Pentagon officials see ‘troubling’ small business decline since COVID

Joe Gould

WASHINGTON ― Over recent months, the U.S. Defense Logistics Agency has awarded hundreds of millions of dollars in contracts for the federal response to the coronavirus pandemic, but that's not necessarily benefitting the Defense Department's usual vendors.

In fact, the Pentagon contracting arm is seeing fewer small businesses in its traditional supplier base competing for contracts in the wake of the coronavirus pandemic, the director of the DLA's Office of Small Business Programs, Dwight Deneal, said Tuesday.

“Our percentages [of small business involvement] are as high as they've ever been over the past five years, but we are recognizing that the participation level from our supplier base's standpoint has steadily declined,” Deneal said at a small business panel at the Association of the U.S. Army's annual meeting, which was being conducted virtually.

“So [the DLA is] looking at the gaps in there and how do we strategically attack those areas where some of our suppliers are just not participating in or winning some DLA contracts,” Deneal said, adding that the agency plans to roll out a new virtual outreach effort next month to reengage its small suppliers.

The comments came as the Pentagon faces congressional scrutiny amid reports it awarded lucrative contracts for disposable medical gowns to a handful of unexpected and inexperienced companies despite bids from more than 100 vendors with track records of successfully completing federal procurement contracts.

To boot, the Pentagon's allocation of $688 million to aid troubled suppliers of aircraft engine parts as well as shipbuilding, electronics and space launch services is facing anger on Capitol Hill because the money wasn't spent to increase the country's supply of medical equipment. Pentagon officials have denied any wrongdoing and stressed the need to support companies large and small that make up the defense industrial base.

Without mentioning either controversy, Deneal said the DLA's dealings on personal protective equipment contracts reflected a commitment to small businesses and efforts to revive domestic supply chains for PPE, widely regarded as a necessity in the wake of the pandemic.

“A lot of companies are starting to pivot their assembly lines to start to get into the business of producing PPE, and that has been quite clear from some of our last solicitations ... for gowns, where we had robust competition from small businesses ― companies that had traditionally never bid on government contracts,” Deneal said.

“We were able to allow that competition pool and subsequent awards to be small business awards, and I think that speaks to the importance that DLA sees and [places on] the small business community,” Deneal added. “It goes to show how our acquisition community is forward thinking and forward leaning.”

The decline in small business participation extends beyond the DLA. The director the Navy's Office of Small Business Programs, Jimmy Smith, said his data showed a similar and “troubling” trend in need of targeted contracting activity by the Navy.

“We're spending about the same, equivalent money every year, but one of the things we're watching in our supplier base is a pretty steep decline in industry partners in certain areas,” Smith said. “I think [it's] incumbent upon us to understand what those shortcomings are and [offer] some solicitations, sources sought in a number of areas where we are seeing a decline in industry partner involvement.”

Smith plans to address the gap in the coming year by pushing contacting officers to directly deal with small businesses and by enforcing agreements with large contractors that they flow work to smaller partners.

“It's definitely troubling from our standpoint on making sure we've got a viable supplier base,” Smith said. “Having a fragile supplier base does us no good, and it actually impacts the war fighter in negative ways.”

https://www.defensenews.com/2020/10/13/pentagon-officials-see-troubling-small-business-decline-since-covid/