The United States faces unprecedented national security and economic challenges. Strategic competitors seek to displace the U.S. military as the world’s preeminent force, the COVID-19 pandemic and impacts from climate change have exposed fragility in critical supply chains, and consolidation in the defense marketplace has undermined the competition and innovation needed to provide the best systems, technologies, services, and products to support the warfighter. These vulnerabilities especially threaten capital-strapped small businesses, which represent a majority of prime- and sub-tier defense suppliers. This Small Business Strategy outlines strategic objectives that will enable the Department of Defense (DoD or the Department) to expand and strengthen its relationship with small businesses and better leverage their capabilities to help solve the Department’s and our Nation’s most complex challenges.

It is imperative for the Department to focus on small business. These innovative companies account for 43 percent of all high-tech jobs in the U.S. and generate sixteen times more patents than large firms. Small businesses spur innovation, represent most new entrants into the Defense Industrial Base (DIB), and through their growth represent the next generation of suppliers with increasingly diverse capabilities.

Small businesses are agile and often can implement change more quickly than larger firms. In Fiscal Year (FY) 2021, small businesses made up 73 percent of all companies that did business with DoD and 77 percent of the research and development (R&D) companies that did business with DoD.1 One high-profile example is Moderna, a former small business and Defense Advanced Research Projects Agency (DARPA) grant recipient that produced millions of mRNA vaccines to help fight the COVID-19 global pandemic. Without small businesses, the vital engine of growth for the United States industrial base would cease to exist.