Key Takeaways for Executives
- The 2019 National Defense Authorization Act contains several provisions to help small business contractors, including extending the prompt payment requirement to small primes.
- The bill also calls on DOD to establish a small business strategy to identify contracting opportunities for small firms.
- In addition, it extends the SBIR and STTR programs until 2022.
Small business contractors are set to benefit from provisions in the 2019 National Defense Authorization Act that extend the prompt payment requirement to small business primes, require the Defense Department to establish a small business strategy and extend the Small Business Innovation Research and Small Business Technology Transfer programs.
One of the most important small business provisions in the NDAA seeks to ensure small prime contractors are paid in a timely manner, Holland & Knight attorney Mitchell Bashur told WashingtonExec.
As he and his colleague Amy Fuentes have explained, Section 852 of the NDAA requires DOD to establish a goal of paying small business primes within 15 days of receiving a proper invoice if the contract doesn’t establish a specific payment date.
The law includes a similar requirement for paying small business subcontractors, which isn’t new. But the requirement has now been expanded to small business primes.
“That’s an important change because it makes sure those small businesses get funding on time,” Bashur said. “They realize that prompt payment is important for small businesses to continue performance on a contract. This provision is meant to ensure that the government does its part to support these companies.”
He said another important NDAA provision requires DOD to implement a small business strategy that provides for a unified management structure within the department for functions related to small business programs, manufacturing and industrial base policy, and procurement technical assistance programs.
Among other things, the strategy must clearly identify opportunities for small businesses to contract with DOD and ensure these firms have sufficient access to program managers, contracting officers and other relevant DOD personnel. The policy also must promote outreach to small contractors through procurement technical assistance programs.
The strategy is important to ensure small businesses continue to enjoy robust opportunities to contract with DOD, Bushur said.
However, he noted new Section 809 Panel recommendations for reforming the defense procurement system envision a more limited role in defense contracting for small businesses. In particular, these recommendations call for eliminating or significantly reducing small business set-asides in commercial contracts and substituting a 5 percent price preference.
This arguably would be a step backward and limit contracting opportunities for small companies.
“With small businesses competing against the big guys, 5 percent isn’t going to be as important as a set-aside,” Bashur said.
Although the law requires DOD to develop its small business strategy by Feb. 9, he said this deadline might slip because of the recent government shutdown.
In addition, the NDAA extends the SBIR and STTR programs until 2022. These competitive programs award grants to small businesses for research and development projects that might otherwise go unfunded.
Bashur said these programs provide important business opportunities for small firms and always have an expiration date, and he is glad the NDAA extends them for a significant period of time.
Several other NDAA provisions will help small business contractors as well, including ones that:
- increase participation in the Small Business Administration’s microloan program;
- codify and reauthorizing the Defense Research and Development Rapid Innovation Program to accelerate the fielding of technologies developed pursuant to phase II SBIR Program projects;
- up funding for procurement technical assistance programs;
- require SBIR-covered agencies to create commercialization assistance pilot programs, under which contractors may receive a subsequent Phase II SBIR Program awards; and
- increase opportunities for employee-owned businesses through SBA loan programs.