Panel would dramatically move Dept of Defense toward innovative small businesses

As hearings for the annual National Defense Authorization Act (NDAA) begin this week, a report by the “Section 809 Panel” is likely to influence the bill’s acquisition provisions. The panel, authorized by the FY 2016 NDAA, has emphasized efforts the Department of Defense can implement to work better with innovative small businesses, including simplified contracting and strengthening SBIR. Congress proved receptive to the panel’s interim report — acting on all three recommendations in the FY 2018 NDAA — and proposals from the first of three final reports will be discussed as the FY 2019 bill advances.

The overarching purpose of the panel is to simplify the defense acquisition process. The panel views the current process as untimely and often overly complicated for small businesses. Both factors result in suboptimal outcomes for the agency, which can ultimately have an impact on missions. A key inefficiency identified by the panel is that Defense has focused its small business contracting on areas not related to mission support, and the panel wants to see more innovations from small businesses directly benefiting warfighters.

To address this problem, the panel calls on Defense to prioritize a strategy for working with these businesses. The panel also suggests that Congress pass a small business act specific to Defense and increase funding to procurement technical assistance centers. To address concerns that businesses deliberately stay small to continue qualifying for special consideration from the agency, the panel further recommends that small business benefits be applied for up to three years after a company outgrows the status.

The 809 panel strongly supports the SBIR and STTR programs, calling for their permanent authorization in the report’s introduction. Other specific recommendations to Congress for SBIR include:

• Increasing the Defense SBIR allocation to 7 percent;
• Increasing Defense Phase I awards to $500,000 and Phase II awards to $1.5 million;
• Apply simplified acquisition procedures for SBIR;
• Allow Defense to issue awards outside of SBA’s master release schedule;
• Allow Defense Phase II awards without a Phase I prerequisite;
• Allow first-time small businesses to receive more than two Phase II awards;
• Facilitate SBIR and STTR technologies to enter Phase III and receive Rapid Innovation Fund (RIF) awards;
• Increase the RIF to $750 million; and,
• Eliminate the cap on RIF awards

The panel further suggests that Congress establish a “Nontraditional Technology Partner Initiative” to pay “cash or noncash awards” to Defense civilians and personnel that develop new technology, contractors that identify partners, and consortia that assist partners in winning first-time defense contracts.

The panel also recommends that Congress create a “Defense Innovation Center Program” to establish open innovation centers that will connect innovative small businesses to Defense projects. These centers should have the ability to award grants and host challenges.

Other sections in the report would adjust the acquisition process and significantly change reporting and audit requirements for small businesses.

The FY 2019 NDAA is being marked up by House subcommittees this week. The full committee is expected to review the bill on May 9. The Senate schedule is not yet public.

Last year’s initial House NDAA would have barred the SBA from spending money on Regional Innovation Clusters or the Growth Accelerators program. SBIR and STTR, which currently have expired authorizations for pilot programs, are often attached to the NDAA bills as well.