WASHINGTON – The Department of Defense is implementing a plan to assess the contractors it does business with by creating a database that will more closely track spending.
As the DoD prepares for $350 billion in budget cuts for 2012, a strategy for maintaining a strong industrial base must be implemented, officials said at a hearing before the Armed Services Committee on Tuesday.
A lack of insight by the DoD on how much it’s spending is high on the list for critics. “The DoD can’t even give you an accurate number of the number of contractors it has working for it at any given time,” said Benjamin Freeman, a national security fellow at The Project on Government Oversight, a nongovernmental watchdog group.
But DoD officials said at the hearing they are working on better accountability.
“There are a number of mechanisms we can use,” said Brett Lambert, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy.
The industrial base consists of a diverse range of companies that directly and indirectly provide products and services to national security agencies, explained Lambert.
The DoD’s database initiative, known as S2T2, will allow the DoD to determine sector-by-sector, tier-by-tier which industries within the industrial base are essential to maintaining the defense industry’s high level of operational capacity. The DoD will also use the data to employ strategies to help businesses within those industries endure defense budget cuts.
Through the data it collects, the DoD said it will be able to take into consideration, as a part of its plan to stabilize the industrial base, the sub-contracted companies that supply to the prime contractors the DoD works directly with. Work has begun on the database.
Lambert referenced the solid rocket motor industry, which the DoD has contracts with just two prime providers, each of which relies heavily on subcontractors, as a key example of the vital role small businesses play in keeping the industrial base stable.
These small businesses are key players in the industrial base, which largely enables the U.S. military to maintain its high level of operation, Lambert said during his witness testimony on Tuesday.
“As we know small businesses play a critical role in the strength of our economy by creating technologies for many folks, including our war fighters,” Rep. Rick Larson,D-Wash., said at the hearing.
But as critics point out, the money the DoD spends on prime contractors does not always make its way down to the subcontractors.
“I haven’t seen any hard science or studies that said you get a real great economic effect from defense spending. In fact, studies that we’ve seen say quite the opposite – that defense spending is actually one of the least efficient at creating jobs,” POGO’s Freeman said.
In September, Defense Secretary Leon Panetta issued a memo emphasizing the importance meeting DoD’ssmall business goal, an effort he has pushed for since taking office this year.
“We need to ensure that they are given every opportunity to compete on a level playing field with larger businesses,” Panetta said.
With looming budget cuts, small businesses will likely face challenges due to a lack of demand, Lambert said during his testimony.
Lambert emphasized the need to develop and apply a strategy that considers fiscal realities, as well as regulatory and procedural issues.
With the uncertainty of how the DoD will be spending its money in months to come, many small businesses are likely to not invest or plan for future hires, said Andre Gudger, director of the Office of Small Business Programs at the Department of Defense.
The DoD has implemented several programs to promote small business growth and contracts, including an initiative to allow for accelerated payments to small businesses.
“Those strides are very, very small and they need to be bigger,” Rep. Bill Schuster,R-Pa.. “We need to figure out a way to break through the DoD, especially for these small and medium sized businesses to do more business – to make it easier for them to get their great ideas, products and services to the war fighter and to the Department of Defense.”