DRIVING SMALL BUSINESS SUCCESS

With AMC accounting for more than half of the Army’s total small business awards, its Offices of Small Business Programs use numerous approaches to set the stage for success in changing—and challenging—times.

by Ms. Beth Scherr

The numbers may not tell the whole story, but they do say a lot. In FY15, for the second consecutive year, the U.S. Army Materiel Command (AMC) surpassed all its assigned goals for total contract awards to small businesses and to the various socioeconomic small business programs. AMC’s accomplishments in FY14 allowed both DA and DOD to exceed their goals for the first time.

In FY15, AMC awarded over $9.2 billion in 63,039 contract actions to small businesses, representing more than 50 percent of the Army total of $17.5 billion in 126,963 contract actions. (See Figure 1)

AMC is responsible for continuing to ensure that the Army and its warfighters have the equipment and services they need to respond at a moment’s notice to any new conflict, whatever its size, nature or location. The AMC Office of Small Business Programs (OSBP), in turn, is responsible for ensuring that small businesses are considered at every step of Army acquisition, in accordance with policy and statutory and regulatory requirements. OSBP has small business offices at AMC headquarters and at seven major subordinate commands, including the four centers of excellence.

AMC’s major subordinate commands manage systems throughout their life cycle, from concept to sustainment to divestiture, and report directly to the higher headquarters on their small business programs on a monthly basis. As Gen. Dennis L. Via, AMC commanding general, put it, “Small business is big business at AMC. Even with declining resources, business opportunities will still exist, especially in the small business community.” Subordinate commanders are well aware of the distinct qualities of innovation and agility that small businesses can bring to AMC’s mission, and how small businesses strengthen the industrial base.

The Army OSBP negotiates and assigns AMC its small business goals, based on the Small Business Act of 1958 (Public Law 85-536) and other statutory requirements. Small business programs have four distinct socioeconomic categories: small disadvantaged business programs; women-owned small businesses (WOSBs); certified Historically Underutilized Business Zone (HUBZone) small businesses; and service-disabled veteran-owned small businesses.

AMC awarded 23.72 percent of its contract dollars to small businesses in FY14, surpassing its assigned small business goal of 19 percent, and 24.72 percent to small businesses in FY15 against an assigned goal of 19.5 percent. All seven AMC major subordinate commands exceeded their overall small business goals, and four of the seven commands met all their socioeconomic goals as well. (See Figure 2)

But goals, on their own, will not drive the actions needed to meet them, such as the outreach to small businesses, engagement with industry and the training necessary for government contracting personnel to make the necessary awards properly. Success requires support from leadership at all levels.

“The reason AMC is so successful is because of the mandatory performance requirements the Department of Defense leverages on senior executive performance objectives,” said Nancy Small, AMC’s director of small business programs. “These objectives are intended to support and promote the right command and program climate that are responsive to small business concerns,” she added.

LEADING BY EXAMPLE

AMC sets the example for the federal government, awarding a higher percentage of contract dollars to small firms than any other federal agency or military service, Small said.

AMC negotiations with DA for its FY16 small business goals resulted in DA assigning the command an overall small business goal of 19 percent of eligible contracting dollars. Determining these goals is a process that uses a trend analysis of historical and current performance, while considering economic factors that may pose challenges to meeting the goals.

These factors include the economy; the command’s mission; the procurement environment; budgetary constraints, such as sequestration; the inclusion of contracts performed outside of the United States instead of just awards for stateside actions; requirements consolidation; strategic sourcing initiatives to provide for standardization of contract awards across service categories; requirements not eligible for small business, such as the award of a major weapon system; and statutory and regulatory changes.

A number of recent legislative, regulatory and policy changes are having an impact on small businesses and OSBPs, including:

• The Small Business Subcontracting Transparency Act (S. 2138), a bill being considered in Congress to improve the review and acceptance of subcontracting plans. This legislation resulted from challenges that small businesses experienced with the federal procurement process and their role as subcontractors.

• Improving Small Business Innovative Research and Technologies Act (S. 2136), also pending in Congress, which would establish a pilot program aimed at increasing opportunities for small innovators in rural states to develop new technologies and commercialize them through the Small Business Innovation Research (SBIR) program.
• A move by the U.S. Small Business Administration (SBA) to include contracts performed overseas in determining prime contract goals as of FY16, in accordance with the National Defense Authorization Act for Fiscal Year 2013. Through FY15, the baseline included only contracts performed in the United States. Including contracts performed overseas would increase the base against which the percentage of small business awards is measured and would result in a lower percentage of awards to all small business socioeconomic programs, at least initially until opportunities increase for small businesses to perform overseas.
• An SBA final rule, effective Oct. 14, 2015, implementing Section 825 of the National Defense Authorization Act for Fiscal Year 2015, which granted authority to award sole-source contracts to WOSBs in appropriate circumstances. In sum, if a contracting officer, after conducting market research in an industry for which a WOSB set-aside is authorized, cannot identify two or more such businesses but identifies only one that can perform at a fair and reasonable price, a contract may be awarded on a sole-source basis with the proviso that the anticipated value of the contract, including options, does not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts. This section also changed the deadline for SBA to conduct a study to determine the industries in which WOSBs are underrepresented to Jan. 2, 2016.
• “Inflation Adjustment of Acquisition-Related Thresholds” for FY16 (Federal Acquisition Regulation Case 2014-022, dated July 2, 2015; see https://acc.dau.mil/CommunityBrowser.aspx?id=734185).

OSBP INITIATIVES

Better Buying Power (BBP) is based on the principle that continuous improvement is the best approach to improving the performance of the defense acquisition enterprise. AMC has various initiatives to improve subcontracting performance in accordance with the principles of BBP 3.0, which include increasing small business participation as a means to deliver better value to the taxpayer and warfighter.

These initiatives, implemented across all small business offices of the major subordinate commands, are designed to reduce barriers for small businesses and to strategically align the commands’ small business programs with DA and AMC commander’s initiatives.

Reflecting the BBP 3.0 focus on incentivizing innovation in industry and government, AMC is seeking to increase the return on SBIR initiatives by more tightly relating its SBIR investments to a commander’s strategic priority. The goal is to use the SBIR investment to develop and commercialize the technology, then move the product beyond development and into the hands of warfighters.

Drawing on the BBP 3.0 initiative to promote effective competition by creating and maintaining competitive environments, AMC OSBP participates in acquisition planning with the requirements, technical and contracting leads for the effort, and completes a thorough review of the acquisition strategy documents—including the market research results, the acquisition plan, subcontracting plan and small business participation plan, as applicable—to ensure maximum small business participation when appropriate.

In FY14, AMC established this emphasis on small business participation in all procurement actions through the use of contract award evaluation factors or subfactors. These factors look at the use of small businesses in performing a proposed acquisition, the contractor’s use of small businesses on previous government contracts and ways to include small business performance in award fee contracts. Thus, if all things are equal among competitors, small business performance could be a deciding factor in the award. Poor small business subcontracting performance could also affect prime contractor incentive fees.

In another move to ensure the consideration of small businesses at the very earliest stage of the acquisition process, AMC’s major subordinate commands’ small business assistant directors participate in peer reviews with the members of the acquisition team for all planned acquisitions above $100 million, with the objective of ensuring consideration of small business opportunities. As part of this initiative, military department and defense agency small business directors similarly review all planned acquisitions above $500 million.

Active oversight and management of small business goals, including use of data metrics and more effective use of market research, is another primary initiative whereby the AMC OSBP works to increase small business participation. This oversight helps to ensure that we are aware of the capabilities of small businesses and that they are aware of DOD’s needs. The DOD OSBP is leading the way within the federal government on a new market research technique called Small Business Maximum Practicable Opportunity (MaxPrac) analysis. In essence, MaxPrac identifies specific contracts being awarded to large businesses that could potentially be satisfied by small businesses.

Another of AMC’s long-term initiatives is developing and training Army acquisition’s small business workforce, supporting the professional growth of the small business specialist as a member of the Army Acquisition Workforce and, in turn, facilitating the expansion of small business training and information at their disposal to increase knowledge and awareness of the value of small business. Small businesses play a vital role in sustaining military readiness, providing economic security and advancing technology. Ensuring that the acquisition workforce understands how small businesses can best fit into the contracting puzzle will help to maximize opportunities for them.

FISCAL IMPACTS

The current fiscal environment poses several challenges to DOD’s ability to provide small business opportunities, however.

First, the reliance on continuing resolutions to fund federal spending has a potential impact on the overall defense industrial base, but potentially more profound consequences for small businesses whose viability is more sensitive to variations and gaps in cash flow. New contracts that may have been planned for award to a small business may be placed on hold pending a fully approved budget, and agencies with existing contracts may be forced to slow their planned levels of effort as the availability of funds shrinks. Large businesses often can continue to operate in these challenging circumstances without an impact on their workforce, but small businesses may be forced to delay hiring or reduce staffing.

Also, in managing programs such as SBIR, budget calculations and allocations are more difficult under a continuing resolution, creating greater execution challenges for the SBIR workforce.

Second, the lapse over the past couple of years in DOD’s compliance with Title 15, U.S.C., Section 637(a)(12)(C), which required DOD to prepare and furnish a forecast of expected contract opportunities to the SBA and the director of DOD’s OSBP, not only made it difficult for small businesses to find out about opportunities but also created a challenge in forecasting goals.

Early in FY15, with the assistance and support of the program executive offices, commanders and all requirement holders, DOD took the first steps toward creating a comprehensive long-range acquisition forecast. This forecast contains requirements from DOD agencies that are valued at $150,000 or more for the upcoming and future fiscal years. While the forecast does not constitute a specific offer or commitment by the responsible DOD agency to fund the opportunities it outlines, it does provide information for marketing and planning purposes.

This information will foster communication between DOD and industry as well as increase competition. Additionally, the forecast will promote industry planning by providing advance knowledge of requirements and will help the AMC commands with acquisition planning, forecasting, setting goals and locating additional sources of supply. The development of a comprehensive acquisition forecast that identifies small business opportunities by industry, as well as contracting, teaming and subcontracting opportunities, is a primary focus area for the AMC, DA and DOD OSBPs, and the DOD Long-Range Acquisition Forecast will be an invaluable tool.

Finally, the inability to enforce subcontracting compliance is having a negative impact on the ability to ensure that large businesses are providing small businesses with opportunities in accordance with their subcontracting plans. Section 1653 of the National Defense Authorization Act for Fiscal Year 2013 provides for penalties to large businesses for failing to comply in good faith with their small business subcontracting plans, and AMC established contract award evaluation factors to implement the law. However, because of constraints on the electronic Subcontracting Reporting System (eSRS), the current subcontracting evaluation system, a major challenge for OSBP is assessing alternatives for determining compliance and subcontracting achievement for AMC components based on the contracts they award.

OUTREACH AND OPPORTUNITIES

It is critical to AMC to continue to grow the industrial base. The command is engaged in the development, support and sustainment of the future Army, while at the same time supporting and sustaining the current Army. Through its 23 organic industrial base facilities, consisting of ammunition plants, Army depots and arsenals, AMC’s overhaul and modernization efforts are enhancing and upgrading major weapon systems—not just making them like new, but inserting technology to make them better. These efforts create opportunities.

Each of AMC’s major subordinate commands has associate directors of small business and small business specialists committed to helping small businesses explore opportunities to do business with their commands. These specialists are an excellent starting place to market a small business’s capabilities effectively. The AMC OSBP website identifies the points of contact at each major subordinate command. The website also links to the March 2015 guide “How to Do Business with the U.S. Army Materiel Command.”

A primary reason for the overall success of AMC’s OSBP results from engaging program executive officers, commanders and contracting professionals over the past two years in the outreach program it developed. The office hosts one of the premier small business outreach events in the Army, the annual Team Redstone (AL) Small Business Industry Outreach, which has grown from 200 small business attendees to over 500 small business attendees and 100 government personnel in only two years.

A key reason for the success of this event is the far-reaching agenda, which includes keynote speakers, presentations and panel discussions involving the commanding generals of AMC and subordinate commands, senior leaders, principal assistants responsible for contracting, the Army and DOD OSBPs, the deputy assistant secretary of the Army for procurement, the assistant secretary of the Army for acquisition, logistics and technology, program executive officers, the civilian aide to the secretary of the Army, SBA, the Defense Contract Audit Agency and U.S. General Services Administration. The FY16 event is scheduled for March 14 in Huntsville, Alabama, as the kickoff to the Association of the United States Army Global Force Symposium and Exposition.

Another primary source of outreach for AMC is the advance planning briefings for industry, held quarterly at one of the four centers of excellence. The tentative dates and locations for 2016 are: Team Redstone, March 8-9; Team Rock Island (Illinois), May; Team Warren (Michigan), August; and Team Aberdeen Proving Ground, (Maryland), November. These two- or three-day events provide a great opportunity to learn of upcoming opportunities at AMC’s four centers of excellence, as well as to network and develop teaming opportunities.

CONCLUSION

As a result of AMC’s record-breaking efforts in FY14, the command’s OSBP received the National Veteran Small Business Coalition 2014 Champions of Veteran Enterprise Award for exceptional support of service-disabled veteran-owned small businesses; DA’s FY14 Women-Owned Small Business Award for Exceptional Program Support; and DA’s FY14 Service-Disabled Veteran-Owned Small Business Award for Exceptional Program Support.

In FY15, Via reiterated the importance of AMC achieving its small business goals and the commitment of AMC leadership to supporting small businesses by emphasizing how critical small business is to our nation’s economy. This unprecedented high-level emphasis on making small business a priority carried through to the leadership of the command’s OSBP and of the U.S. Army Contracting Command, contributing directly to AMC’s exceeding all goals in its small business program in back-to-back years.

AMC is open for business and remains committed to ensuring that warfighting formations are prepared when the call comes. Small business will continue to play a critical role in enabling AMC to develop and deliver readiness solutions. AMC’s work with small business is all about the Soldier, and it’s critical that we never lose sight of that.

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For more information, contact Nancy Small, director of AMC’s OSBP, at usarmy.redstone.usamc.mbx.small-business@mail.mil; or go to the AMC OSBP website at http://www.amc.army.mil/amc/smallbusiness.html.

MS. BETH SCHERR is deputy director of the AMC OSBP, with more than 13 years of experience in contracting. She has held various positions from the execution through the strategic level. She has an M.A. in contract management from the Naval Postgraduate School and a B.S. in accounting from Montclair State University. She is Level III certified in contracting and Level I certified in program management.

This article was originally published in the January – March 2016 issue of Army AL&T magazine.

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