Assistant Secretary
of the Army for Acquisition Logistics and Technology (ASALT) for the
reforms he has proposed to strengthen the munitions production base,
please tell me what the Department of Defense and ASALT have done or
are planning to do to engage and support the needs of small, sole
suppliers, such as the sole supplier in my home State of Missouri, to
work in partnership and communicate with these suppliers and to provide
them with more predictability and regularity of production orders to
avoid the adverse impacts of irregular production orders?
Ms. Buehler. I agree that it is important for the government to
effectively communicate expected business opportunities to small
businesses. It is for this reason that the Army Office of Small
Business Programs (OSBP), in coordination with the Office of the Deputy
Assistant Secretary of the Army (Procurement), issued a joint
memorandum in 2021 to the Heads of Contracting Activities (HCAs) that
established policy and processes for publication of acquisition
forecasts to small businesses. Our policy requires the HCAs provide
detailed acquisition forecasts, including projected contract awards and
opportunities anticipated for award through a small business set-aside,
in January and June of each fiscal year. Army OSBP has been posting
these small business acquisition opportunities on a publicly available
website for the past 2 years.
Additionally, the Program Executive Offices under the Assistant
Secretary of the Army for Acquisition, Logistics, and Technology
regularly conduct Advance Planning to Industry Days where they reach
out to small businesses to support specific programs.
[all]