DEFENSE DEPARTMENT

Small Businesses: Showered With Praise, But Not Shown Much Love

5/1/2011
By Sandra I. Erwin
At almost every public appearance in front of an industry crowd, government officials give the mandatory shout-out to small businesses. The standard rhetorical fare includes promises that the Pentagon will increase small business participation in defense contracting, lower barriers to attract new suppliers, open up the market to innovative firms, etcetera, etcetera.

This may sound like music to the ears of many entrepreneurs, particularly those with advanced technological expertise, who typically have shunned government contracting for its notorious red tape and creativity-stifling tendencies.

To the chagrin of many cash-strapped small businesses, words have not turned into action. In fact, the barriers to entry keep getting higher. While Pentagon higher-ups and politicians shower praise on small businesses, in the muddy trenches of government contracting, it can be ugly. According to industry accounts, the entire procurement process is a path strewn with obstacles.
Military procurement leaders who work with the private sector have recognized the problem.

“We put small businesses in a really tough position,” said Brig. Gen. Frank L. Kelley, commander of Marine Corps Systems Command.

“Getting small businesses involved in defense is a pet peeve of mine,” he told contractors at an industry conference. Small firms today can only get their foot in the door by “partnering up with a big guy,” said Kelley.

Over the course of an extensive career managing military projects, Kelley noticed that the only interaction he ever had with industry involved large prime contractors. “I had zero access to smaller companies on behalf of the government,” he said. “It irritated me. I’m sure it irritates small businesses,” he added. “I don’t know how we fix it. … We have to find some ways for government to get to the small business guys.”

Small business executives could not agree more.

“As a small company, it gets harder every day to do business with the Defense Department,” said Lance Criscuolo, president of Zyvex Technologies, a manufacturer of lightweight boats in Columbus, Ohio.

“The barriers to entry go up, not down,” he said in an interview. It starts with the amount of paperwork and bureaucracy, which makes it cost-prohibitive for most small companies to even try to compete. Suppliers may have products that the military seeks, but once they take a close look at the bidding process, they get a rude awakening. “You need an army of procurement guys to understand the specifications and understand what they’re actually trying to buy,” Criscuolo said. “We could supply the end product they’re looking for. But all the additional things that go with it just don’t make sense.”

Thousands of companies would more than welcome the chance to win a government contract, but they cannot afford the financial burden, Criscuolo said. “Why can’t the Defense Department just tell us what they need and allow us to submit our products?”

Another stumbling block for small business is the conventional wisdom that little companies whine and want handouts, Criscuolo said. “That’s not what we’re interested in. We just want the opportunity to compete.”

But to have a fair chance to compete, small businesses face a litany of pain.

“Most government organizations that are supposed to work with small businesses will not even bother to return phone calls from small businesses unless they already know them,” said Stephen A. Gould, president of Gould & Associates Global Services Inc., in Golden, Colo.

“Talking to members of Congress is equally frustrating, as most will typically listen to a small business person, nod as if they care and then forget about the conversation almost immediately,” Gould said. “These are genuine barriers to competitiveness and success,” he added. “The sad truth is that qualified and capable small businesses, especially those owned by veterans, often tend to get ignored while others tend to get thrown work due to connections or based upon whichever socio-economic group the folks on Capitol Hill want to curry favor with that month.”

From the get go, the cards are stacked against small companies, Gould said. “Probably 90 percent of Defense Department procurements are at least in some way tailored to an existing supplier or supplier the contracting officer or government customer knows,” he said. “If the contracting officer or customer has never heard of you, chances are you’re not going to get a fair shake.”

Pentagon officials, for their part, defend their record of supporting small businesses. Undersecretary of Defense for Acquisition, Technology and Logistics Ashton Carter said the Pentagon awards $150 billion to $200 billion worth of contracts to small businesses.

In his “Better Buying Power” guidance to the Pentagon’s procurement work force, Carter specifically calls for greater engagement of small businesses, said Glenn Fogg, director of the Pentagon’s Defense Venture Catalyst Initiative. The DeVenci office works with venture capitalists to recruit companies with hot technologies. The program is intended to help companies get their wares in the proverbial door. Those that make the cut receive funding from sponsoring organizations, Fogg said. “I think DeVenci is one of the tools that are helping” the Defense Department to lower the barriers to entry for small businesses.

Despite programs like DeVenci, it is clear that small businesses face long odds. “The U.S. government has told itself that it is ‘pro small business,’” Gould said. Government officials can choose to believe their own story, but in the meantime, “most of the small business people who make our living supporting the government find ourselves marginalized and pushed aside in favor of large business.”

Topics: Business Trends, Doing Business with the Government

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