Pentagon Struggles to Attract New Entrants Into Industrial Base.

• Author: Tadjdeh, Yasmin

The Defense Department has for years been plagued by a perennial problem: attracting new entrants into the defense industrial base.

Injecting the DIB with the innovation that small businesses, nontraditional companies and startups bring is critical if the Pentagon wants to maintain overmatch against adversaries, experts say. But despite a myriad of programs and efforts to entice firms to work with the Pentagon, data shows that there has been a continued downward trajectory.

There has been a decrease in both the total number of Defense Department vendors, and new entrants into the defense industrial base, according to a draft of the National Defense Industrial Association's Vital Signs 2022: The Health and Readiness of the Defense Industrial Base report, which included data provided by decision science company Govini.

The DIB has dropped from about 58,000 vendors in 2019 to about 55,000 in 2020, according to Govini data. That is also a significant drop from the 69,000 vendors that were in the market in 2016.

Likewise, there has been a decrease in new vendors, the report found.

"While not as extreme as last year's drop, the DIB did drop from 6,500 new entrants in fiscal year 2019, to 6,300 in fiscal year 2020," the study said. "The fact that the drop continues is worrying."

The Government Accountability Office also recently flagged the trend in an October report titled, "Small Business Contracting: Actions Needed to Implement and Monitor DoD's Small Business Strategy."

The number of new entrants entering the defense industrial base declined from 2016 through 2020, the report found. In 2020, there were a total of 5,526 new entrants compared to 7,083 in 2016. There is no unified standard definition of the term "new entrant," which accounts for some variations in data between studies.

Additionally, the number of small businesses contracting with the Pentagon has significantly declined since 2011, GAO found. Small businesses receiving contract awards plummeted 43 percent from 42,723 in 2011 to 24,296 in 2020.

GAO cited two major issues facing small businesses: certain governmentwide contracting initiatives and administrative difficulties working with the Pentagon, including burdensome cybersecurity requirements.

"Since 2005, government-wide initiatives led by the Office of Management and Budget have encouraged agencies to consolidate and coordinate their purchases of common products and services," the report said. "OMB's ongoing category...