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i 

62–677 2010

[H.A.S.C. No. 111–183] 

SMALL BUSINESS’ ROLE AND OPPORTUNITIES IN RESTORING AFFORDABILITY TO 

THE DEPARTMENT OF DEFENSE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TERRORISM, UNCONVENTIONAL 

THREATS AND CAPABILITIES 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 29, 2010 
(II) 

SUBCOMMITTEE ON TERRORISM, UNCONVENTIONAL THREATS AND 

CAPABILITIES 

LORETTA SANCHEZ, California, Chairwoman 

ADAM SMITH, Washington 

MIKE MCINTYRE, North Carolina 

ROBERT ANDREWS, New Jersey 

JAMES R. LANGEVIN, Rhode Island 

JIM COOPER, Tennessee 

JIM MARSHALL, Georgia 

BRAD ELLSWORTH, Indiana 

BOBBY BRIGHT, Alabama 

SCOTT MURPHY, New York 

JEFF MILLER, Florida 

FRANK A. LOBIONDO, New Jersey 

JOHN KLINE, Minnesota 

K. MICHAEL CONAWAY, Texas 

THOMAS J. ROONEY, Florida 

MAC THORNBERRY, Texas 

CHARLES K. DJOU, Hawaii 

TIM MCCLEES, Professional Staff Member 

ALEX KUGAJEVSKY, Professional Staff Member 

JEFF CULLEN, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2010 

Page 

HEARING: 

Wednesday, September 29, 2010, Small Business’ Role and Opportunities 

in Restoring Affordability to the Department of Defense ................................. 1 

APPENDIX: 

Wednesday, September 29, 2010 ............................................................................ 15 

WEDNESDAY, SEPTEMBER 29, 2010 

SMALL BUSINESS’ ROLE AND OPPORTUNITIES IN RESTORING 

AFFORDABILITY TO THE DEPARTMENT OF DEFENSE 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Miller, Hon. Jeff, a Representative from Florida, Ranking Member, Subcommittee on Terrorism, Unconventional Threats and Capabilities ............... 3 

Sanchez, Hon. Loretta, a Representative from California, Chairwoman, Subcommittee on Terrorism, Unconventional Threats and Capabilities ............... 1 

WITNESSES 

Lemnios, Hon. Zachary J., Director, Defense Research and Engineering, U.S. 

Department of Defense ........................................................................................ 4 

Oliver, Linda B., Acting Director, Office of Small Business Programs, U.S. 

Department of Defense ........................................................................................ 6 

APPENDIX 

PREPARED STATEMENTS: 

Lemnios, Hon. Zachary J. ................................................................................ 24 

Miller, Hon. Jeff ................................................................................................ 22 

Oliver, Linda B. ................................................................................................ 34 

Sanchez, Hon. Loretta ...................................................................................... 19 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Mr. Miller .......................................................................................................... 51 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Johnson ...................................................................................................... 59 

Ms. Sanchez ...................................................................................................... 55 

(1) 

SMALL BUSINESS’ ROLE AND OPPORTUNITIES IN RESTORING AFFORDABILITY TO THE DEPARTMENT OF 

DEFENSE 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE ON TERRORISM, UNCONVENTIONAL THREATS

AND CAPABILITIES, 

Washington, DC, Wednesday, September 29, 2010. 

The subcommittee met, pursuant to call, at 2:06 p.m., in room 

2212, Rayburn House Office Building, Hon. Loretta Sanchez (chairwoman of the subcommittee) presiding. 

OPENING STATEMENT OF HON. LORETTA SANCHEZ, A REPRESENTATIVE FROM CALIFORNIA, CHAIRWOMAN, SUBCOMMITTEE ON TERRORISM, UNCONVENTIONAL THREATS 

AND CAPABILITIES 

Ms. SANCHEZ. The subcommittee will now come to order. 

Good afternoon. I would like to welcome all of you, and thank 

you for joining us this afternoon. Today, we are here to further examine the opportunities and the challenges for small technology 

firms to compete in defense acquisition. 

The purpose of today’s hearing is to answer some of the questions that I know I am asked, and my colleagues must be asked 

all the time, by small business owners in our districts. Many small 

businesses do not know how to navigate or approach the Department of Defense [DOD] bureaucracy. And so, this subcommittee 

has held a number of hearings on small businesses this past year 

because, as I have stated before, small businesses are the key driver of innovation for the Department of Defense. 

And that is where the jobs are located and that is what we are 

trying to do in our nation, so this is one of the areas where I hope 

we can have some effect. And I cannot stress enough how pertinent 

the success of small businesses are to the U.S. economy and, of 

course, to our daily responsibilities in the Department of Defense. 

Small businesses have different perspectives on key national security issues particularly compared to their large counterparts. One 

of the goals for this hearing is to understand how our national security requirements and goals are interpreted by small business 

and how better the Department of Defense can guide small businesses to the current technological needs of the department. 

Currently, this nation’s small businesses encounter a lot of challenges. I have known so many businesses have come out here and 

have tried for years and years and have come up with nothing. And 

so, it is important for them to know how to navigate because that 
2 

is where some of our critical technology and innovation can come 

from. 

I hope, today’s hearing, our witnesses will address these challenges, and also to highlight effective tools and resources that we 

can take back to our communities to help these small businesses 

access these contracts. For example, I am sure that my colleagues 

are constantly approached about more information about who they 

call. 

Everybody thinks there is always some person, that they are just 

missing the right person’s name or their phone number, and that 

they would get a contract if they could just get to that person. So 

maybe you can shed some light on who that person is and what 

their phone number might be, or maybe what the real process is 

for our small businesses. 

And I know these sound like small requests, but when you are 

a small business, you think you have a great idea, and you just 

can’t seem to break through, it can become very frustrating. And 

that is a frustration that many of the members hear. 

Another issue that could be discussed during this hearing is the 

ongoing challenge of reauthorizing the Small Business Innovation 

Research [SBIR] program. The underlying law authorizing that 

program expired in 2008, and we have been having many fits and 

starts trying to get that underway to reauthorize it. However, it 

hasn’t been successful, and I find it very disturbing, and I am extremely concerned, and it is very time-consuming. So we are trying 

to figure out how to get that on track. 

So I think it would be particularly helpful for our witnesses to 

explain the consequences of not passing a comprehensive reauthorization bill and the effect that it will have on our overall strategic 

effectiveness of the SBIR program. 

And finally, I would like to point out that the Department of De- fense has invested nearly $5 billion in SBIR over the last 5 years 

across thousands of projects but doesn’t get full value for this investment because proper funding isn’t available to field and transition these technologies to the warfighter or to the commercial marketplace. And that is why this committee established a new program in the pending fiscal year 2011 defense bill called the Rapid 

Innovation program. 

The Rapid Innovation Program authorizes $500 million for the 

purposes of developing innovative solutions to defense needs and to 

accelerate insertion of those technologies into weapons programs or 

into the marketplace. This program is intended to primarily support small, high-tech private firms. So I would welcome your comments on how the department would execute this new authority if 

it becomes law. 

So today, we have two distinguished witnesses before us. The 

first, we have brought back the Honorable Zachary Lemnios, the 

director of defense research and engineering at the U.S. Department of Defense—welcome again, Doctor—and Ms. Linda Oliver, 

the acting director of the Office of Small Business programs in the 

U.S. Department of Defense. Welcome. 

And once again, I would like to thank the witnesses for being 

here today. I am looking forward to your testimony. Without objection, we will accept the written testimony into the record. I would 
3 

like to tell you that each of you will have 5 minutes to summarize 

your testimony, or tell us something that is not in there that you 

think we need to know, and then we will ask some questions, and 

we will be observing the 5-minute rule. 

So I will now yield to my very capable ranking member from 

Florida, Mr. Miller, for his opening statement. 

[The prepared statement of Ms. Sanchez can be found in the Appendix on page 19.] 

STATEMENT OF HON. JEFF MILLER, A REPRESENTATIVE 

FROM FLORIDA, RANKING MEMBER, SUBCOMMITTEE ON 

TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES 

Mr. MILLER. I thank the chairwoman for yielding for an opening 

statement. 

This morning, the full committee heard testimony on Secretary 

Gates’ Department of Defense initiative on efficiency, targeted to 

finding cost savings and to improving general business operations 

within DOD. Now, many of us, I am sure, have questions and concerns regarding the secretary’s initiative, as we have got to ensure 

that critical capabilities are not sacrificed in the name of blind costcutting. 

The threats to our great nation are varied, so really a fine balance must be struck between identifying effective savings and protecting needed capabilities. And at the end of the day, we must be 

fiscally responsible while not failing in our responsibility to ensure 

that our country has the ability to defend its interests. 

I believe DOD can find many solutions by turning to the small 

business community. Small business men and women are constantly developing innovative solutions to the myriad of challenges 

that exist in today’s world, and they do so precisely while operating 

efficiently and effectively. They are truly an invaluable source of 

talent and technology creation increasingly important to the department’s operations. 

With this in mind, we as a Congress must work with DOD to improve small business availability to access the department. We 

must improve the information flow and engagement between the 

department and the small business community and eliminate remaining contracting obstacles that deter small business from working with the department. 

By leveraging the expertise, creativity and passion that exists 

among small business owners and their companies, the department 

will find improved efficiencies often without significant disruption 

or impact to current DOD functions. 

Madam Chairman, I have additional information that I would 

like entered into the record in regards to my opening statement, 

but because we do have votes coming, I would like to yield back 

the balance of my time. 

[The prepared statement of Mr. Miller can be found in the Appendix on page 22.] 

Ms. SANCHEZ. Okay. So first, we will hear from the Honorable 

Lemnios, please, for five minutes. 
4 

STATEMENT OF HON. ZACHARY J. LEMNIOS, DIRECTOR, DEFENSE RESEARCH AND ENGINEERING, U.S. DEPARTMENT OF 

DEFENSE 

Mr. LEMNIOS. Well, thank you very much, and good afternoon, 

Chairman Sanchez, Ranking Member Miller, and subcommittee 

members. It is a pleasure to be back before you again today. And 

I know we have talked about a number of technology issues in the 

past, and we will continue that dialogue as we move forward. I am 

pleased to be here today on behalf of the dedicated men and women 

working across the Department of Defense who discover, develop, 

engineer and field critical technologies in defense of our nation. 

As a chief technology officer for the Department of Defense, I am 

also honored to be joined today by Ms. Linda Oliver, the acting director of the Office of Small Business Programs in the office of the 

under secretary of defense for acquisition, technology and logistics. 

Ms. Oliver will speak specifically to the Small Business Innovation 

Research program. 

My comments this afternoon are a summary of my written testimony, and they will center on the importance of the small business 

community in driving invention and innovation to quickly launch 

new capabilities that support our warfighters. I will keep this opening statement brief so we will have plenty of time for questions 

during our session this afternoon. 

The department of science and technology, our S&T enterprise, 

encompasses a remarkable pool of talent and capabilities. Our footprint includes 67 DOD laboratories in 22 states with a total workforce of 61,400 employees. We operate 10 federally funded research 

and development centers, 13 university-affiliated research centers, 

and 10 information-analysis centers across critical disciplines for 

the department. 

Coupled to this enterprise, the department enjoys a strong relationship with the small business community through a variety of 

programs designed to foster invention and innovation. It is these 

programs that I would like to discuss today, which include the Defense Acquisition Challenge, the Rapid Reaction Fund, the Quick 

Reaction Fund, and the Open Business Cell, as well. 

The Defense Venture Catalyst Initiative is our way to couple 

with the small business communities, specifically with companies 

that aren’t the traditional contracting vehicles for the department 

and offer us new opportunities to see new ideas. Each of these represent an avenue of innovation and a path to bring ideas into the 

department and transition concepts developed in our laboratories 

in these small business environments to commercial use. 

The small business community is an engine of innovation. It attracts entrepreneurial talent and the agility to rapidly form new 

teams with the speed of the commercial marketplace. It has been 

my goal to move the department’s innovation cycle to that of the 

commercial sector, and Chairman Sanchez, when we met last time, 

we spoke exactly on those terms. 

In many cases, simply providing access to a field unit, our operators, our testing facilities provide small businesses with insight and 

fundamental technical and operational challenges that we face. To 

that end, we have provided these companies with access to our 

S&T advisors across the combatant commands, and we have 
5 

strengthened our S&T engagement to support the department’s 

joint urgent operational needs environment. And because small 

businesses typically have fewer resources to test and operationalize 

their techniques, we have provided access to the department’s 

training facilities and test results. 

One example of this type of access is the Joint Experimental 

Range Complex at the U.S. Army Yuma proving ground. This facility allows a number of small companies to test a wide range of 

technologies in a realistic environment and has open channels of 

innovation to provide us with new capabilities. 

The department provides other paths for small businesses to respond to time-critical challenges. These include our Rapid Reaction 

fund, our Quick Reaction fund, and our Defense Acquisition Challenge. Each of these programs addresses a different opportunity for 

the small business community to connect with the department, and 

it is precisely that connection that I think many of you have asked 

about. 

As an example, the Open Business Cell uses a Web interface to 

solicit solicitations to a defined set of problems. Over the past several months, we have received over 7,000 inquiries on our Web site. 

We are evaluating those concepts now, many of which wouldn’t 

come through a normal acquisition process, a normal solicitation 

process. 

This nontraditional approach allows companies that are not familiar with the DOD acquisition process to understand our needs 

and our future in terms that they can relate to in a very, very simple fashion. Our Defense Venture Catalyst Initiative, or DVCI, targets small companies with emerging technologies that meet our 

warfighter needs and are ready to go directly from the commercial 

marketplace. 

In addition to the activities already in place, the department continues to drive the participation of small business across all of our 

programs. My office, DDR&E [Director, Defense Research and Engineering], is investigating and developing and implementing new 

small business initiatives. We are looking into ways that we can 

exploit our existing authorities under the SBIR program to couple 

to those identified needs from our combatant commanders and either augment ongoing projects or accelerate projects that are underway to tie them directly to our combatant commanders’ needs. 

As part of our defense industrial base, small businesses represent a cadre of entrepreneurial innovation who bring new technology solutions and the agility to take on technical challenges that 

we face today and will face for years to come. The efforts that I 

have highlighted in my written testimony discuss in detail how we 

are connecting broadly across this community and how we are providing our department’s needs to the small business community. 

Madam Chairwoman, thank you for the opportunity to present 

these brief remarks, and I look forward to your questions. 

[The prepared statement of Mr. Lemnios can be found in the Appendix on page 24.] 

Ms. SANCHEZ. Thank you, Director. 

And now, I would like to have Ms. Linda Oliver, acting director 

for the Office of Small Programs, please. 
6 

STATEMENT OF LINDA B. OLIVER, ACTING DIRECTOR, OFFICE 

OF SMALL BUSINESS PROGRAMS, U.S. DEPARTMENT OF DEFENSE 

Ms. OLIVER. Thank you, Chairwoman Sanchez, Ranking Member 

Miller. It is a pleasure to be here, and how nice for me to be the 

fourth person to say something, and every single one of you have 

just said nice things about small business. This is my very favorite 

kind of hearing. 

My testimony is a description, in quite excruciating detail, of 

what the Department of Defense does to sort of seed innovation in 

the Department of Defense through the SBIR program. You are entitled, and we are happy to provide this detail, what we spent, 

where it went, broken down in a hundred ways. 

However, I would like today to present a different way of looking 

at how it works, how we seed innovation in the Department of Defense and perhaps, Chairwoman Sanchez, to answer for at least 

one of the programs how people get in. 

I have an SBIR product here. Somebody—yes, thank you. Good. 

Thanks. The black ones are prototypes. The khaki colored ones are 

the most recent developments. 

A little company in Seattle—now, see, I brought these because 

this is one that could get through the security and was concrete 

and all that kind of thing. This is actually a very high-tech set of 

gloves. These gloves are used in Afghanistan, are allowing our 

service people to be able to function in those high elevations. 

These were made by a little company called Outdoor Research, 

Inc. This company is in Seattle, had been in business for 19 years 

before it thought about an SBIR project. It came in with a discussion of what—we had a topic, a concern about—— 

Ms. SANCHEZ. But it came in. 

Ms. OLIVER. Yes. 

Ms. SANCHEZ. Here is the question. It came in. What does that 

mean, it came in? How did it get to you? 

Ms. OLIVER. That is a—— 

Ms. SANCHEZ. That is the question the small businesses back at 

home want to know. Hey, I got this great idea. I am making gloves. 

I think I can make them for people in Afghanistan. They came in. 

Don’t gloss over that. They came in. What does that mean? 

Ms. OLIVER. Okay. The SBIR program consists of what are sort 

of like broad agency announcements. There are general topics we 

need to know more about. The companies respond to the proposal, 

and the SBIR program is in two parts. 

The first part is here is kind of what we propose to do. This is 

sort of the concept, and then there is a proof of concept. And then, 

the second part, the phase two part, would be the prototype, in this 

case the gloves. 

Everybody understands gloves, I guess, but these are new materials, a new way to process. And the ones that you have on, Chairwoman Sanchez, are in fact ten years old. Representative Miller 

has the more developed ones, the ones that are now under contract. 

We got the prototype so that you could see there—we have, and I 

would be happy to send this to your staff, Tim, particularly—— 

Ms. SANCHEZ. Well, Tim wants to know if he can keep them to 

go skiing. 
7 

Ms. OLIVER. No. Sorry, Tim. These don’t belong to us. 

Ms. SANCHEZ. So you put out a thing saying, ‘‘Hey, we are looking at this. We are looking for some ideas about this.’’ You put it 

on the Web. These people answer back. 

Ms. OLIVER. Yes. 

Ms. SANCHEZ. You like their answer. 

Ms. OLIVER. Well, because SBIR is a particularly small-business 

friendly process, Dr. Lemnios’s people look at the questions before 

they even go out to make sure that all of it is clear. The process 

is set up so that, during one period of time before the competition 

itself starts, there are experts available for each of those topics. 

The small business can actually—and this is very unusual in a procurement—can actually talk to the person who is responsible for 

the topic and who will determine—who answered best for the topic. 

Let’s see. I am not sure. That is about half of the small businesses that are selected for phase one go on to phase two. At that 

point, our SBIR funds are finished, and the scramble is to find 

what we call phase three, but which really means finding—— 

Ms. SANCHEZ. Somewhere that it fits in the—— 

Ms. OLIVER. Exactly. 

Ms. SANCHEZ [continuing]. In the defense or somewhere that 

they can get funds to actually do the things that you can buy. 

Ms. OLIVER. Right. And in the case of this company, for example, 

there are 146 people working, making gloves in Seattle that the 

company representative told me yesterday would not be there making those gloves but for the SBIR program, that it was there at the 

right time. They have a couple of large—see, the contracts with 

very large ceilings, meaning the Department of Defense can order 

from them. They went from a little, I don’t know, $1.5 million company 20 years ago, 25 years ago, to a $50 million company now. 

And most importantly, according to this company, they are actually helping our service members. They keep their hands from 

freezing. These gloves keep their hands from freezing, and one of 

the sets makes it possible for them to operate machine guns, for 

example, and not burn their hands. 

Ms. SANCHEZ. Great. 

Ms. OLIVER. Those are just the kinds of things that we want, and 

we have a very well developed Web site. And I will send Tim the 

site. 

[The prepared statement of Ms. Oliver can be found in the Appendix on page 34.] 

Ms. SANCHEZ. Right. I am going to stop you here only because 

we have got some votes that are going to be called on the floor, so 

I want to make sure that we get at least a round of questions in, 

and then we will decide whether you guys want to stick around 

while we spend our time over on the floor. 

I am going to ask my ranking member, Mr. Miller, if he would 

like to ask his 5 minutes’ worth of questions first. 

Mr. MILLER. Thank you. 

Ms. Oliver, I know you have got to be aware that insourcing has 

been a contentious issue for many private contractors in this country. Thousands of individuals have either lost their job or really 

have been forced into accepting government positions, many times 

at less pay. 
8 

So could you expand a little bit on what your office is doing to 

assist the hundreds of small businesses around the country who 

are being directly impacted by insourcing efforts? 

Ms. OLIVER. I would be happy to take the question back to the 

Department of Defense. The piece of the Department of Defense 

that is doing all the policy and the process for insourcing is called 

Personnel and Readiness. I will ask them to specifically ask what 

we are doing with—to try and make this impact not as great on 

small businesses. I will take that back for you. 

[The information referred to can be found in the Appendix on 

page 51.] 

Mr. MILLER. Mr. Lemnios, the importance of small business in 

America is obvious to each of us up here on the dais, and I understand your role, that you want to get the best and most cost-effective product to the warfighter and to their enabler. Please explain 

which programs you think best bring our highly innovative and 

successful small businesses into DOD’s marketplace of ideas. 

Mr. LEMNIOS. Congressman, let me give you one example. I was 

at Fort Bliss yesterday and the White Sands Missile Range yesterday with Army units that were training with a variety of components. 

One of the components that I saw there was built by a company 

called iRobot. You may have seen it. These are robotic platforms. 

This has given our warfighters tremendous capability. It has kept 

young kids out of the fight where they can operate this tele-operated vehicle to clear a room, to clear a building, to provide initial 

insight into very dangerous areas. And quite simply, it saved lives. 

That was a capability that came out of a small company initially 

developed maybe 5, 6 years ago. It was at the very forefront of cutting-edge technology at the time. That company has since driven 

that equipment set with additional sensors, additional tele-operated, and in some cases autonomous capability. 

I have talked to these 19-, 20-, 25-year-old kids that are using 

it, and it is intuitive because it is in their framework. They understand how to use video games, and they understand how to use this 

piece of equipment very much in the same way. 

There are many examples like that. And five years ago, eight 

years ago when I was at DARPA [Defense Advanced Research and 

Projects Agency], there were very few companies that had that capability in their mainstream technology base, that had that capability in their current product offerings. And the department made 

an investment in this small company, and that investment has 

paid off that it is now a core capability in our department. Just one 

example of many. 

Ms. OLIVER. And that is an SBIR company, was an SBIR company. 

Ms. SANCHEZ. Thank you. Okay. 

As I mentioned in my opening statement, delays in passing a 

comprehensive reauthorization act must impact the department’s 

ability to run a $1.2 billion effort. Could either of you comment on 

some of the challenges the department faces in planning and executing the SBIR program as a result of the reauthorization delays 

or the 30 and 60 temporary extensions that the agencies have had 

to live with over the past 2 years? 
9 

And I know that last year, House was able to give DOD–SBIR 

a 1-year extension, which ends tomorrow. What can you tell me? 

What would you prefer to see, and how is it affecting your work? 

Mr. LEMNIOS. Chairman Sanchez, let me just start by maybe 

clarifying and exemplifying—amplifying an answer to your previous question and then how this reauthorization applies. And I 

think it is actually helpful to step back a little bit and give you 

some insight into how the SBIR topics come forward, how the selection is done, and how we couple with the small business community. 

The SBIR program has been remarkably successful in holding 

grassroots conferences—in fact, I have spoken at many of these— 

that engage the small business community to understand what the 

needs of the department are. The topics that are then solicited actually come through my office for technical review. 

But we work with the service community to really make sure 

that the topics that these companies respond to reflect the current 

needs of the department. And that is a very broad process. 

When I go to the service laboratories, they are all involved, 

again, at the grassroots level with the local small companies, constituents, to really get the best and the brightest ideas. I really 

want to make sure that you folks understand that this just isn’t 

a vertical program. It is one that has enormous breadth, enormous 

context across many, many states. 

Now, with regard to the reauthorization, Ms. Oliver will speak 

to that. But I wanted to make sure you understood that the connection, the critical front-end connection is really a one-to-one connection with these small companies that have innovative ideas. It is 

critically important. 

Ms. OLIVER. It is very disruptive to have a stop-and-start, stopand-start kind of program. We have now, I am sorry to say, standard plans for what we would do if it were not reauthorized. 

But a much more optimum way—and thank you so much. I know 

it was this committee, this subcommittee specifically that gave us 

a year of a sort of freedom to think about our programs instead of 

thinking about reauthorization. 

It would be so much better to have the authorization of the SBIR 

program match with practically anything, our budget planning, 

which is about 5 years, the amount of time it takes to—since with 

each reauthorization, usually there are changes. The time it takes 

to implement the changes and then see how the changes go, measure whether they are good changes or bad changes, again for 5 

years, or even with the cycle of the SBIR program itself from the 

time that somebody thinks up an idea and it gets into this sort of 

broad agency announcement status. After Dr. Lemnios’s people 

have done their work, from the time that phase one is awarded and 

carried out, phase two is awarded and we start to find a home for 

it at phase three, that is at least 4 years. 

The reauthorizations would be so much more—they would make 

so much better use of our time, of our resources, if we could stay 

focused on the results of the program. So I thank you for the question. Every 30-day reauthorizations are a huge waste of resources. 

Ms. SANCHEZ. Thank you. 
10 

In your turn on page six of your written testimony, Ms. Oliver, I see that the services have available, and on average, $300 million 

for SBIR collected via a statutory tax. I also understand that the 

current law does not allow the agencies to spend the tax dollars to 

administer the SBIR program. Is that correct? 

Ms. OLIVER. That is correct. 

Ms. SANCHEZ. And if so, how do you fund this effort? 

Ms. OLIVER. We beg, borrow and steal the resources insofar as 

we can. And we would have a better program if we were able to 

use program resources to run the program. 

Ms. SANCHEZ. What should that percentage be? 

Ms. OLIVER. The National Academy of Science has estimated 6 

percent in its study to look at that very problem it looked at, from 

15 to 3 percent. Six percent is an average for overhead that needs 

to be spent on a program in order to have it be effective. 

Ms. SANCHEZ. And Ms. Oliver, on the last page of your written 

testimony, you mentioned that a policy memorandum was issued 

clarifying SBIR phase two responsibilities. Could I get a copy of 

that memorandum? I don’t think that I have seen it. And who was 

it addressed to, and can you give us examples of what you meant 

by SBIR two responsibilities? 

Ms. OLIVER. Yes, ma’am. Dr. Findley was the official who signed 

that out. He was in the prior administration. He was—and we will 

surely provide you with a copy of it—signed out in 2008. 

The responsibilities he was talking—that he was reiterating are 

that prime contractors have responsibilities to be—in the way they 

treat the intellectual property of the small businesses, as do program managers, and there is a responsibility on the part of the program managers, and actually the prime contractors, to help find 

the most cost-effective way to carry out programs, and that very 

frequently is through SBIR projects. So that is what that letter was 

about. 

Ms. SANCHEZ. Okay. 

The gentleman from—Mr. Conaway. I was trying to think of 

what state you were from. 

Mr. CONAWAY. Exactly, the state of confusion, Madam Chairman. 

I have only been around a short period of time, so don’t worry 

about it. 

You mentioned your prime contractors, and their supply train 

contractors many times are not small businesses. What kind of incentives and/or requirements do they have for providing—I mean, 

I can figure out how small business can be the glove manufacturer, 

because that is, start to finish, their deal. But how do they plug 

into the bigger programs where we spend more money? And how 

does the—we hold the prime contractor responsible, and their supply chains responsible for any of that? And if so, how do you go 

about doing that? 

Mr. LEMNIOS. Congressman, let me—so each of those is on a 

case-by-case basis. In fact, that issue is one that has been the subject—or one of the elements of the directive that Secretary Carter 

signed out on September 24 to actually look at how we can do that 

more effectively, more efficiently to protect the innovation of the 

small business community in the context of a lead system integrator. 
11 

But let me give you one example that I saw just, again, last 

week. I don’t travel every week, but last two weeks it has been 

pretty heavy. I was up at Fort Drum, New York. And in that case, 

we had a capability that we are putting on our H–60 Black Hawk 

helicopters to detect small arms fire. 

This is a capability that doesn’t exist today. And the Army has 

a similar capability. It is called Boomerang, and you may have seen 

this. It is a system that acoustically detects a gunshot, and again, 

it has protected many lives in theater. 

This system will triangulate on a gunshot, will allow the operator 

to know he is being shot at. It is a very effective system. 

Through a DARPA program, we funded—DARPA funded an effort to take the same contractor—this is a small company, BBN is 

the company. They are in the Boston area—to apply that same 

acoustic signature, acoustic detection system, to our H–60 Black 

Hawks. And we are now testing that. In fact, we will be deploying 

four of these special helicopters to theater shortly. 

But the innovation there was coupling the small company, BBM, 

with the lead system integrator, Sikorsky. Sikorsky—— 

Mr. CONAWAY. Yes, but Sikorsky didn’t do that. You guys did 

that. 

Mr. LEMNIOS. Well, we worked with Sikorsky as the lead system 

integrator, and we directed that they use this small company because this small company had the capabilities that were needed. 

They had the technology that Sikorsky did have. 

Mr. CONAWAY. But you directed Sikorsky to do that. I guess my 

question was—and that fly that you brought with you, by the way, 

is your friend, not ours. 

Mr. LEMNIOS. We have noticed. 

Mr. CONAWAY. Exactly, so he will be hanging around you a lot. 

How does Sikorsky—I understand how you could direct them to 

say we want this capability. We have got a company over here. You 

guys figure out how to—but how does the system—or should the 

system work in such that Sikorsky, as it is building its base model 

of the UH–60, is plugging in small businesses where that makes 

sense, or should they? 

Mr. LEMNIOS. Well, there are many examples where large companies don’t have an innovative technical concept that they need to 

complete a full system build. We see this all the time. I have seen 

this in propulsion. I have seen it, in this case, with this acoustic 

sensor. Even the robotics system that I mentioned earlier is part 

of a larger system that is being integrated by a much larger set of 

companies. 

So the glue that brings all that together are discussions that we 

have in the department with this full set of companies. We do that 

through conferences. We do that through solicitations. And when 

these companies come together, they in fact see the value in taking 

that small idea and integrating it into a larger system. 

Mr. CONAWAY. Okay. Give us about a half a minute on contract 

bundling, as that phrase is used, and the restrictions in last year’s 

NDAA [National Defense Authorization Act] that said you are supposed to notify Congress when that happens. Have you actually notified Congress that there was an intent to bundle, as that phrase 

is used? 
12 

Ms. OLIVER. Yes. I am sure we have. I should say that bundling 

is sort of a misused word, has been a misused word. We keep track 

of every—in the Department of Defense, we keep track of every 

bundled contract that must be identified, and my office actually 

looks at every single one to see, rather, whether there has been a 

full justification. 

However, when people use the term ‘‘bundling,’’ usually they are 

thinking of consolidating, thinking of contract consolidation as opposed to bundling, which is a much more narrow aspect of consolidation. There is—I think this has been signed—there is new legislation, which I think was signed yesterday, which redefines consolidation—which treats consolidation as we have in the past treated 

bundling, which will go a long way. 

Mr. CONAWAY. Right. Would you mind checking and, for the 

record, getting back to us—— 

Ms. OLIVER. I would be happy to. 

Mr. CONAWAY [continuing]. On compliance with the director—— 

Ms. OLIVER. Notification. 

Mr. CONAWAY [continuing]. Notification that you notify us? 

Ms. OLIVER. Yes, certainly. 

Mr. CONAWAY. Thank you, Madam Chairman. I yield back. 

Ms. SANCHEZ. Great. 

Do you have any other questions? 

I have one more before we—actually we will break for votes, and 

I think, since we have no other members who came, I am sure that 

they will have questions to submit for the record and would appreciate your answers. 

Mr. Lemnios, you mentioned that you have increased your outreach to the industrial base. Can you give us some examples of how 

that is, or what you mean by that? 

Ms. SANCHEZ. Well, as I mentioned earlier, the critical part of 

the engagement with the small business community is right up 

front. It is providing insight into the department’s challenges, the 

areas where we need new technical ideas and new capabilities. 

We have a Web site, defensesolutions.com, one-stop shopping. 

Companies can come on board, take a look at what we have— 

defensesolutions.com. They can take a look at what is there. We 

regularly post challenges that the department has, areas where we 

need new innovation, areas where we need new ideas. This is on 

the DTIC, Defense Technology Information Center portal, so it is 

government-wide. It provides access to a wide range of challenges. 

So the Web-based portals have been very helpful. There are 

many small companies that simply can’t afford to go to conferences, 

and they can’t afford to travel to Washington, and this is a simple 

way for them to get some insight into areas that we need new 

ideas. 

The other way that we have reached out, my full staff and the 

staffs that I see across the service laboratories, we have conferences. We speak and meet with small business community regularly. In fact, many, many times for me, that is an enlightening 

moment, because you see new ideas that you wouldn’t see otherwise. 

I will give you an example. I was at Aeros Aviation in Tustin, 

and in fact this small company is building an airship that we are 
13 

funding. It is called Pelican, and it was originally funded as a 

DARPA project, and we are now transitioning it to first flight the 

end of next year. 

And this small company has an idea for building an airship that 

can transition from lighter than air to heavier than air so you don’t 

have to carry ballast. It is a tremendous operational capability. 

Our value in that is connecting that company with technical resources at NASA [National Aeronautics and Space Administration] 

Ames for additional simulation and connecting them to the end 

user. So they are not just developing the concept. They are thinking about how that concept will be used. 

So this outreach is more than just publishing a set of needs. It 

is connecting this community with technical resources and operational insight so that the products that they develop, whether it 

is gloves or whether it is 100-yard airship, has a transition path 

that is in the framework of what the end-use case will look like. 

The last thing I will say that has tremendous value to this community is coupling these small companies with our test ranges and 

with our test resources so they can get the same insight that I saw 

the last two days at Fort Bliss and White Sands, giving that insight to companies that wouldn’t normally have that ability to see 

what an operational environment actually looks like. 

It changes their way of thinking, and it changes the ability and 

the speed and the context of how they develop a product. Critically 

important, and we have done that through a number of avenues— 

companies all the time that we try to make those connections. 

Ms. SANCHEZ. Okay, great. 

Well, I thank you for your testimony before our committee and 

for your written testimony. We will be submitting some more questions for the record, and thank you both for at least enlightening 

me about some of the things going on with the program. Thank 

you. 

And the committee is now adjourned, I think in time for some 

votes that are about to be called. Thank you. 

[Whereupon, at 2:49 p.m., the subcommittee was adjourned.] 

A P P E N D I X 

SEPTEMBER 29, 2010 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

SEPTEMBER 29, 2010 

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WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

SEPTEMBER 29, 2010 

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RESPONSE TO QUESTION SUBMITTED BY MR. MILLER 

Ms. OLIVER. It is important to note that the Department’s insourcing efforts are 

focused on services and not individual firms or contractor positions. To that end, the 

Department’s insourcing efforts (under the purview of the Under Secretary of Defense for Personnel & Readiness) are intended to: 

• reduce inappropriate reliance on contracted services; 

• help shape the workforce by ensuring that work that is inherently governmental, closely associated with inherently governmental, or otherwise exempt 

from private sector performance (to mitigate risk, ensure continuity of operations, build internal capacity, meet readiness needs, etc) is performed by government employees; 

• ensure the Department has the necessary capabilities and skills to meet its missions; and 

• generate efficiencies and savings. 

The Department greatly values the contributions made by private sector firms, 

particularly small businesses, to the Department’s missions. The private sector is, 

and will continue to be, a vital source of expertise, innovation, and support to the 

Department’s Total Force. In fact, we have seen continued growth of contracted 

services in our budget requests. Insourcing impacts less than 1% of currently contracted services, and the net growth in contracted services this past year was still 

more than $5 billion. 

At the same time, we are conscious of the impact our insourcing decisions may 

have on private sector firms and their employees. The DOD Office of Small Business 

Programs is committed to assisting small businesses and maximizing their participation in DOD acquisitions. [See page 8.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

SEPTEMBER 29, 2010 

(55) 

QUESTIONS SUBMITTED BY MS. SANCHEZ 

Ms. SANCHEZ. I understand you helped develop Secretary Gates’ recently announced ‘‘Efficiencies Initiative.’’ It is my understanding that the premise of the initiative offers specific guidelines to Pentagon acquisition folks for how to make 

smarter contracting decisions that don’t waste taxpayer dollars. I believe the Secretary stated something to the effect that if successfully executed, the plan would 

save around $100 billion over the next five years. 

Mr. LEMNIOS. In August, the Under Secretary of Defense for Acquisition, Technology and Logistics announced the fact that the acquisition community would be 

intimately involved in supporting Secretary Gates’ Efficiencies Initiative. Throughout August, culminating in a formal announcement on September 14 by Under Secretary Carter, I served on a senior integration group led by Secretary Carter. This 

group includes the senior acquisition leadership from OSD, the Services, and select 

Defense Agencies. One of my specific tasks was to represent the DOD small business enterprise and suggest options to support the Secretary’s initiative. 

Ms. SANCHEZ. What was your specific task in the development of the Efficiencies 

Initiative? 

Mr. LEMNIOS. In August, the Under Secretary of Defense for Acquisition, Technology and Logistics announced the fact that the acquisition community would be 

intimately involved in supporting Secretary Gates’ Efficiencies Initiative. Throughout August, culminating in a formal announcement on September 14 by Under Secretary Carter, I was involved in a senior integration group led by Secretary Carter. 

This group included the senior acquisition leadership from OSD, the Services, and 

select Defense Agencies. My specific task was to represent the science, technology, 

systems engineering and developmental test communities, and suggest options to 

support the Secretary’s initiative. 

Ms. SANCHEZ. What will your role or roles of your office be, if any, with implementing the initiative? 

Mr. LEMNIOS. My responsibilities include leading how we are looking at ways to 

strengthen the Industrial Research and Development linkages to the DOD, ways to 

strengthen technology maturity assessments, and ways to strengthen test and evaluation. 

Ms. SANCHEZ. What roles can/should small high-tech businesses play toward 

reaching the goals of this new initiative? 

Mr. LEMNIOS. It is still too early to make specific comments as the initiatives are 

being developed. I will say that we are also looking at ways to strengthen the small 

business interactions with the Department and warfighter. Small business has long 

been the innovation engine of the Department and the nation. We recognize this 

and wish to continue to strengthen the relationship. We are also outlining a range 

of options that would allow us to use the current structure and authorities of the 

small business innovative research program to address time-critical warfighter 

needs; if successful, this will strengthen both the small business community and the 

Department. 

Ms. SANCHEZ. What do you view as the biggest hurdles, particularly for small 

high-tech firms, with supporting this initiative? 

Mr. LEMNIOS. It is still premature to discuss specific hurdles in depth, but over 

the years, the Department has recognized there are special needs for small business. 

These include ensuring access to information, competitive equity and getting funds 

contracted. In part to address this, my office initiated a pilot program, called the 

Open Business Cell, to specifically reach out to small business. This office serves 

to marry small business solution providers with program offices and requirements 

generators to streamline the process. Information on this program can be found at 

www.defensesolutions.mil. 

Ms. SANCHEZ. Are there or will there be metrics developed and put into place to 

measure the progress of this initiative? 

Mr. LEMNIOS. We are still developing implementation plans and are looking at 

how to put metrics in place. These will be highlighted in the implementation rollout. 
56 

Ms. SANCHEZ. Does the new initiative leverage existing cost-savings efforts or is 

it dependent on the development of new methodologies, procedures, program, personnel adjustments, etc? 

Mr. LEMNIOS. Since we are developing implementation strategies, I can’t give specifics. I can say, however, that we are looking very broadly at methodologies, procedures, program and personnel adjustments, and so forth. 

Ms. SANCHEZ. How can DOD leverage capabilities of small high-tech firms to drive 

better outcomes for the department on major weapon system acquisition? 

Mr. LEMNIOS. Achieving better outcomes on major weapon system acquisitions is 

a top priority for the Department. Though small business prime contracting opportunities in support of major systems programs are pursued, most of the opportunities for these programs will continue to be in subcontracting. A total of $49.5 billion 

dollars in subcontracts went to small businesses in FY2009. The subcontracting 

goal, established by the Small Business Administration, is 31.7% for FY2011. We 

anticipate small, high-tech firms will continue to develop new technologies to feed 

major systems. The Small Business Innovation Research and Small Business Technology Transfer programs alone involved awards totaling over $1.4 billion in 

FY2009. The Department’s SBIR Commercialization Pilot Program exists to identify 

SBIR technologies that have the greatest potential for transition to production. 

Ms. SANCHEZ. Can you summarize the role SBIR plays in defense acquisitions? 

How does the Milestone Decision Authority ensure and monitor SBIR participation 

in all Milestone activities? Is it through the Milestone A Review and/or other governance processes? Are there incentives to drive inclusion of SBIR solution or penalties for failure to consider SBIR solutions? 

Mr. LEMNIOS. It is critical that promising technologies be identified from all 

sources domestic and foreign, including government laboratories and centers, academia, and the commercial sector. This includes consideration of the use of technologies developed under the Small Business Innovation Research (SBIR) program. 

The risk of introducing these technologies into the acquisition process must be reduced through coordination, cooperation, and mutual understanding of technology 

issues. DOD Acquisition Programs are required to provide maximum practicable opportunities to small business, including small disadvantaged business, womenowned small business, veteran-owned small business, service-disabled small business and Historically Underutilized Business Zones. Acquisition Program Managers 

document their utilization of small businesses in their Technology Development 

Strategy and their Acquisition Strategy. At Milestone A, the Milestone Decision Authority (MDA) reviews the proposed materiel solution and the draft Technology Development Strategy (TDS). The Technology Development Phase begins when the 

MDA has approved a materiel solution and the TDS, and has documented the decision in an Acquisition Decision Memorandum. SBIR technologies are pursued based 

on merit relative to all alternatives available to the program manager. There are 

no penalties for failure to use SBIR solutions. However, DOD encourages use of 

SBIR technologies and small businesses in order to meet subcontracting goals established by the Small Business Administration, which is 31.7% for FY2011. 

Ms. SANCHEZ. Are there documented guidance or procedures that define how Program Managers should evaluate and, more importantly, plan for insertion of SBIR 

technologies into Major Defense Acquisition programs? 

Mr. LEMNIOS. The Department of Defense Acquisition Instruction, DOD5000.01 

requires that Major Defense Acquisition Programs develop acquisition strategies to 

facilitate small business participation throughout a program’s life cycle through direct participation or, where such participation is not available, through fostering 

teaming with small business concerns. In addition, DOD5000.02 requires Major Defense Acquisition Programs to identify promising technologies from all sources domestic and foreign, including government laboratories and centers, academia, and 

the commercial sector. DOD5000.01 also requires the program manager to give 

small business the maximum practical opportunity to participate during the technology development phase and succeeding acquisition phases. Further guidance for 

inserting SBIR technologies into Defense Acquisition programs is defined in the Dec 

2008 AT&L policy memorandum ‘‘SBIR program Phase III guidance.’’ 

Ms. SANCHEZ. How can SBIR participation in later-stage acquisition program activities, as occurred with the Virginia-class submarine, be ensured and what is the 

proper balance of responsibility between the prime contractor and the government 

program manager? 

Mr. LEMNIOS. The Department of Defense Acquisition Instruction, DOD5000.01 

requires that Major Defense Acquisition Programs develop acquisition strategies to 

facilitate small business participation throughout a program’s life cycle through direct participation or, where such participation is not available, through fostering 

teaming with small business concerns. The Acquisition Strategy guides program 
57 

execution across the entire program life cycle, focusing primarily on the upcoming 

phase. The strategy evolves over the phases and continuously reflects the current 

status and desired end point of the phase and the overall program. An MDA-approved update to the Acquisition Strategy is required prior to Milestone C and Full 

Rate Production. This Acquisition Strategy developed by the government program 

manager translates into the provisions of their contract with the prime contractor. 

Integration and use of SBIR technologies on major programs can best be achieved 

when the program manager and prime contractor(s) proactively seek SBIR solutions. 

However, the program manager has overall responsibility for the outcome of the program, balancing requirements against affordability and time. 

Ms. SANCHEZ. You mentioned areas where you are seeking to improve either the 

government acquisition process or the SBIR program. Could you provide the committee more detail on your key initiative? Does it involve adding dollars to seed the 

initiative? Do you need additional authorities? Will you change or cancel failing redundant initiatives? 

Mr. LEMNIOS. It is still too early to provide specific details. However, at this time, 

I do not foresee the need for additional funds or new authorities. The Department 

will continue to look to the small business community in driving invention and innovation to quickly launch new capabilities that support our warfighters and protect 

our nation. 

Ms. SANCHEZ. I understand you helped develop Secretary Gates’ recently announced ‘‘Efficiencies Initiative.’’ It is my understanding that the premise of the initiative offers specific guidelines to Pentagon acquisition folks for how to make 

smarter contracting decisions that don’t waste taxpayer dollars. I believe the Secretary stated something to the effect that if successfully executed, the plan would 

save around $100 billion over the next five years. 

What was your specific task in the development of the Efficiencies Initiative? 

Ms. OLIVER. In August, the Under Secretary of Defense for Acquisition, Technology and Logistics announced the fact that the acquisition community would be 

intimately involved in supporting Secretary Gates’ Efficiencies Initiative. Throughout August, culminating in a formal announcement on September 14 by Under Secretary Carter, I was involved in a senior integration group led by Secretary Carter. 

This group included the senior acquisition leadership from OSD, the Services, and 

select Defense Agencies. My specific task was to represent the science, technology, 

systems engineering and developmental test communities, and suggest options to 

support the Secretary’s initiative. 

Ms. SANCHEZ. What will your role or roles of your office be, if any, with implementing the initiative? 

Ms. OLIVER. My responsibilities include leading how we are looking at ways to 

strengthen the Industrial Research and Development linkages to the DOD, ways to 

strengthen technology maturity assessments, and ways to strengthen test and evaluation. 

Ms. SANCHEZ. What roles can/should small high-tech businesses play toward 

reaching the goals of this new initiative? 

Ms. OLIVER. It is still too early to make specific comments as the initiatives are 

being developed. I will say that we are also looking at ways to strengthen the small 

business interactions with the Department and warfighter. Small business has long 

been the innovation engine of the Department and the nation. We recognize this 

and wish to continue to strengthen the relationship. We are also outlining a range 

of options that would allow us to use the current structure and authorities of the 

small business innovative research program to address time-critical warfighter 

needs; if successful, this will strengthen both the small business community and the 

Department. 

Ms. SANCHEZ. What do you view as the biggest hurdles, particularly for small 

high-tech firms, with supporting this initiative? 

Ms. OLIVER. It is still premature to discuss specific hurdles in depth, but over the 

years, the Department has recognized there are special needs for small business. 

These include ensuring access to information, competitive equity and getting funds 

contracted. In part to address this, my office initiated a pilot program, called the 

Open Business Cell, to specifically reach out to small business. This office serves 

to marry small business solution providers with program offices and requirements 

generators to streamline the process. Information on this program can be found at 

www.defensesolutions.mil. 

Ms. SANCHEZ. Are there or will there be metrics developed and put into place to 

measure the progress of this initiative? 

Ms. OLIVER. We are still developing implementation plans and are looking at how 

to put metrics in place. These will be highlighted in the implementation roll-out. 
58 

Ms. SANCHEZ. Does the new initiative leverage existing cost-savings efforts or is 

it dependent on the development of new methodologies, procedures, program, personnel adjustments, etc? 

Ms. OLIVER. Since we are developing implementation strategies, I can’t give specifics. I can say, however, that we are looking very broadly at methodologies, procedures, program and personnel adjustments, and so forth. 

Ms. SANCHEZ. Your testimony suggests that DOD should actively seek out and 

support small business contractors. What are some of the special or unique capabilities that small business brings to defense acquisition? 

Ms. OLIVER. Small businesses generally have lower overhead than large companies and are more cost-effective in delivering goods and services to DOD. Small 

businesses are more agile and flexible than large companies in meeting DOD requirements, including highly technical solutions to complex problems. Consequently, 

DOD encourages small businesses to participate in the Small Business Innovation 

Research Program (SBIR). 

The SBIR program was established to help promote innovation and commercialization from small businesses through Federal research and development budgets. These programs are intended to harness the enthusiasm and innovation inherent in small, high-tech American firms to develop and commercialize critical technologies in order to meet the needs of our American and Allied Warfighters. This 

sector of our industrial base is a key element of our nation’s military and economic 

strength, and it is also often found at the heart of regional economic development 

or cluster initiatives. 

The SBIR Program sets aside a significant amount of funds for research and development for small businesses in a given year. For example, during Fiscal Year 

2008 a total of 12,280 Phase I and 1,672 Phase II proposals were received and evaluated, and 1,826 Phase I and 1,072 Phase II contracts were awarded at an aggregate value of $1.2B dollars. Competition among small firms is used for all Phase 

I awards, which provides funds to explore ideas that could move to the second developmental phase. 

Ms. SANCHEZ. How significant a problem for small business is contract bundling 

at DOD and what can be done to address this? 

Ms. OLIVER. The table below summarizes contract bundling in DOD acquisitions 

for Fiscal Years (FY) 2006 through 2009 and is indicative of the significance of contract bundling for small businesses at DOD. In 2009 for example, there were only18 

out of a total of more than 3.5M contract actions that were classified as bundling. 

In terms of dollars, this represents less than 1% of the total DOD small business 

eligible procurement dollars. The DOD Office of Small Business Programs regularly 

reviews contract bundling in DOD acquisitions through the standard bundling report from the Federal Procurement Data System (FPDS) that is generated on a 

quarterly basis. The report tracks all DOD bundled actions for the time period. Our 

goal is to eliminate all unjustified bundling within DOD. 

Department FY 

DoD 

Total # 

Actions 

Total # 

Bundled 

Actions 

DoD SB– 

Eligible $ * 

DoD $ 

Awarded 

to SB 

Total 

Bundled 

Dollars 

DEPT OF 

DEFENSE 

2006 3,350,312 5 $234,951,480,470 $51,316,934,021 $159,926,275 

DEPT OF 

DEFENSE 

2007 3,529,595 25 $269,312,039,976 $55,047,209,461 $1,622,530,680 

DEPT OF 

DEFENSE 

2008 3,653,199 16 $314,555,539,523 $62,471,471,402 $6,193,632,827 

DEPT OF 

DEFENSE 

2009 3,559,134 18 $302,376,720,694 $63,894,421,489 $2,730,226,674 

* SB-eligible dollars are the dollars remaining after SB goaling criteria have been applied 

Ms. SANCHEZ. Are primes and their supply chains specifically incentivized to identify and include small business solutions in acquisition planning, and how are SBIR 

solutions specifically reflected in a prime contractor’s Subcontracting Plan, which 

has traditionally pointed generally towards ‘‘small business’’ but not SBIR? 

Ms. OLIVER. DOD source selection regulations and policy incentivize prime contractors to identify and include small business as part of meeting contract requirements. In accordance with DOD regulations and policies, when a subcontracting 

plan is required, the contracting officer must evaluate the extent to which small 

businesses will participate in the performance of the contract. DOD policy and regulations regarding acquisition plans also require a discussion of market research and 

identification of small business opportunities for subsystems, components, and serv-
59 

ices at the first tier subcontracting level. Additionally, while the Federal Acquisition 

Regulations regarding subcontracting plans does not require identification of SBIR 

technologies to be used in the performance of the contract, DOD policies require that 

the use of SBIR technologies be addressed in acquisition planning. 

If there is work that can be subcontracted, prime contractors (unless they are 

small businesses) are required to have a portion of their subcontracted work to 

small businesses. However, there is nothing in the current policy that requires the 

small businesses to be Small Business Innovation Research (SBIR) Firms. 

Ms. SANCHEZ. You mentioned areas where you are seeking to improve either the 

government acquisition process or the SBIR program, could you provide the committee more detail on key initiatives? Does it involve adding dollars to seed the initiative? Do you need additional authorities? Will you change or cancel failing redundant initiatives? 

Ms. OLIVER. We are proud of our successful initiative to motivate program managers (PMs) to consider SBIR technology. As a result of our efforts, DOD Instruction 

5000.02 Operation of the Defense Acquisition System has been updated to include 

the following statement: ‘‘PMs shall consider the use of technologies developed 

under the Small Business Innovation Research (SBIR) program, and give favorable 

consideration to successful SBIR technologies.’’ 

Another initiative to improve the program is our ongoing effort to improve and 

update a Defense Acquisition University (DAU) course on integrating SBIR projects 

through a specific training module. In addition to this effort that is intended to increase understanding of the program for DOD program managers, we host special 

training for DOD acquisition personnel at the Annual DOD SBIR Training Workshop. Additional training is provided to industry and the academic community at 

the Annual DOD SBIR Beyond Phase II Conference. 

My office also leads a DOD SBIR program managers working group. The group 

identifies, evaluates, and shares best practices and efficiencies. The DOD SBIR Program is evaluated for best practices and efficiencies on a regular basis. 

QUESTIONS SUBMITTED BY MR. JOHNSON 

Mr. JOHNSON. Numerous studies that have been placed before Congress have 

demonstrated that minority- and women-owned firms continue to face numerous 

barriers in the marketplace that non-minority and male-owned firms do not confront. These barriers include denial of the capital that is essential to forming or expanding a business; higher interest rates for loans that minority- and women-owned 

businesses are able to obtain; exclusion from contracting opportunities by prime contractors; inflated pricing by suppliers; and inability to obtain bonding. Hearings held 

during this Congress and previous Congresses make clear that there is substantial 

evidence that these barriers are the result of discrimination against minorities and 

women and that they would be exacerbated in the absence of government programs 

to level the playing field. This is why programs like the 8(a) program are so critical: 

they are the government’s means to assure that it will not perpetuate prior discrimination or allow the federal contracting process to be infected by market discrimination. Do you agree that these are important goals for the government to achieve? 

Ms. OLIVER. Yes. The Department of Defense (DOD) believes strongly in the 

SBA’s 8(a) program and continues to use it in our procurement activities. 

Mr. JOHNSON. The Department of Defense has the largest volume of contracts of 

any agency of the government. Its actions therefore have significant impact on the 

opportunities available for minority- and women-owned firms to participate in federal contracting. 

a. What percentage of contract dollars did the Department award to minority and 

women-owned firms in FY 2009 and (if the data is available) FY 2010? Please make 

clear whether the answer includes all Defense Department contract dollars, including those spent on contracts that were not let competitively. If this percentage does 

not include all contract dollars, please explain which contracts are included in your 

calculation. 

b. What percentage of contract dollars awarded to minority-owned contractors 

were awarded through the 8(a) program in FY 2009 and (if the data is available) 

FY 2010? Please make clear whether the answer includes all Defense Department 

contract dollars, including those spent on contracts that were not let competitively 

and were not restricted to small businesses. If the percentage does not include all 

contract dollars, please explain which contracts are included in your calculation. 

Ms. OLIVER. For the purposes of answering questions a and b, we have equated 

‘‘small disadvantaged businesses’’ with minority-owned small businesses because the 

two terms are often used interchangeably. However, it is possible for a small dis-
60 

advantaged business to be owned by someone who is not a minority and it is possible for a minority to own a small business but not be disadvantaged. In FY 2009, 

the Department of Defense obligated 7.2% ($21.7B) of its dollars on contracts awarded to small disadvantaged businesses. It obligated 3.4% ($10.2B) on contracts 

awarded to small businesses owned and controlled by women. That Fiscal year, the 

Department obligated on contracts $302.4B dollars, including those spent on contracts that were not let competitively and were not restricted to small businesses. 

According to the dynamic Small Business Goaling Report, in FY 2010 the Depart- ment obligated 7.2% ($21.0B) of its dollars on contracts with small disadvantaged 

businesses. It obligated 3.6% ($10.5B) on contracts awarded to small businesses 

owned and controlled by women. That Fiscal year, the Department obligated 

$290.1B dollars. The FY 2010 figures are still preliminary, unofficial, and may 

change. The Small Business Administration (SBA) determines small business 

achievements by removing certain categories of contracts from a base of appropriated dollars. Typical examples are: contracts awarded to sheltered workshops and 

similar non-profit organizations, foreign military sales, utilities, and leases. 

A more exhaustive list of exclusions can be found in the Appendix to the Small 

Business Goal Report at www.fpds.gov/Reports/manage/html/preview_Small_Business_Goaling_Report.html. Except for the adjustments made by 

SBA, the answers to question b include all DOD contract dollars. In FY 2009, 

60.39% of DOD dollars awarded by contract to small disadvantaged businesses were 

awarded through the 8(a) program. Preliminary figures for FY–2010 indicate that 

approximately 56.5% of the dollars were awarded through the 8(a) program. 

Mr. JOHNSON. What percentage of contract dollars goes to minority-owned firms 

through subcontracting? Please make clear whether the answer includes all Defense 

Department contract dollars, including those spent on contracts that were not let 

competitively and were not restricted to small businesses. If the percentage does not 

include all contract dollars, please explain which contracts are included in your calculation. 

Ms. OLIVER. In FY 2009, 4.1% ($6.0B) of the subcontracted dollars under DOD 

prime contracts were awarded to small disadvantaged businesses; the total dollars 

in FY 2009 was $144.5B. The FY 2010 numbers have not yet been compiled. The 

source of the Department’s subcontracting figures is the Electronic Subcontracting 

Reporting System. The system collects total dollars that are subcontracted as reported by prime contractors. The FY 2009 figure of $144.5B includes subcontracts 

to small businesses as well as subcontracts to other-than-small entities. 

Mr. JOHNSON. Is the 8(a) program an important and necessary tool for providing 

minority- and women-owned firms a fair opportunity to compete for federal contracts? 

Ms. OLIVER. Yes. The DOD continues to use the Small Business Administration’s 

(SBA) 8(a) program as the primary means of providing contracting opportunities to 

small, disadvantaged businesses. The majority of contracts awarded to small and 

disadvantaged businesses in 2009 and 2010 were let through the 8(a) program. The 

program is a critical means of helping small, disadvantaged businesses gain a foothold into the federal contracting arena, through which they can grow and become 

competitive firms in our economy. While the Section 8(a) program does not include 

a presumption of social disadvantage for businesses owned and operated by non-minority female owners, non-minority female business owners can, and do, participate 

in the program by demonstrating social disadvantage. The SBA has recently issued 

final regulations, implementing the Women-Owned Small Business Program that 

will provide women-owned businesses contracting benefits similar to those afforded 

by the SBA’s 8(a) program. 

Mr. JOHNSON. What else could Congress do to further explore the barriers facing 

minority- and women-owned businesses in federal contracting? 

Ms. OLIVER. The Department of Defense would prefer to have time to evaluate 

the effectiveness of the implementation of the new SBA rule pertaining to womenowned small businesses before making further recommendations. 

Mr. JOHNSON. Does the Department of Defense have in place the ideal set of tools 

authorized by Congress to address potential inequities in small business contracting? 

Ms. OLIVER. No, there can always be improvement. For example, the authorization for the Department’s SBIR program expired in 2008 and since then has been 

reauthorized in multiple small increments of time. A longer-term reauthorization of 

the SBIR program would ensure continuity of operations enabling the department 

to streamline the efficiency and effectiveness of the program. 

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