The proof is in the numbers: From fiscal 2011 to 2020 the number of small businesses receiving Defense Department contract awards decreased by 43%, despite obligations increasing by 15%.
I recently spoke with a small business owner, let’s call him David, who is a subcontractor for a large defense firm. David has an IT firm with about 100 employees and is a veteran.
While the Prompt Payments Act ensures the prime David works for gets paid quickly, sometimes within 15 days, the same defense prime makes David wait 90 days. This three-month gap until payment costs David, back of the envelope, about $200,000 in annual financing — the equivalent of a highly skilled full-time employee with annual salary and benefits.
For David’s small business this constitutes a significant drain of resources.
A year ago, a Pentagon report called out this and other problems facing small businesses and extolled the innovation small business contractors like David bring. But clearly the federal government has not made much progress in lessening the burden on small business.
