DLA’s case for small business waiver

The U.S. Small Business Administration granted a waiver to the Nonmanufacturer Rule (NMR) for Defense Logistics Agency solicitation number SPE8EJ18R0001 on August 22, 2018. The program covered by the waiver is referred to as the Special Operational Equipment Tailored Logistics Support (SOE TLS) Program. The SBA has granted a NMR waiver for the past three iterations of the SOE TLS program, dating back to 2008. Since then, the acquisition strategy as a 100% small business set-aside has not changed. The effect of the waiver is to permit small business prime vendors/integrators to provide the products of both small and large business manufacturers under the program. NMR waivers are a lawful and effective tool in place for government buyers to maximize opportunities for small businesses to win prime contracts. Without it, small businesses are at a strategic disadvantage relative to larger, more established corporations. DLA is compliant with the terms of the waivers that SBA granted.

While the NMR waiver is an acknowledgement that not all needed SOE TLS products are available from small business manufacturers, DLA’s commitment to supporting federal small business policy goals is well documented. DLA currently has about 10,000 suppliers; 80% percent are small businesses. Since 2018, DLA contracts with small businesses were worth an average of $14.8 billion, with the proportion of DLA spend on small business contracts exceeding 38%, significantly higher than the Department of Defense and federal government overall.

In the case of the SOE TLS, DLA’s acquisition strategy gives preference to small businesses and ensures the prime contractor will be a small business. Each small business prime awardee must demonstrate a clear organizational structure focused on providing all categories of products within the scope of the program. Awardees invest considerable amounts of capital and time in gaining the proficiency needed to offer the products and provide DLA’s military customers with access to cutting edge advancements normally unattainable through other contracting vehicles. Each awardee must also demonstrate the ability to provide distribution for a worldwide set of customers

The SOE TLS Program also gives small business manufacturers increased access to government orders in a way that precludes the set-up of the extensive administrative infrastructure needed to do business with federal buyers. The SOE TLS Program prime vendors are experts at coordinating the digital transactions necessary for invoicing, payment, delivery, response, etc. These are capabilities that many small business manufacturers with new and critically advanced products to offer simply do not have. The SOE TLS prime vendors also provide the financing and capital needed to sustain small business manufacturing, since most government supply contracts do not pay for any order until after delivery.

The structures of DLA’s acquisitions are ultimately defined by the needs of its military and government-wide customers. DLA’s purpose in setting aside this procurement with a NMR waiver was to ensure that small businesses were able to participate to the maximum extent possible — as prime vendors and as manufacturers — while allowing DLA to meet customer requirements in the most expeditious, cost-effective way possible. Although DLA and SBA have worked together on similar NMR waivers for many years, we recognize that SBA has recently taken exception to how the program has been implemented. DLA intends to work with SBA to resolve the items of misunderstanding.

Michelle McCaskill is chief of media relations at the Defense Logistics Agency.

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