As a result of sequestration, either military force size will be preserved or the Defense Department will invest in modernization.
“It’s either one or the other. The budget is not going to support both,” said Joseph Misanin, deputy director of the Department of Defense Office of Small Business Programs. Misanin spoke Tuesday at Navy Gold Coast, a U.S. Navy small business procurement event.
The direction is becoming clear, Misanin said, and it’s modernization over force size.
The immediate impact of sequestration is lost revenue, which means less money for contract awards and subcontracts, Misanin said, adding that it’s unclear exactly where the cuts are going to occur.
Misanin is responsible for the Small Business Innovation Research (SBIR), Small Business Technology Transfer, Mentor-Protégé, and Indian Incentive programs.
The SBIR program is structured in three phases, which award small business proposals for research and development.
“We’ve lost on that program about $100 million, 8 percent as a result of the sequester. If you do the math, roughly translated, let’s say about $1 million for Phase II — you’re talking about 100 Phase II opportunities that were vaporized because of sequestration,” Misanin said.
Misanin said small business numbers are tracked weekly, and in the past two weeks those contracts have accelerated.
The good side to all of this, Misanin said, is that there is an “unprecedented” emphasis on small business and support to small business, especially in technology innovation. He said that small businesses involved in technology and innovation are “in a good space,” even though there are budget issues.
“The amount of money out there is clearly going to go down. I think there is enough momentum in there to keep pushing small business and small business initiatives forward as we go forward,” Misanin said.
“I believe all this emphasis exists because we want to re-create bigger wins — bigger wins that impact the economy as a whole. Because our ability to generate military power depends solely on the economic power of the country. So the more money in revenue the country can generate, the more is available for the Department of Defense to build capabilities,” Misanin said.
Companies like Qualcomm (Nasdaq: QCO) are success stories that SBIR is trying to reproduce through small business programs, he said.
“If we can figure out the secret sauce to do more of that, we would be well on our way to economic recovery,” Misanin said.
Large companies are starting to get on board with innovation and are using small businesses as a source for innovation to gain competitive strategy against other companies, he said.
Misanin also discussed initiatives for small businesses, including a better buying power initiative and work force development.