Samantha Cohen

This report analyzes the current state of affairs in defense acquisition by combining detailed policy and data analysis to provide a comprehensive overview of the current and future outlook for defense acquisition. This analysis will provide critical insights into what DoD is buying, how DoD is buying it, from whom is DoD buying, and what are the defense components buying using data from the Federal Procurement Data System (FPDS). This analysis provides critical insights into understanding the current trends in the defense industrial base and the implications of those trends on acquisition policy.

This paper garners information crucial to understanding business growth for new entrants and small businesses who contract with the federal government by utilizing publicly available contracting data from the Federal Procurement Data System (FPDS) to track new entrants from 2001-2016. This information is then used to evaluate entrances, exits, and status changes among federal vendors with the purpose of comparing challenges faced by small businesses with those of larger ones. Measuring market trends over time and in multiple sectors shows how the challenges facing small businesses, such as market barriers to entry and imperfect competition, keep them from growing. The final results compare the survival rates between small and non-small new entrants contracting with the federal government and analyze the graduation rates for those small new entrants who grew in size during the observation period and survived after ten years. The study finds that around 40 percent of new entrants exit the market for federal contracts after three years, around 50-60 percent after five years, and only about one-fifth of new entrants remain in the federal contracting arena in the final year of observation. Across the six samples studied, thegraduation rates of small businesses consistently decrease.

This report is the second in an annual series examining trends in what the U.S. Department of Defense (DoD) is buying, how DoD is buying it, and from whom DoD is buying. This year’s study looks in depth at issues in research and development, acquisition reform in the FY2017 National Defense Authorization Act (NDAA), performance of the defense acquisition system, the future of cooperative International Joint Development Programs, and major trends apparent in the activities of the major defense components. By combining detailed policy and data analysis, the study provides a comprehensive overview of the current and future outlook for defense acquisition.