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Government Contracting 101 - Part 4: What is the Role of Small Business in New Product Development?

Posted by Brian Ormsby on Tue, Apr 18, 2017 @ 11:08 AM

Small businesses are the cornerstone of innovation in the US Government, and  Federal Acquisition Regulation (FAR) Part 19 discusses Small Business Programs.  It sets the size standards to be considered a small business, and it also sets the policies, coordination with the Small Business Administration (SBA), Small Business Set-Asides, subcontracting with small businesses, description of special categories of small business, etc.

Small businesses are on the leading edge of innovation.  In fact, small businesses invent at a rate faster than large businesses. In a patent study[1], it was found that the smaller the company, the greater the number of patents per employee.  This was found to be true all along the scale; as businesses grow, their patent to employee ratio declines.  Small business accounts for 8% of all patents issued, but 24% of all patents in emerging technologies.  The government is interested in emerging technologies as that is how they keep their competitive edge.

Because of this, and other factors, Congress has mandated that small businesses receive 23% of all Federal Government contracting dollars, including 5% of prime and subcontracts to Small Disadvantaged Businesses; 5% of prime and subcontracts to Women-Owned Small Businesses; 3% of prime and subcontracts to HUBZone Small Businesses; and 3% of prime and subcontracts to Service-Disabled Veteran-Owned Small Businesses.

There are some very specific programs designed to enhance the role of small business in government contracting.  Here are a few of the major key programs:

Small Business Innovative Research (SBIR) Program

The SBIR program was established within the National Science Foundation in 1976 with the first awards issued in 1977.   The program was well received and further established in 11 different agencies with the SBIR Development act of 1982. It is designed to enhance the role of small businesses in research and development that has potential for commercialization.  The program has not only generated significant innovation in the country but also been recognized as a significant driver in overall job growth in the United States over the last 30 years.  The non-dillutive funds have helped many small businesses succeed where they might have otherwise failed early on.  Two large success stories from the SBIR program funding are Symantec and Qualcomm.  

The SBIR program currently mandates the 11 agencies set aside 3.2% of their R&D budgets for the program.  In 2016 this translated into 3,029 awards for a total of $1.35 Billion.  The US Small Business Administration (SBA) serves as the coordinating agency for the SBIR program.

Small Business Technology Transfer (STTR) Act

Modeled after the SBIR program, STTR was established in 1992.  The goal of the STTR program is to facilitate the transfer of technology developed by a research institution through the entrepreneurship of a small business concern.  The program accepts proposals where small businesses partner with universities or research institutes.  There are several qualifiers to this program as to the percentage of work performed, employment of the Principle Investigator, etc.  In 2016 there were 567 awards for a total of $192 Million.

Federal and State Technology Partnership (FAST) Program

FAST programs are competitive grants programs designed to strengthen the technological competitiveness of small businesses.  These funds are issues from the Federal Government to the state level where the program is managed.

The emphasis on using small business concerns doesn’t stop at the SBIR/STTR level.  There are several other ways that small businesses can get involved in government contracting.  Some contracts are set up specifically for small businesses (we will discuss these opportunities for small business in a special blog near the end of this series).

Federal contracting with small businesses is a win-win.  Small businesses get the revenue they need to grow their businesses and create jobs, and the Federal Government gets the opportunity to work with some of America’s most innovative and nimble small businesses, often times with a direct line to the CEO.

 - Brian Ormsby, ReliAscent

[1] Patent Trends among Small and Large Innovative Firms during the 2007-2009 Recession, Anthony Breitzman, PhD.  May 2013.


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Topics: government contracting, Small Business, new product development

SBA Statistics Show Small Business Improving

Posted by Mike Anderson on Tue, Jul 15, 2014 @ 03:07 PM

The Small Business Administration (SBA) keeps statistics on small businesses in the United States.  Recent data from the first quarter of 2014 show positive results for small business growth after a period of stagnant growth since the recession of 2009.  Across the United States, Small Business accounts for a majority of job growth so when the small business sector took a hit in the last recession, it had a significant impact on the economy as a whole.  For instance, in 2009 the "birth rate" of new small business was at it's lowest point in the last 10 years.  This rate has been on a slow, but steady, increase since early 2010.  When you combine that with the "death rate" of small businesses (again at a peak in 2009) there are some positive indicators.  The death rate has declined more rapidly over the last several years, meaning more small businesses are surviving.  The amount of income from small business has steadily increased since 2009 showing again a positive indicator for this sector.  Finally, the hiring rate for small businesses is above the separation rate (indicating a positive gain in employment) and the gap appears to be the largest gap for several years. Take Colorado for instance, there are almost half of the state's private workforce employed by small business concerns.  This percentage is not too far off of the national average.  Further, almost 98% of all employers in the state are small businesses.  It is also interesting to see that the largest gain in new jobs was from firms in the 1-4 employee size category. 

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Topics: SBA, Small Business

What you should know about an ICP audit.

Posted by Mike Anderson on Fri, Feb 14, 2014 @ 08:30 AM

Over the last couple of years the DCAA has increased it's focus on auditing Incurred Cost Proposals.  This has resulted in some companies getting involved with the DCAA auditing ICP's as much as 6 or 7 years old.  I don't know about you but I have a hard time remembering last week, let alone 6 years ago.  This certainly causes a problem in contract close-outs since the ICP must be accepted in order to true up the indirect billing rates on a cost type contract.  There are some new directives that may help relieve some of this situation for the small business.

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Topics: Small Business, icp audit, incurred cost audit, incurred cost proposal

DCAA, DCMA and the small business government contractor (You).

Posted by Mike Anderson on Wed, Feb 12, 2014 @ 05:10 PM

As we did a webinar this morning for quite a few SBIR award winners from the Navy regarding the DCAA and the DCMA, it occurred to me that there could be a lot of small business government contractors that are slightly confused about these agencies roles.  I thought it would be useful to go over a little bit of the discussion from the webinar here. 

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Topics: DCMA, government contractor, DCAA, Small Business

NDIA & SBTC Committee to address DCAA issues for Small Business

Posted by Mike Anderson on Fri, Aug 16, 2013 @ 08:28 AM

A while back I wrote a blog about our Russ Farmer heading a joint committee of the SBTC and NDIA to take small business concerns to the DCAA and DCMA for resolution.  At that time the committee was asking for input from Small Business of concerns or problems that they were having with primarily the DCAA but also any issues they might have with DCMA.  As you might imagine, there are some issues out there.  The first priorities of the committee were to 1) establish a relationship primarily to identify and resolve issues that were common, broad-based and significant and 2) to define a path forward to work on resolution of consultant cost conflicts on dated outstanding incurred cost audits.  The issue on the consultant costs has 3 primary issues:

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Topics: DCMA, DCAA, Small Business, NDIA, SBTC

How the FY2014 budget will help Small Business

Posted by Mike Anderson on Mon, Apr 15, 2013 @ 11:00 AM

Last week we talked about some of the opportunities in the President's proposed new budget for FY2014.  I would like to look at more of the specifics of how that might translate into something good for small business. The Office of Management and Budget issued some insight to the thinking behind the FY2014 budget.  The main emphasis is, of course, to help build-up and support a strong middle class in America.  These programs are seen to either support that or help Americans reach that level.  The main thrusts of the budget are:

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Topics: Government Contractors, Small Business, FY2014 Budget

Small Business Contracting Opportunities

Posted by Mike Anderson on Mon, Apr 01, 2013 @ 09:00 AM

It seems that most of the news coming out of the Government lately is depressing and seems to not be in favor of small business contractors.   Some of this bad news is political positioning and some of the news is a warning to small businesses that are not paying attention to their customers and of course some of it will impact small business.  Being an optimist at heart, I would like to look for the opportunities in all of this.  I saw a couple of opportunities in the past week that I would like to bring to everyone's attention.  These could be good ways to find opportunities in an otherwise shrinking pool. 

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Topics: government contracting, SBA, Small Business

New Government Contract Opportunity: OASIS

Posted by Mike Anderson on Fri, Mar 29, 2013 @ 02:01 PM

The government released this week a draft for a Proposal (RFP) this week called One Acquisition Solution for Integrated Services (OASIS).  OASIS is a Multiple Award, Indefinite Delivery, Indefinite Quantity (IDIQ) type contract for Government-wide  professional service procurement.  The opportunity is coming out of the GSA branch of the government and has two parts.  The first part will be an unrestricted contract but includes goals for small business subcontracting of 50%.  The second part is a set aside contract for small business.  As you can see, there is a tremendous opportunity within this vehicle for small business participation.  The goal of this contract is to supply professional services to both commercial and non-commercial needs within the federal agencies.  The areas of expertise include the following categories:

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Topics: Government Contract, government contracting, OASIS, Small Business