NETCENTS-2 is a Potential Bonanza for Small Businesses

Small businesses have much more invested in NETCENTS-2 than previously, and stand to make much more from the contract than they could through set-asides and subcontracting. If all the goals are met, they could walk away with just under half of the $24.2 billion contract ceiling.

They can now compete directly for business throughout many of the contract categories, and also benefit from mandates steering business directly to them. In the NETCENTS-2 Products category, for example, 23 percent of the total obligated dollars are reserved to small business subcontractors.

The Application Services and Network/Operations Infrastructure Solutions categories have separate small business companion IDIQ contracts, where any requirement between $3,000 and $150,000 has to be competed only among a small business pool of companies.

The reaction so far has been favorable, Robert Smothers, NETCENTS-2 program manager, feels.

“The NETOPS contract is too new to have compiled statistics,” he said. “However, the Application Services contract has exceeded all expectations, with $550 million of the $960 million ceiling awarded since 2012.”

As with other of the military services and government agencies, small business have typically had a hard time in securing government businesses. In many cases they were just not seen as capable as the bigger integrators, lacking the expertise and infrastructure to meet the requirements of complex IT programs, and until recently small business participation in Air Force procurement had been on a steady slide.

That attitude has been slowly changing, under pressure from Congress and the White House. In February 2012, for example, the Air Force published its Small Business Improvement Plan and in January 2015 the Air Force announced it had met its small business goals, the first time that had happened since nearly a decade earlier.

Various factors are driving that. While demands on the military ratchet ever higher, sequestration and other cost-cutting measures are constantly squeezing budgets. In the procurement world, that translates into a push for more and more competition to lower prices while still retaining the quality of products and services.

That, theoretically, gives small businesses an advantage. They don’t have the overhead of the larger companies and therefore have more room to compete on price. They are also more agile than the larger companies and can react faster to provide the right mix of expertise and experience needed for military programs, which are themselves looking to be more nimble in providing more innovative solutions for their warfighters.

Congress is also putting more pressure on government overall, and the military in particular, to increase its levels of procurement from small businesses. In the annual National Defense Authorization Act it passed in late 2014, it included several provisions aimed at just that, to make sure that the goal of committing 23 percent of overall federal contracting to small business becomes a regular feature, and not the occasional triumph.

For one, Congress included language specifically discouraging the kind of bundling of multiple contracts that had given large contractors an advantage in winning business. Another now makes agency leaders directly accountable for meeting their organization’s small business contracting goals.

That adds yet another incentive to increasing small business purchases in the military. Senior executive service members who head up acquisition programs have for several years already been evaluated each year on the way they drive small business goals.

The Air Force’s long-term strategy calls for “strategic agility” in all of its acquisition activities, and the Air Force Acquisition Enterprise directive calls for its procurement force to become the most agile and effective in the entire government.

While NETCENTS-1 had both large and small business contract holders much of the small business opportunities were at the subcontracting level, admitted market researcher Deltek, which has closely followed the evolution of NETCENTS.

But “NETCENTS-2 created significant opportunities for small businesses by creating separate vehicles similar to (the GSA’s) Alliant unrestricted and small business contracts,” analysts there said in emailed comments. “This was directly in line with the Air Force’s strategic initiative supporting small business goals.”

All the small business only contracts have the same scope and coverage as those competed as full and open, with small business specialists in the NETCENTS-2 program office reviewing all acquisitions over $10,000 at the task order level.

When it first published the Small Business Improvement Plan (SBIP), the Air Force didn’t shrink from how poorly it had done in previous years, even while legal mandates were in place to boost small business opportunities.

Although small businesses continue to “serve superbly,” the Air Force said, the service’s small business prime contract award rate had declined sharply prior to the launch of the SBIP. Given declining budgets, it said it needed to re-examine the way it does business in order to increase small business prime and subcontracting opportunities.

In NETCENTS-2, that has led to some specific pro-small business activities that can be leveraged. For the Products non-set aside category, for example, decentralized contracting officer outside of the main NETCENTS program office can, at their discretion, invoke a fair opportunity exception and set aside order to small business vendors as long as they meet FAR Part 19 eligibility requirements.

In the Application Services and NetOps categories, for anything over the small business only ceiling of $150,000 the ordering office conducts market research to see whether or not there is a reasonable expectation of receiving offers from at least two small business companion contracts. If that’s indicated, then the task order is to be competed in the Small Business Companion contract pool of vendors.

Also, all of the vendors on NETCENTS-2, outside of the small businesses themselves, had to include a small business subcontracting plan as one of the requirements for them to be get a NETCENTS-2 award. A formal record of all the reviews of acquisitions over $10,000 has to be included with each task order contract.

The Air Force Small Business Office is making a concerted effort to reach out to all of the services’ acquisition force to emphasize this push to include more small business participation.

In a May 2015 visit to Hanscom AFB, for example, Mark Teskey, the Air Force’s Small Business director, told program managers, engineers and contracting airmen that boosting small business use is “all about developing our industrial base and creating competition. Simply put, small businesses are key to driving (that) competition.”

Not all programs are suited for small businesses, he said, but where agility and innovation and both required, small businesses are generally nimbler than big companies and can react faster when changes are needed.

For the Air Force, promoting small business doesn’t necessarily stop at the borders of its own programs such as NETCENTS-2. Though that contract will no longer provide engineering services to go with the products and solutions it does offer, it is passing that off to other government contracts that do emphasize small business use.

In December 2013, for example, the Air Force signed a Memorandum of Understanding with the GSA to use its OASIS Small Business contract to procure complex professional services.