The Honorable Lloyd J. Austin, Secretary, U.S. Department of Defense (December 12, 2023)

Summary

A December 12, 2023 letter from the Committee on Small Business to Secretary Lloyd J. Austin of the U.S. Department of Defense; the signature blocks name Roger Williams, Nydia Velázquez, Nick LaLota and Hillary Scholten. The letter states that the Committee writes to inquire about how the Department of Defense (DoD) could better integrate small businesses into the defense industrial base, and says the number of small businesses in the defense industrial base has decreased by 40 percent over the last ten years. It seeks an update on the DoD's actions on issues identified in the Small Business Strategy, including bundling and consolidation of contracts, subcontracting plan accountability, and size standards revisions for NAICS codes. It requests a staff level briefing no later than December 22, 2023.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

                                        December 12, 2023

The Honorable Lloyd J. Austin
Secretary
U.S. Department of Defense
1000 Defense Pentagon
Washington, DC 20301

Dear Secretary Austin:

         The Committee on Small Business writes to inquire about how the Department of
Defense (DoD) could better integrate small businesses into the defense industrial base. Over the
last ten years, the number of small businesses in the defense industrial base has decreased by 40
percent.1 This represents a substantial decrease in the number of small businesses currently
involved in the defense industry and an amount of consolidation that the DoD states poses
“national security and economic risk to the nation that could lead to a decline in key domestic
capabilities.”2

        While small businesses are currently serving a vital role in the defense industrial base, the
21st century has been marked by fewer and fewer small businesses receiving contracts from the
DoD.3 This is in stark contrast to the 20th century where the rapid changes in the nature of
combat required agile production lines and rapid innovation. Many of the same needs are
reemerging due to the rapid changes taking place in the realm of computing, AI, and electronic
warfare. The DoD’s need for agility and innovation presents an opportunity to bolster small
businesses participation in both strategic defense efforts and the economy.

         In its 2018 National Defense Strategy, the DoD noted that future of American conflict
will be defined by “(n)ew technologies including advanced computing, “big data” analytics,
artificial intelligence, autonomy, robotics, directed energy, hypersonics, and biotechnology,” and
that these are “the very technologies that ensure we will be able to fight and win the wars of the
future.”4 This general position was reaffirmed by the DoD in 2022 but concerns still exist that
the DoD’s acquisition process needs adjusted to account for the rapid evolution of technology.5

1
  U.S. DEP'T OF DEFENSE, STATE OF COMPETITION WITHIN THE DEFENSE INDUSTRIAL BASE, 14 (Feb. 2022).
2
  Id.
3
  LUKE A. NICASTRO, CONG. RESEARCH SERV., R47751, THE U.S. DEFENSE INDUSTRIAL BASE: BACKGROUND AND
ISSUES FOR CONGRESS, 28 (Oct. 12, 2023,).
4
  U.S. DEP'T OF DEFENSE, SUMMARY OF THE 2018 NATIONAL DEFENSE STRATEGY OF THE UNITED STATES OF
AMERICA, 3 (Jan. 2018).
5
  LUKE A. NICASTRO, CONG. RESEARCH SERV., R47751 THE U.S. DEFENSE INDUSTRIAL BASE: BACKGROUND AND
ISSUES FOR CONGRESS, 3 (Oct. 12, 2023).
The Honorable Lloyd J. Austin
December 12, 2023
Page 2 of 3

         The majority of modern technological development is driven by the private sector.6 Small
businesses produce 16.5 times more patents than large companies on average, making a stronger
connection between the DoD and small entities vital to the DoD’s goals of evolving with the
progression of technology.7 It would also minimize any lag between private sector introduction
of products and technologies and DoD’s utilization of such technologies and capabilities. The
DoD stated itself “[t]he ingenuity, agility, and capabilities of [small businesses] are inextricably
tied to the nation’s national and economic security.”8

        The Committee appreciates the Department’s efforts to identify and address barriers to
entry for small businesses, including through the implementation of its most recent Small
Business Strategy and understands there are existing programs such as SBIR, Army R&D
marketplace, Project Spectrum, and the xTech Prime Competition that are intended to assist
small businesses participating in the defense industry However, the continual decline of small
business participation remains concerning.

        The Committee seeks input from the DoD regarding how both it and Congress could
better integrate small businesses in the Defense Industrial Base. In particular, the Committee
would appreciate an update on the Department’s actions to address the issues identified in the
Small Business Strategy including: bundling and consolidation of contracts; subcontracting plan
accountability; and size standards revisions for NAICS codes. Additionally, the Committee
would like an update on the DoD’s progress in creating additional market synergies and market
intelligence tools, as well as any regulations or policies it identified that were unduly
burdensome to small businesses.

       We therefore request a staff level briefing on the changes needed to expand small
business participation in the Defense Industrial Base as soon as possible but no later than
December 22, 2023. To schedule the briefing or ask any related follow-up questions, please
contact the Committee on Small Business Majority Staff at (202) 225-5821. The Committee on
Small Business has broad authority to investigate “problems of all types of small business” under
House Rule X. Thank you in advance for your cooperation with this inquiry.

                                                    Sincerely,



_________________________                                      _________________________
Roger Williams                                                 Nydia Velázquez
Chairman                                                       Ranking Member
Committee on Small Business                                    Committee on Small Business


6
  Jesse Hamilton, et al., Military Procurement in a Digital Age, DELOITTE (last visited Nov. 7, 2023),
https://www2.deloitte.com/us/en/insights/industry/public-sector/future-of-warfighting-in-a-digital-age/military-
procurement-digital-age.html.
7
  U.S. DEP'T OF DEFENSE, STATE OF COMPETITION WITHIN THE DEFENSE INDUSTRIAL BASE, 13 (Feb. 2022).
8
  Id.
The Honorable Lloyd J. Austin
December 12, 2023
Page 3 of 3




_________________________       _________________________
Nick LaLota                     Hillary Scholten
Chairman                        Ranking Member
Subcommittee on Contracting     Subcommittee on Contracting
and Infrastructure              and Infrastructure
Committee on Small Business     Committee on Small Business


File and source

File

2023-12-12_HouseSBC-Majority-to-agency_letter-re-dod-re-defense-industrial-base.pdf

Size

184,879 bytes

SHA-256

4f044b1107dd2d4660df5e83f9a5777222413bed4f562af53e6b33ebdcd4edbc

Our copy

2023-12-12_HouseSBC-Majority-to-agency_letter-re-dod-re-defense-industrial-base.pdf

Original

smallbusiness.house.gov