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Small businesses are expected to see increased opportunities to engage in defense contracts in 2023—a continuation of recent trends. In 2021, small businesses made up 73% of companies working with the Pentagon and 77% of the department’s research and development efforts. In 2022, defense contract spending rose 6.7% and reached $436 billion, rebounding from a $40 billion dip in 2021 as a result of the COVID-19 pandemic.
Last year, facilities and construction saw $54 billion in spending. Transportation and logistics increased to $30 billion, and foreign military equipment sales rose to $38.5 billion. IT is another arena that is likely to see heightened research spending, especially in artificial intelligence, cybersecurity, 5G communications, machine learning, and quantum computing. Most agency or branch budgets have increased their investment in research development, test, and experimentation by over 10%.
The Biden administration has especially sought to engage economically disadvantaged companies in new contracts with the goal of awarding 15% of defense contracts to these businesses by 2025. Agencies have been encouraged to create more opportunities for all socio-economic classes and improve their market research for identifying such companies. 8(a) companies, which are owned by socially and economically disadvantaged persons, are especially likely to benefit from these initiatives.
Small businesses currently comprise 99.9% of all U.S. companies. The Department of Defense’s new strategy focuses on three main goals: implementing a unified management approach, ensuring projects align with national security priorities, and strengthening support of small businesses.
The Department has 96 APEX Accelerators across the country that focus on engagement and training, helping small businesses find opportunities and increase their readiness. These accelerators will work on reducing barriers to entry, increasing set-aside competitions, and leveraging programs to grow the industrial base. Business owners who are interested in working with the Department of Defense can start by reading the “Guide to Marketing to DoD” on https://business.defense.gov.
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