Review of the DoD Small Business Strategy Report

This podcast episode delves into the recently released Small Business Strategy by the DoD in January 2023. The 25-page document is analyzed in detail, providing a comprehensive breakdown of its contents. Along with this analysis, the podcast also features candid commentary on the strengths, weaknesses, and notable aspects of the strategy.

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Read Transcript Here:

Mike: [00:00:00] Hey everybody. Mike LeJeune here with Game Changers for Government Contractors, and today we have a special guest. Josh Frank is with us. So Josh, for those that don't know, who are under a rock or something like that, who haven't either read your book or listened to a podcast, why don't you tell everybody who you are and what you do?

Josh: Hey, thanks Mike. I'm glad to be back again. Those of you who don't know me, Josh Frank. I'm managing partner for RSM Federal. As Mike indicated, I've written books, et cetera. I've been in the market over 35 years. I'm a real big small business supporter. The rest of it I'll leave to my bio.

Mike: Yeah, there you go. And today we are going to be talking about a really interesting subject. It's always interesting when the government is trying to rework something in their small business programs. DOD recently put out a document, their small business report. So we're going to break that down today, kind of get both of our thoughts on that. But Josh, you know, you're the one who kind of redlined it first. Why don't we start with you here. What are your just kind of general thoughts, standouts on the whole report and their strategy?

Josh: Mike, you and I were [00:01:00] talking a couple weeks ago about what's working right, what needs to improve. At least from a government industry perspective, there's this lack of partnership between government and industry, right? We've been talking about this podcast all over the place, right, for years. And it started when everybody made the protest a standard part of their RFP, RFQ

Mike: Yeah

Josh: right proposal process. And so let me first say, for all the listeners, this report was much needed. You know, of the programs, the unified communications and management, this was well needed. I will say before anything else, it does feel a little bit like an echo chamber. I'm not saying all of it is doing the same thing and expecting different results, right. Which, you know, definition of insanity. But there is somewhat of an echo chamber. in the report. I hadn't talked to you about that aspect of it, but did you see similar echo of same things, different results?

Mike: Yeah, and one of the things that I'll say in just [00:02:00] looking at a report like this is, I didn't know this was going on. You didn't know this was going on. We're a couple of the players in here where, you know, it'd sure be nice before the government puts something out like this to get some insight from some of the people in the market. Right?

Josh: So, so, so I totally agree, but and I wasn't going to bring this up today, but deep in the report, evidently in 2021, the Department of Defense put out a request for feedback from industry

Mike: I remember that. Yep.

Josh: within the federal register. I remember sort of tangentially, whatever that word is. When I saw this come out and I was like, I had all kinds of feedback.

Mike: We both did.

Josh: Oh, we, we're real big in the small business space. Yeah. I went out and looked, there was like 200 comments. And I started looking through the comments and I was like, Ugh, these are missing the point. So to your point, yeah, I'm a little disappointed that that went under the radar. And it's typical. Alright, so you really got me on a soapbox now because if there was a true partnership between government and industry, there would've been more of a [00:03:00] concerted effort to go industry

Mike: mm-hmm

Josh: hey, we're looking at revamping the entire small business program for the Department of Defense.

Mike: Right, right.

Josh: Make sure that we get some of the value that you guys can provide.

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Josh: General thoughts, what stands out? First thing that stands out, and thank you DOD for being honest about it: we met our goals. We met our goals, but we lost 40 to 50% of the industrial base.

Mike: It's a head slap moment, right?

Josh: Oh, [00:04:00] oh, it is, it is. The report, let's be very specific and, and by the way, this may be a little bit longer podcast, Mike, than some of the other ones that we're going to have, okay? There are a couple of points I'm going to always want to make here. The reports makes it very clear. Only 40% of the industrial small business industrial base was lost. ONLY

Mike: We just lost half of the base. Yeah.

Josh: Yeah. Now I've spoken to, because you know, we support a lot of conferences and we keynote, so I've spoken to the chief acquisition officers for some of the federal agencies. They're indicating even more than 40%

Mike: yeah

Josh: across the board. Think about this from a logical business perspective. If they met their goals with half the number of small businesses, it's logical to assume that one of the reasons why the small business community is disappearing within DOD is because they're simply awarding more contracts to those companies that are already winning.

Mike: Yeah.

Josh: And what makes me scratch my head is also later in the document, they want to increase the next [00:05:00] thresholds. So first: Met the goal, but we lost 40% of the base. If that doesn't show you right there that the goaling reports for SBA have a huge gap hole in them, it's not working as it's supposed to, obviously. The whole increasing NAICS thresholds, I think that's great for small business. But the problem with that, is that when you increase those next thresholds, what you're doing is you're allowing those contracting officers to continue to award contracts to the existing successful companies, that 50% of companies that are being successful. I don't have a problem with that as long as we recognize that doesn't play well with the whole concept of reconstituting the industrial banks.

Mike: It's doesn't work that way. Yeah.

Josh: Right, so that's some of my general thoughts. The need to reduce barriers: the barriers have been steadily increased by DOD over the past decade or two. DOD would probably say, yeah, you're right. We're obviously the reason these barriers exist. [00:06:00] But to be clear, they say they need to reduce and they say there's two core issues in the report.

There's a breakdown of supply chains. And by the way, it doesn't say it in the report, but I, I'll say out loud, the breakdown in supply chains is not a result of Covid, which simply made the problem visible.

Mike: Yeah. It made it worse, but

Josh: Right. We've got a bunch of clients that are commodity, that are product-based, small and fortune companies right, that we work with. The supply chain in the government is a result of us sending all of our manufacturing overseas for the last 40 years.

Mike: Now we're dependent on that boat that's got to cross the ocean and everything that happens in between and

Josh: Exactly. But DOD is correct. There's a breakdown of supply chains. Absolutely, that's one of the core issues. The second core issue is consolidation of contracts and thank you DOD for being so direct on this. Right? You know they say, all right, so two core issues. Breakdown of supply chains and consolidation of contracts. You've got to be kidding me, Mike. Kudos, for saying it publicly. But they're finally admitting that their category management and strategic sourcing, which you [00:07:00] and I have been talking about

Mike: for years,

Josh: for years. And a whole bunch of our clients are like, thank you for making us suffer through the whole category management strategy discussions because 40% of our market is now category management. 20%. I appreciate DOD finally recognizing it, but this is not slight impact. It's heavily

Mike: mm-hmm.

Josh: impacting to the tune of 40%. Ooh. That's why we're losing a, a, a good chunk of our industrial base right? Now, they say they need to reduce reliance on single or sole sources of supply. Yet this is the executed objective, the purpose behind category management. And so I have to ask the question this is the big one, this is where we can go a little bit back and forth. I have to ask, are the small business programs truly talking to the acquisition leadership? The report says the deputy office for, you know, acquisition and sustainment, uh, et cetera, they're on the working committee, right? There's working groups. In a nutshell, [00:08:00] Mike, If those are my general thoughts, wait till you ask me for the let's dive in detail

Mike: Yeah, as we dive in, there's more. You know, just to comment on what you said there, you know, when I sit down with a, a new client that is entering the market, one of the first things I say is, where are you currently? I know the answer to the question, but I ask anyway. Where are you currently getting opportunities to put in your pipeline? The answer is always SAM.gov. That's always the answer. They're usually shocked when I say, well, only about 20, maybe 30% of all opportunities are ever going to make it to SAM.gov

Josh: mm-hmm, right

Mike: because of all the contract vehicles, direct awards. Or, you know, the first time you see it on SAM.gov is not an RFP, it's a notice to sole source to XYZ company you know, or something along those lines. Once you look at that, then you pile on the fact that we have what is it, a third of the contracting officers that we've had before, of course, the government is trying to find easier ways to do their job. Yet what I have seen over the last two [00:09:00] plus years is an excruciating squeeze on all companies, not just the small ones, but especially the small ones.

Josh: Sure

Mike: where I could sit here for an entire hour on this podcast and list client after client, contract after contract, where they've said, Mike, the RFP was supposed to drop 18 months ago. Still nowhere in sight. This is actually a contract renewal, and the government has been doing six-month extensions for two freaking years.

They're like, we were counting on this contract, but it would be okay if it was one. But I've got several clients where they're like, I've got six contracts right now that are all like this. Here's a better piece of it here. Some of those contracts they've actually put out on the street as RFPs, they've gotten to almost the deadline and said, eh, you know, we're going to go back and revise this. We'll be back in a month or two, three months and a year later it's still not on the street.

Josh: That's pretty frustrating.

Mike: When you look at these issues that they've pointed out here, [00:10:00] these are the core issues that I think they were willing to throw under the bus. I don't think they were willing to throw under the bus: we have 30% of the staff we need to do our job. Contracting is just completely ineffective right now with, with how those things are going on.

Josh: I hear you. But remember this. Small business offices, and, you know, we'll get into the three programs at least briefly, but, the small business offices, the Apex accelerators, they're fully staffed.

A little bit later in this, I do want to talk about the way this will really work is if acquisition and the small business programs truly are working together. But their objectives are so opposite.

Mike: Yeah. They're so different. Yeah.

Josh: They're so different. I question whether it's the echo chamber or we're going to see change, true change over time.

Mike: I think we'll see change. It's just a matter of is it the right change? Because, you know, if you look at it on the surface: Category management, contract consolidation. It's [00:11:00] actually on the surface a good thing for the government and a good thing for taxpayers. Right?

Josh: Absolutely. Absolutely.

Mike: It's just painful for small business in the way it's done. And again, tangents here, and then we'll, we'll get back into to this report.

Josh: Sure.

Mike: If Mike was doing it, I would see some contracts out there like this, some contract vehicles, but I would see more opportunity to on-ramp. There's so many things that you can't on ramp to.

?It's interesting when you look at the whole thing, it's not necessarily looking at what's good for small business. It is: what do we want our objectives to be in the government for small business? Not necessarily what's best for them, what's going to grow them and all that, but what should our objectives be? And I think that's the part to me that kind of rubs me the wrong way of you're trying to set goals for yourself when the goals should be success for small business.

You know, seeing small businesses grow, seeing that base number grow, seeing them win more contracts, seeing them stay in the market. I always have complained about the 8a [00:12:00] program for several years because I'm like, you know, there's not enough going in that. The reason I know that is because of the massive failure rate after they graduate. When I look at businesses across the

Josh: That's a great point. That's a great point, Mike.

Mike: When I look at businesses across the board, it's seeing businesses get past the three to five year mark, then past the 10 year mark, and things like that. Like I'd like to see goals and milestones in this report to see businesses graduate out of their small category and into a large category because they're growing so well. And new ones that enter the market don't take three to five years in this market because they're just beating their head on the wall all the time. Now yeah, that's part of our job. That's why we exist. But part of it is also, you know, there's some people, no matter what you do, they just run up to these roadblocks. You can sit down with a client and say, based on the industry you're in, don't even think about it. Don't even think about it

Josh: We do that on occasion.

Mike: Yeah, and they'll say, does the government not buy what we sell? Oh yeah, they buy a ton of it, but you're not going to sell any because it's locked down in this contract vehicle or that contract [00:13:00] vehicle. Or there's some other reasons why you're not going to be competitive in the market. I don't recommend you get in this market. I hate that I have to give that speech a lot of times to people,

Josh: mm-hmm

Mike: you know, probably 15, 20% of people, instead of saying, Hey, there's a level playing field, regardless of what you sell, you can come in and you can grow. It's just not always the case in this.

Josh: No, no. And, and I would argue there is no level playing field. And, you know, to tack onto what you just said, the government, you know, small business offices and, and obviously they're trained to do it this way, they'll say, doesn't matter what you sell. If your product, uh, commodity or service is locked down by category management, best in class, whatever it may be, you can be a subcontractor.

That's government. From a business perspective, it often does not make sense to attempt a subcontract to those primes because there's just not enough opportunity. You can't differentiate,

Mike: there's not enough margin. That goes back to the basics of business is, Sure Josh, you can subcontract if you're good with 4% margin, because the prime has to have a little bit of [00:14:00] that cut.

And what you're selling is so razor thin anyway. It goes back to the business sense of does this make sense for a business to support? Which is why I think there's a huge part of the base that says, you know what, we're just not going to play this anymore.

We're going to go do commercial stuff, or I'm going to go back to work at Walmart.

Josh: I'm with you. So let me circle back though. Apex is just one of the three programs, but don't think I'm hating on Apex, right? During any given week, we're supporting multiple Apex training events, right?

Mike: Yeah.

Josh: In 2022, we supported more than a dozen of their offices. We supported states. We supported the fall conference. Almost every counselor has read one of our books.

Mike: Yes.

Josh: And quite a few have asked us for mentorship you know, to better grasp the business side, right? So, I love working with them. I just don't like the program, that the program ties their hands.

Mike: Yeah. And that's the thing, right? It, it shouldn't be tying their hands. It should be, like I was saying, what is best for small business? And small business needs a total solution, not a very lopsided solution that only teaches [00:15:00] them half of what they need to know.

If you just look at things from a consumer lens, most people have one store they go to when they leave the house. They're going to go to Walmart, they're going to go to Target, they're going to go to their local grocery store. They're going to go to one.

And if they can't find what they're looking for, they rarely go to the next store. They usually just go home. They give up the fight, right?

Josh: That's a, that's an interesting analogy, Mike. I like that.

Mike: It happens all the time. I if I can't find it at my local Walmart, local Circle K, whatever it is that I'm shopping for, whatever it is I need, I'm going to go home and I'm probably going to hop on Amazon.

And I know that makes people furious, right? But if I can go to one place and buy everything I need, I can go on Amazon or walmart.com and I can buy my dish soap, I can buy my canned goods. I can buy

Josh: I love it.

Mike: Some door locks

Josh: you're, you're totally on target. Yes.

Mike: That is how we are trained as a society. There's nothing more frustrating than politics. And the other thing in our system right now is the medical care system, right? We've heard people complain about that for years. If you go to your doctor [00:16:00] today, now Josh, I know you use the VA so you're, not like us normal people. But if you go to the doctor today, and let's say you have an ear problem. Your doctor's going to say, well, you should probably see a specialist about that. See our person at the, on your way out today, and we'll get you an appointment. And that appointment might be 3, 6, 8 weeks out, whatever.

I had a problem with my ears a while back I called after my, my GE appointment and they said it's going to be two and a half months. And I was like, well, why the hell am I going to come see you? I'm not going to have the problem. And sure enough, I got in there and he was like, well, nothing looks wrong with your ears.

And I'm like, it was three months ago. This is not helping. I said this from the chair. I was like, how much are you going to charge me today for seeing me three months after the problem is gone? And like the deer in the headlights of this guy, right? Because I was like, I know there's a thousand dollars bill coming my way.

And you saw me three months late. When people have to deal with that where, hey, I maybe not be able to get an appointment with the score or whatever. I have to bounce around. It's not their individual problems, it is the program [00:17:00] as a whole. I'm bouncing somebody around and they're like, you know, I'll just go get it on Amazon.

I'll just go look this stuff on YouTube. I don't have the time or care. I'm just not going to worry about this market because this is making it too difficult for me to do business. I'm going to go find something else to do.

So,

Josh: Now, that was a great soapbox, Mike.

Mike: I'm going to take it one step further in what I'll, I'll call my closing arguments here. In my closing arguments here, we're really focused on one area that is the problem, in quotes, right? You know, that's the problem. You know, we don't have this unified management approach and all these kind of things. But you know what, it doesn't do a lot of good to make all the changes over here on this side and make zero changes on the contracting side.

Josh: Yeah, exactly.

Mike: Or not have them on the same page. One of the biggest frustrations that you'll find from small businesses today: they'll say, Mike, this is a $200,000 contract. Why can't I get this guy to use SAP? My answer is [00:18:00] always look, contracting officers have a way they do business. And if they don't do that, I don't care how much you twist that arm, they're not going to do it.

If they don't want to use a certain contract vehicle, they're not going to do it. If they don't want to use sole source, they're like, but I've got all the justification for them to sole source this to me, and yet they still want to put it out on the street,

Josh: Then you need to ghost it with your, uh, your end user. But anyway, I agree.

Mike: It's just, it's just one of those things. There's all of these levers that contracting officers can pull and won't. Some of them will. Some of them are awesome, but some of them won't. And part of this to me is that they are not aligned with the small business goals overall.

And it's not because they're bad people, it's because they're on a mission to do what they have to do with limited resources. And that's just the way it is. So for my final point, we've got to align those things and not just make it about cranking out those RFPs or putting it on contract vehicle. But align their mission with the small business people as well, so they can pull [00:19:00] more of those levers.

Josh: I agree with almost all of that. The one thing I would argue is, it's not the contracting officers.

Mike: It's above them. Yeah. It's above them. It's way above them.

Josh: It's way above. That's right. It's Under Secretary of Defense, uh, acquisitions, sustainment.

Mike: I a hundred percent agree with that.

Josh: I don't want the contracting officers listening going, ah, you know, you're blaming us.

Mike: No, no, no, no.

Josh: We have to use these vehicles and, and it's best in class.

Mike: Yeah, they're an endpoint in the cycle that's being affected by the rules that are being passed down. Right?

Josh: Yeah. But as we've both said, the issue is there must be a synchronization of objectives, and metrics, et cetera, and the report mentions this. Don't jump on me. Don't start screaming at me. The report mentions it. But there are diabolical differences between what the small business programs are being chartered to do and what their objectives are. The reality is almost everything that is going to impact their objectives is actually controlled [00:20:00] outside their office. It's controlled by the acquisition, right?

Mike: Yeah.

Josh: And executed by contracting officers. And the one thing that they can control to improve retention, to grow the small business base and stop the hemorrhaging is the one item they say we will not do.

Mike: Yeah.

Josh: Or we'll do, but we're relying on a collaboration within our community of interest. But we know it doesn't work. Do we have time for one final point? Because I,

Mike: one final point. Yeah.

Josh: Okay, one more. One of the greatest challenges that I saw is the perceived absence of industry in this entire process. We really haven't been talking industry. We're talking the three major DOD small business programs. We're talking DODs offices, right? Acquisition, but we're not talking the one side of the value chain that can help stop that hemorrhaging of small businesses and help grow the base, and that's industry. And if simply learning how to enter the market, having capability statement, et cetera, et cetera, we just wouldn't be talking about the issues and losing [00:21:00] 40% right?

This is my closing. I can't overemphasize the importance of bridging government sales strategy with overall business, so Mike, I'm going to throw this out there. I'm actually going to submit something to the DODs OSBP, but I'll say it publicly here for the first time.

It may be somebody calls me first, but I want to support the working group. No cost. I want to volunteer, so I'm going to write a note. They need somebody from industry that has the viewpoints that we've got. Because the echo chamber, and I, I think that's what we're going to end up calling this podcast episode or, the DOD small business echo chamber.

But, I'll simply close with this, Mike. This was a really awesome topic for us to cover. Part of me thinks we did this, I did this, more for the government than I did for our, our listeners, our small business and industry. Because there to be change. The report has some great stuff. Everybody is working hard to execute it, but there's some issues that I just don't see getting resolved. My 2 cents.

Mike: A hundred percent [00:22:00] agree. So if you're, if you're listening to this and you're an influential person in DOD that can get Josh on that working group or whatever, you know, definitely reach out to us. Josh will be reaching out. I thank you for coming on and talking about this and just being very candid about all the challenges. And, I think one of the reasons we voice the frustration is we are passionate about helping those people. And

Josh: That's right. We are, yes.

Mike: There's nothing worse to me than having to tell somebody, Hey, you're probably not going to be able to play in this market. Or, Hey, you should go do better things because this market is not a good one for you. Or, having to sit down and, teach them something that's just been completely skipped over, and that's why they're having these issues, you know? I could go off on a tangent for another hour about a lot of these things.

Josh: Mm-hmm.

Mike: But I, I think we'll just wrap it up by saying, Hey, I, think it's good to see that, you know, somebody has acknowledged some of the issues. But now it's time to take some action and move this forward. We don't have decades to solve the problem. We just don't, you know, if we want to see the [00:23:00] industrial base built back up. If we want to see smoother contracting processes. If we want to see all these organizations working together and our taxpayer dollars going further.

You know, we need to act faster than a decade to fix the problem, which is how a lot of things are viewed in the government. I'd like to see this kind of fast tracked somehow over the next year to where there's some serious changes being made. I'll just leave it with that and thank everybody for listening to another episode.

Thanks, Josh, and we'll see you next time.

Narrator: I really hope you enjoyed the podcast today. If you did, I would really appreciate it if you would like and subscribe to the podcast and screenshot it and tag me on LinkedIn or whatever social media. So thank you again for joining us today, and we'll see you next time.