Small, innovative companies want Congress to help them get a bigger share of Defense Department contracts — and they have suggestions for what form that help should take. Three associations representing small software and technology companies asked Congress for pathways to improve the way the Pentagon works with them.

The Aug. 1 letter, sent to the leaders of the House Armed Services Committee and the House Appropriations Committee by the group, listed changes that could make a difference. The items included creating a standard definition of software-as-a-service (SaaS), increasing the use of other transaction authority (OTA) and increasing eligibility for Small Business Innovation Research (SBIR) programs by allowing for more participation of venture capital in SBIR funding.

“I think there are other structural elements like the budget process and the acquisition process that ultimately all need to be like different levers in order for the innovation chain to work. It’s not about just creating new policy for the sake of policy, but it’s really standardizing the approach across different military services and DoD components,” said Jane Lee, the vice president for policy and government affairs at Rebellion Defense and  chairperson for the Software in Defense Coalition.

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The three organizations to sign the letter included the Software Defense Coalition, the Alliance for Commercial Technology in Government and the National Venture Capital Association.

In addition to recommendations, the letter also reinforced its support for language in the fiscal 2024 House National Defense Authorization Act (NDAA) the organizations regarded as helpful.

“For the most part, it’s really thanking Congress for being smart and adapting a lot of these changes and maybe adding one or two little things here and there,” said Warren Katz, chairman of the Alliance for Commercial Technology in Government and a former managing director at Techstars  told Federal News Network.

Katz said his priority item on the list of recommendations was enforcement of regulations requiring DoD to perform market research to find commercially available products before agreeing to buy new products. The letter references language in the 2023 NDAA requiring contracting officers to look for available products and it requests “the enforcement of on-the-books regulations to perform market research on commercially available items and when discovered, purchase them in preference to custom development,” the letter said.

“Most of what’s wrong with the defense industry today is that innovative commercial product companies are ignored because the contracting officer in the government either doesn’t know about them or doesn’t do the required market research. And the prime contractor influences [contracting officers] and pushes them toward custom-making things that can be bought off the shelf,” Katz said.

The letter contained several recommendations for helping small companies get products from the innovation stage and into commercial development. Under the current rules, a company with more than 50% investment coming from venture capital is ineligible to participate in the SIBR program unless the company gets a waiver. The letter recommended changing the rule.

“I think the intent of the SBIR is to allow the best entrants to compete, to provide demonstration projects and to accelerate, hopefully with phase two and phase three, to move to the production phase. The waiver process doesn’t allow all small businesses to participate. We’re just trying to improve eligibility,” Lee told Federal News Network.

The three industry groups also want to see increased use of OTAs in DoD acquisition. The letter said the federal government as a whole does not use OTAs  to the fullest extent. It called on Congress to order a report on the utilization, success rate and use cases of OTAs and to increase training on how to use them more effectively. The federal government uses OTAs to streamline research and development, prototype development and other projects with non-profit research institutions.

“OTAs give federal civilian agencies and DoD a flexible procurement pathway to engage with industry and academia on researching and prototyping activities,” the letter said.

Lee said software companies also face challenges when it comes to working with the Pentagon on SaaS contracts. The letter recommended DoD come up with uniform standards for how it defines SaaS for acquisition purposes.

“Small businesses often must alter the way they refer to their products because of a lack of understanding within DoD of what SaaS means. A common definition of SaaS would be instructive and help ease barriers for small businesses that build emerging technology for government use,” the letter said.

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