DoD’s New Small Business Strategy Seeks to Expand Opportunities

Published: February 09, 2023

Federal Market AnalysisDEFENSEPolicy and LegislationSmall Business

The Pentagon’s new small business strategy seeks to increase access to defense contracting and support growth of the small business industrial base.

The Department of Defense (DoD) recently released its new Small Business Strategy aimed at reducing barriers to small businesses (SB) doing defense work, increasing small business set-aside competitions, and leveraging programs to grow the U.S. industrial base.

In the media release announcing the strategy, Deputy Secretary of Defense Dr. Kathleen Hicks said, “Reducing barriers and creating more opportunities for small businesses will allow us to expand, innovate, and diversify, increasing our warfighter advantage, strengthening our supply chains, increasing competition in our marketplace, and growing our economy here at home.”

The announcement noted that small businesses were awarded over 25 percent of all DoD prime contracts last year and that small businesses account for 73 percent of defense industrial base (DIB) companies. At the same time, the strategy is seeking to reverse a downward trend in the number of small business DIB companies, which declined by over 40 percent in the past decade, according to DoD.

DoD’s Strategic Objectives for Small Business

The strategy outlines the following three strategic objectives with corresponding implementation actions for each:

  1. Implement a Unified Management Approach for Small Business Programs and Activities. This involves developing and implementing a unified management structure to integrate DoD small business programs and activities; establishing common training and credentialing for a unified DoD small business workforce; streamlining entry points into the defense marketplace for small businesses by unifying and improving the small business websites; and improving small business access to decision makers.
  2. Ensure the Department’s Small Business Activities Align with National Security Priorities. This involves stabilizing and scaling existing programs that help small technology and manufacturing businesses deliver capabilities to the warfighter; utilizing data tools to understand and expand small business participation and spending; and expanding policy and process engagement of small business professionals and senior leaders on small business matters.
  3. Strengthen the Department’s Engagement and Support of Small Businesses. This involves improving outreach and communication with small businesses; providing cybersecurity training and resources to small businesses; and educating small businesses on the risks of foreign ownership, control, and influence.

Prioritizing Small Business Goals Over Best in Class

A day after the DoD SB strategy was released, the Office of the Under Secretary for Defense for Acquisition and Sustainment (USD(A&S)) released a memorandum, Achieving Small Business Goals through Category Management Practices, which places achieving SB utilization above Best in Class (BIC) contract goals. Citing a December 2021 Office of Management and Budget (OMB) memorandum on supporting small businesses, the DoD memo states, “… the achievement of these goals shall be prioritized over attainment of Best in Class (BIC) contract goals if achievement of both goals is not possible. The use of BIC contracts should not impede the ability of the DoD Components to meet or exceed socioeconomic small business goals.”

Growing IT R&D Spending with Small Businesses

Technology research and development is one key area of potential growth opportunities for small businesses offering technological innovations. In a January event spotlighting 2023 contracting trends, Kevin Plexico, Deltek senior vice president for research, noted a significant increase in Research, Development, Test and Evaluation (RDT&E) budgets across the DoD over the last several years. Research spending into cybersecurity, artificial intelligence, machine learning, quantum computing and 5G communications continues to grow, as the military seeks to bring these technologies to bear on both warfighting and enterprise operations.

The new DoD strategy notes that small businesses have accounted for 77 percent of the research and development (R&D) companies doing business with DoD in recent fiscal years, so the growing RDT&E budgets bode well for small innovative firms that do work in these key focus areas and others.


Check out our report, Federal Contracting Trends to Watch in 2023, or our free webinar, Top Ten 2023 Trends Impacting Federal Contracting.