Analyzing the Composition of the Department of Defense Small Business Industrial Base

Abstract

This paper explores the composition of the Department of Defense (DoD) small business (SB) industrial base by analyzing public records for companies registered to do business with the government and publicly available DoD contract and subcontract award data from 2015 through 2021. We demonstrate that although the amount of money DoD awarded to SBs grew by almost 68% between 2015 and 2021, the total number of SBs in the defense market shrank nearly 23% concurrently. The decline in SBs can be attributed to the fact that SB program policies fail to address the underlying issues that keep small and nontraditional companies from navigating the defense market successfully. Furthermore, SB policies enable the largest SBs–which include companies that generate hundreds of millions or billions of dollars in DoD revenue annually–to expand their market share, irrespective of price, quality, or innovativeness. To contextualize these findings, we provide an overview of the history and stated objectives of DoD SB initiatives and utilize qualitative research to understand the experiences of individual SBs in the defense market. We offer a series of concrete recommendations to improve how the DoD SB program is structured and measured, to enable it to better meet its objectives.