Think government is dysfunctional? Check out this circus.
A major driver of business and engineering is the Department of Defense (DoD).
While high-profile contracts like the F-35 gets all the headlines, the sheer size and complexity of Pentagon operations and the hundreds of billions of dollars involved ensure that DoD activities are a major driver in the manufacturing sector.
That’s fine for Lockheed Martin, Boeing, Raytheon and similar heavyweights, but what about small- and medium-sized enterprises?
The DoD has an Office of Small Business Programs, which created their “Comprehensive Subcontracting Plan Test Program” (CSPTP) to determine whether comprehensive subcontracting plans will increase subcontracting opportunities for small businesses while reducing the administrative burden on contractors.
The test program is simple in concept: large defense contractors establish companywide subcontracting plans that describe how the company intends to subcontract government work. Prime contractors submit a subcontracting plan for each individual project as part of the bidding process, describing how much of the project will be outsourced and to which companies.
It’s a test program, but it’s been around for 25 years and Congress plans to make the CSPTP permanent under the 2017 National Defense Authorization Act.
It looks straightforward and like a good idea but it’s not without controversy. The American Small Business League (ASBL) filed suit against the Pentagon in Federal District Court in San Francisco after the Pentagon refused to release subcontracting reports that had been submitted by Sikorsky Aircraft to the test program. Federal Judge William Alsup agreed with the ASBL and ordered the Pentagon to release the Sikorsky data. The Pentagon has appealed the case to the Ninth Circuit Court of Appeals.
So what’s the problem? Take a look at this graph from a November 2015 report from the Government Accountability Office (GAO) run the value of the test program:
So why aren’t more small manufacturing firms benefiting?
One reason is the technical complexity of many high-value DoD contracts. Lockheed Martin’s F-35 for example, uses primary subcontractors Northrop Grumman Corporation and BAE systems, themselves large corporations.
The reporting system itself may skew the data. In the F-35 example, Lockheed Martin has approximately 500 Tier 1 and 1200 Tier 2 suppliers, but the Tier 2 contractors are not counted as small business subcontractors to Lockheed Martin.
Another possibility is linked to the size of modern DoD contracts: major subcontractors to multinational corporations frequently grow into large corporations themselves, effectively growing themselves out of the program.
Despite these difficulties, the GAO report suggests that the program is successful in reducing administrative costs. To cap it all off, the Pentagon doesn’t like the program and has recommended killing it.
So here it is in a nutshell: The DoD launched a test to see if big defense contractors can be encouraged to spread the wealth with small business across America. A quarter of a century later, no one knows if it really works. The Pentagon doesn’t want it and small business associations claim it’s bogus, but Congress is going to make it permanent.
It’s nuts and it’s just a small snapshot of how business is done in government contracting and while all this goes on, we argue about which bathroom transgendered people should use. Government can be at its most useless and inefficient when its trying to help.
