The Department of Defense (DoD) is among the world’s largest purchasers of goods and services (Czech and Mueller, 2011). Approximately two-thirds of its budget in fiscal year (FY) 2012—a proportion that has grown over time—was for nonpersonnel expenditures. In addition to weapon systems, DoD purchases include such varied products as engineering services, food, clothing, landscaping services, and many others from more than 1,000 industries (as defined by six-digit codes of the North American Industry Classification System, or NAICS).

The more than $350 billion DoD spends annually for goods and services attracts policymakers’ attention not only for its size...

For much of the last century, the federal government has sought to “aid, counsel, assist and protect, insofar as possible, the interests of small business concerns” (SBA, undated-b). Such policies have deep historical roots in a public ethos holding small business to be the “backbone of democracy” and free enterprise (Bean, 1996). The means to promote small business have evolved over time, from Depression-era loans to initiatives seeking to boost federal contracting with small businesses generally to those seeking to increase federal purchases from “disadvantaged” and other specific categories of small businesses.

The origin, preservation, and expansion of small-business policies...

As noted above, Congress has established a goal that 23 percent of all federal dollars on prime contracts be spent with small businesses. To achieve this goal, every two years SBA works with each federal agency to set an agency-specific goal (SBA, undated-c). SBA ensures that the sum total of these goals, if met, would exceed the 23 percent government-wide target. The most recent goal that SBA negotiated with DoD calls for 22.50 percent of DoD prime-contract dollars to be spent with small businesses (Office of Small Business Programs, undated-b).

In recent years, DoD has spent more than $350 billion...

The contract-action data we have examined provide not just a general overview of small-business purchases by DoD but also some specific prospective opportunities, and limits, for strategic-sourcing efforts among small businesses. We consider data for specific suppliers, purchasers, and industries. We caution the reader that the examples we present in this chapter are illustrative. Any efforts to identify best targets of opportunity must take into account practical considerations. Some contracts or requirements may not be good candidates for initiatives we describe. DoD personnel are, ultimately, the best arbiters of what purchases and initiatives can best fulfill all DoD needs.

In...

DoD purchases goods and services from many industries, but the share that small businesses have of the federal marketplace differs from what they have in the overall industry. Although there may be many reasons for this, industry-size standards contribute to the disparity. Even at the level of the six-digit NAICS code, industries can be very broad and can include many activities outside DoD requirements and likely undertaken by smaller firms than those that can fulfill its requirements.

Changing economic conditions over time have also affected the thresholds. There is some evidence that economic activity is more concentrated among larger firms...