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The Country Intelligence Report
Cracking the DOD Contract Code: A Guide for Small Businesses
What if you could decode the labyrinth of DOD contracts and crack the code for small businesses? That's exactly what we're aiming for in this enlightening episode. We'll be taking a magnifying glass to the Department of Defense's spending patterns and the major contracts they've awarded this past fiscal year. We'll unravel how these contracts reveal the DOD's evolving priorities and what they hint at in terms of wider defense sector trends. But that's not all - we also scrutinize the FY22 small business procurement scorecard, its victories, and the unexpected downturn in contracts and bucks awarded in FY23.
As we venture further, the spotlight shifts to set-asides for small businesses. We'll guide you through the intricate world of dollars and actions per set-aside and unveil the organizations that might just be your golden ticket. We don't shy away from the tough truths either, addressing the dip in actions for small business set-asides in the past fiscal year and the potential repercussions. Remember, when it comes to snagging a contract with the government, having a lucid service and value proposition is paramount. So buckle up and get ready to gain insights that could be the key to navigating the convoluted universe of DOD contracts.
- Hosted by: Terrell Cummings & Devon Florczak
- www.countryintel.com
Hello and welcome back to the Country Intelligence Report. We're your hosts, spencer Bentley, terrell Cummings and Devin Floorzak. Today we have part two of our end of the year, end of the fiscal year, wrap up.
Speaker 1:This time around we thought we'd do something a bit more unique and discuss how Country Intel prepares for the end of year, end of the fiscal year and, overall, some trends that we've been seeing in terms of awards, contracts, actions taken and other insights that we think can be compelling to businesses, specifically small businesses that deal with the federal government. And we'll go ahead and dive right into it. So, reflecting on the year that the DOD has had and the road ahead, let us discuss some significant contracts that have been rewarded in the past year and how these contracts may reflect the evolving priorities of the DOD. The type of contracts, the types of groups that they're awarded to and the types of organizations that these contracts are being sponsored by all have implications on trends in the overall defense sector and, devin, I know you have a few insights that you'd like to share, so why don't you let us know about how some of these trends may be shaping the future of the defense sector as they play out?
Speaker 2:Yeah, definitely.
Speaker 2:I think, in general, as far as spending goes and the more large contracts that are awarded in FY23 points to the military departments and upgrading or developing new equipment or material to support the overall readiness of the nation.
Speaker 2:And that's interesting because, as we all recall and I think it was FY22 or maybe it was FY21, it was a big deal when Microsoft won the Cloud Compute Contract over Amazon and that was one of the larger federal contracts awarded for that time period. But specifically for this past year it seems like more so there's been an emphasis on, like I said, spending within the different military departments, especially improving either ships, aircraft or just general activities within the middle depths, especially with the actual engineering of these things. So I think that's just sort of reflects the world that we're in this year, especially with the Middle East becoming turbulent. Within the last couple of weeks I'm sure the DOD as a whole saw that something was coming Just off. We had Ukraine and then it just seems like tensions everywhere are starting to escalate. So I think the spending in the last year totally makes sense and sort of reflects where we're at.
Speaker 1:Yeah, that makes a lot of sense. Seeing these different trends sort of play out is definitely enlightening and it can help a lot of businesses sort of plan for the year ahead, and not just the current year but well into the future. And you know, one thing that's particularly, I guess, poignant for us and other small businesses is the small business set aside. And you know, I'd like for us to sort of discuss how the DOD is approaching this really invaluable mechanism for small businesses and the impact that their initiatives have had regarding you know how it led to an overall increase in investments in small businesses and you know what that can mean for entrepreneurs looking to get into the space and small businesses looking to maybe expand from one organization to the next or just, you know, continue to grow within their own organization.
Speaker 2:Yeah, I mean FY22 was definitely a good year for those with small business set asides working with the DOD. And you know, I think we have some statistics we'll talk about in a bit later but FY23 might not have been as good, but maybe that sort of reflects. You know the DOD as a whole and you know, like I said, you know obviously all these larger contracts are going to. You know these larger vendors, you know, such as Lockheed or Huntington Ingle, general Electric, et cetera, and if there's more money going to, you know the larger vendors, obviously you know the pieces of pie sort of shrinks for the smaller guys like us. But you know, going forward, I think it's important to sort of note that. You know obviously you know we could work with these smaller vendor or these larger vendors, but we definitely need to look ahead and try to figure out. You know, if 2023 wasn't down your small business, maybe 2024 will be. You know, a lot more promising and I think that's something that you know.
Speaker 2:We definitely saw, you know, the when we were taking a look at the FY22 small business procurement scorecard. I think the government was very excited to report. You know that they pretty much over exceeded their goal amount for the year. They over exceeded by it looks like, you know, 10 to 15 percent. You know, each year, the government sort of promises or makes a goal about how much money they want to award to small businesses and those with set asides. You know, underneath small business and you know they definitely over exceeded that for 2022. But, you know, as we were looking at the samgov data for 2023, I think we saw that there's actually a decrease across the board in both contracts awarded and dollars awarded, which you know, seems. You know, like I said again, that's kind of interesting just because you know we you know briefly mentioned the larger contracts that are awarded this year to the large guys and you know, I feel like, as the global environment changes, you know that obviously has an impact on you know, how the DOD spends its money and grants money to contracting groups.
Speaker 1:Yeah, it does, and I think that's something that we always have to be sort of cognizant of is that you know these budgetary decisions are never made in a vacuum.
Speaker 1:Sometimes they're made in a reactionary stance politically, you know, especially if you're dealing with the DoD.
Speaker 1:Obviously, as we can see now, different priorities can switch overnight at the drop of a dime, you know, and as priorities switch, the rationale for how awards should be crafted and granted also switches. You know it's what we see now that you know, obviously the Ukrainian-Russian war has been sort of playing center stage with foreign policy and you know defense priorities. But now we have this, you know, israeli Hamas conflict that's going on. That is sure to change the rationale for a lot of decision makers on you know where budgets should go and why, and that's just the world that we live in as defense contractors. So it's always important that we understand that and we adjust accordingly, because small business set aside is a powerful tool. But you know, unfortunately, you know small businesses don't have the influence or lobbying power that the larger players do, and that has real-world consequences when you are not involved in the high-level decision making on where funds should go for any particular reason. So definitely something that small businesses need to stay cognizant of.
Speaker 2:Yeah, and if we want to get into specifics, we can as well. So the data that we looked at was data from SAMgov and we were just taking a look at total actions and total dollars granted. So you know, when we say an action, that means that you know a contract was posted and you know that is equal to one action and then you know dollars is a total amount of eligible dollars that were awarded, you know, for that action. So you know, even though the government was reporting that, you know FY22 was great. I would assume that when they come out with their score card in 23, that it's going to be, you know, maybe a slight decrease. You know it kind of depends on what sort of data they're looking at. You know we're just looking at what's on SAMgov, so I'm sure they have a more comprehensive look. You know taking a look at, you know GSA and you know other, you know contracting sites. You know that's not just SAMgov, but from at least what we can see on SAMgov is, you know, like we said, there's definitely been a decrease overall in both actions and dollars awarded.
Speaker 2:Between you know the time period of FY22, which we're considering, you know, october 1st 2021 to October 1st 2022, you know, compared to 23, which is, you know, october. You know, 2022 to October 2023, you know this past period and you know specifically, we saw around a 30% decrease in total actions awarded to small businesses and then a decrease of 12% in dollars. So you know the amount of overall work definitely drastically decreased, but you know the dollar amount was only a 12% decrease. So you know that's not truly terrible.
Speaker 2:But I did find interesting, though is just specifically looking at the Small business set-asides actually got impacted the most. When we're looking at actions so just contracts awarded it looks like those that had 8A set-asides and certified hub zone set-asides had the most amount of actions decreased between the periods. And then, when we're looking at dollars, hub zone was actually one of the most impacted by dollars as well, and then the small disadvantage business as well. So yeah, and we can theorize, of course, why that might be, but I just find that that's interesting and I feel like a lot of people aren't really talking about. Obviously, the general theme is that they're talking about the general amount of dollars that are worth small businesses, but I think it's good to analyze what set-asides these dollars are actually going to and who's being impacted the most.
Speaker 1:So Devin, do you think that if the actions were down for 2023, should we expect the actions to probably increase in 2024? Is that what you're thinking or is this kind of just depends on the cycle of the contracts that are going to be better out there.
Speaker 2:Yeah, I mean, maybe FY 2022 was so good that and speeded far expectations that 2023 was just always going to be a down year, no matter what. We've sort of looked at data from the last five years but I think our conclusion when we took a look at that a couple of months ago was that after COVID the federal contracting environment sort of changed. So I think that we're sort of in a new area of contracting from pre-COVID to post-COVID, as we all know, with remote work and different tensions in certain places of the world post-COVID. So overall, who knows what next year will hold? But maybe FY 2022 was so good that FY 23 was just a sort of return to the mean.
Speaker 2:So one thing that we can look at is the actual dollars and actions per set-aside. I think what might be helpful is if we take a look at each of the set-asides and sort of identify the best organizations that each set-aside can sort of look to per dollars and actions rewarded. So we can go ahead and just start with the overall small business set-aside. So obviously it doesn't really help much if we just talk about everything sort of decreasing from the previous year to last year. That doesn't really help anyone, but we can at least talk about the different set-asides and which organizations seem to be the most beneficial to reach out, depending on what set-aside you have and for a small business set-aside.
Speaker 2:So what we did was we took a look at the dollars per action ratio change year over year and we took a look at that. We have a couple of organizations for each set-aside and for the small business set-aside it looks like if you just have a general small business set-aside, you want to look for work with either the Department of Labor, the Department of Commerce or the Office of Personnel Management. And I think for us as primarily workforce development consultants maybe for us for country intel the Office of Personnel Management is something that we should look to and hone in on. But of course all of this depends also on your area of expertise. But doing analysis like this can definitely give you some insight on where you should be focusing your action as a small business.
Speaker 1:Yeah, that's fascinating. You know your spot on. This type of analysis really can help guide not just our hands but any small business looking to become more efficient with their expansion or search for new work. It is interesting that we've seen a decrease in actions for small business set-asides just in general in the past, in the previous fiscal year. Obviously, like you said, there can be a lot of different factors that play into that. It could be that the previous year, like you said, was exceptional. Like you said, we're coming back to the main.
Speaker 1:It could also be a consequence of, like I said earlier, shifting priorities or consolidation, which we see is always an ongoing issue in the contracting realm, search companies, mid-sized companies, snatching up these small companies and just generally sort of clearing the board. It's something that is definitely interesting, this analysis that you've done. Just looking at it now, I can see that there are certainly some bright spots for small businesses. There are also some significant changes. I think this again goes to just a shifting of priorities. I'd be interested to see how these numbers step up to or compare to, rather, what the numbers would be like in, say, the first or second fiscal year of a new administration. What type of, how political wins can impact the standing of small business and the prioritization of actions being granted and overall dollars spent. This is fascinating work here.
Speaker 2:Yeah, I mean the thing that I sort of took away by taking a look at and analyzing each sort of set aside was that each set aside seems to have different set of organizations they should be reaching out to. When we look overall and you're just taking a look at this data, I think everyone assumes that you should just go work for or try to get work with the DOD and the Department of Veterans Affairs because they have the most money available and they give out the most actions. But when we're looking at more so a dollar per action ratio, I think that sort of highlights certain organizations that might be hidden besides just going after the VA and the DOD. One that's sticked out for me was for women owned small business was that it looks like they might have the best luck.
Speaker 2:Taking a look at the Department of Treasury, which not many other set asides have the Department of Treasury as a key organization that they should reach out to. It looks like A&A has it as well. So, yeah, I think that the general just is that if you have a certain set aside, just don't assume that you're going to want to just primarily work with the DOD. Obviously, like we said, the DOD is the most money and they put out the most contracts. But you should definitely take a look at this data that's offered by SAMgov and other procurement sites and try to figure out some alternative organizations that your company can work with.
Speaker 1:Makes a lot of sense. Thanks that we've touched on this before, but flexibility in your offerings and in your strategy for gathering work is really important when you're trying to secure a contract with the government as a whole. This particular analysis that you've done is quite interesting. I wonder if we could put it out there for the general public, just to reference, because it is pretty telling for small businesses looking to gain some sort of advantage If you have a clearly defined service and value proposition that you can articulate well. I think leaving yourself open to working with different departments, different organizations within the government is really key to winning new business. This is definitely eye-opening, for me for sure.
Speaker 2:Yeah, definitely. Maybe we'll have to do a blog post about it.
Speaker 1:Yeah, stay tuned for that. This will definitely be made available thanks to the brilliant mind of one, devon Florzak, but I think in terms of overall trends we're going to have to see. I'm very interested to see how these numbers stack up to this previous fiscal year. Obviously, we've had quite a few developments that could have impacted this, both domestically and abroad. It will be interesting to see how these hold up If there's an overall trend in the decrease away from small business set-asides and awards and what the implications may be of that if that is the case for the broader contracting realm.
Speaker 1:Because, as we've seen and we've touched on a few times here, there is unfortunately a shift towards more and more awards going to larger big-name players in the space. We'll have to see. That could be just a phenomenon of the DoD. Obviously, it seems like some of these smaller departments have held their ground and are continuing to give that preference to small businesses, but we'll see if that holds water when we run the numbers next year. Thank you for listening. This has been a great summary of the fiscal year. Hopefully you got some actionable intelligence out of this. Be tuning in for the blog post that will accompany this episode. We'll be highlighting some of the analysis provided by Devon Florzak, and we will talk to you next time.
