The Air Force is taking a carrot and stick approach to improving how many contracts and subcontracts go to small businesses.
The service earlier this month issued a small business improvement plan focused on three goals, one of which could tie real dollars to how vendors meet their goals.
“One thing we are exploring is whether or not we would have an award fee kicker on top of the other incentives we have in the contract that would be focused on how that company exceeds their small business goals,” said Joseph McDade, director of the Air Force’s Office of Small Business Programs, Thursday at the AFCEA Northern Virginia Air Force IT day in Vienna, Va. “We don’t have a particular number yet. We are still early on in the process. But … award fee kickers will get a disproportionate amount of executive attention for various reasons. If we are trying to target behavior and we are trying to get people to do the thing we want, we think that may be the most effective way to actually make meaningful change. We have a lot of work to do. We are exploring it, but we are nowhere near making a final decision.”
As for prime contracts, the Air Force is adding another layer of oversight to the program executive offices.
McDade said the service is developing a new series of metrics around small business prime and subcontracting.
“In the spring review, the program executives will be reviewing both their prime contract small business activity and their subcontract activity,” he said. “We’ve never done both of those things in the spring review.”
He said the focus across the board is on making meaningful change and increasing small business prime and subcontracting.
Dollars, contracts stagnated
Over the last six years, the Air Force’s prime contracts to small business as a percentage of overall contracts awarded have stagnated, while its total dollars awarded increased for a time and then fell off.
For instance in fiscal 2010 — the most recent data available — the service awarded $9.1 billion to small firms (16.9 percent). That is down from $10.2 billion in 2009 and $9.3 billion in 2008. The Air Force isn’t alone in having problems meeting government-wide small business goals. For 2010, the Small Business Administration found agencies missed the 23 percent goal for awarding prime contracts to small businesses for the fifth year in a row. The Defense Department fell short of its goals in three of five socioeconomic categories, including awarding just 20.9 percent of its prime contracts to small businesses.
This lack of success across the board has caught the attention of Congress. Rep. Sam Graves (R-Mo.), chairman of the Small Business Committee, led the introduction of six bills over the last month to improve oversight, increase the goals and give small firms more opportunities to compete for federal work.
McDade said the Air Force knows it needs to do better and its new strategy will help get them there.
“There are two really important things about the plan. The first is it is absolutely a result of a partnership between my office and our senior acquisition executive, Mr. [David] Van Buren,” he said. “As we developed the plan, we did it collaboratively. We did this in partnership, and then we coordinated this Air Forcewide.”
McDade said any plan needs widespread support and by working through Van Buren’s office, they were able get the stakeholder buy-in. Van Buren recently announced he was retiring in March.
The plan has three major goals:
Stop the decline in the prime contract awards to small business;
Take a look at game changing approaches to reverse the trend over the long term;
Better understand the value of small businesses to the Air Force;
“As long as we are in alignment and partners with the acquisition office, what then happens is we drive from the top down what the acquisition community is focusing on,” McDade said. “The plan is communicating to the entire acquisition workforce and those who support it that we are serious about doing this. The fact that the acquisition office then put the implementation of this plan in its goals and objectives for calendar year 2012 communicates to the small business community, the acquisition community and all the communities that support us that we are going to be serious about tracking our progress as we go forward.”
One of the biggest challenges for any small business office is ensuring its data is accurate and it is doing a wide enough search for small businesses.
Data, market research remain challenges
McDade said the Air Force is trying to address both of these long-standing problems.
“We are partnering with the Defense Contract Management Agency to put together a lean review of the entire process for collecting and actually using the data that we collect for subcontracting,” he said. “I’m a firm believer that once I know what the process is then I can take a look at the injections that will make the data and process better.”
McDade said the Air Force also will work with the SBA, the General Services Administration and other agencies to address the data creation and collection challenges.
McDade also wants to work with industry associations to improve how the service does market research.
“One of the things my preliminary assessment, again I’ve only been on the job for five months, is the small business community often gets involved with too little, too late,” he said. ” If we try to get involved earlier in the lifecycle of the procurement, we will get much better at market research. I think we have a lot of work to do there. To do that right, we have to get industry buy-in and come up with a process that we and industry are comfortable with.”