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"[f]or all procurement actions expected to exceed the $150,000 simplified acquisition threshold, prime contractors are required to make a "best effort' attempt to make use of small disadvantaged businesses, SDVOs, and WOSBs as subcontractors if the opportunity exists under the contract"

My dad has a small software company that sells statistical analysis software. He told me that he often gets buyers from minority owned businesses that exist solely to exploit that regulation. Say BigCorp wants to score a sweet government contract, and they need to use my dad's software. The CEO of BigCorp talks to his buddy at IAmAMinorityCorp and says "We want the Neyer-D Optimal Test Suite from Neyer Software." IAmAMinorityCorp buys the software, then resells it to BigCorp for 2x what they paid, pocketing the difference.

The system is heavily broken. Anyone who thinks otherwise needs to get their head out of the sand or their hands out of my wallet, preferrably both.

The system is flawed.

However, the system also does some very good work by forcing more work into smaller companies. I have had the pleasure of working for two companies doing business with the government. One doing research through the SBIR program, and another just winning contracts as a small business.

On the good side, both of these companies did very good work and didn't do the "IP shuffle" as you described above. In fact, I'd say the biggest impediment to us getting stuff done was either the government moving slow, or some other company we were forced to work with slowing us down. In fact, the kiss of productivity death for any project was getting involved in a project with one of the bigger consulting companies (BAH, Accenture, etc).

On the other side, the title of "woman owned" and "minority owned" are completely taken advantage of at all times. Both companies I worked for were "woman owned", which in practice meant that the wives of the bosses owned the company (or at least some of it), but really didn't take part in anything other than showing up for Christmas parties. I am not aware, however, of any real advantage the "woman owned" and "minority owned" titles got us, though.

In all my experience, the SBIR program was one of the biggest scams around. At the end of project, you only have to produce "proof that you researched" the problem. It's completely ok for you to spend all the money to simply determine that the project is not feasible (i.e. we watched movies all day and did a few google searches during the previews).

In theory, the government would stop giving projects to companies that never produced anything. I personally never saw that happen.

If a company is really on the up and up, the SBIR program could be a great opportunity. However, it's way too easy to game the system.

Mostly true.

Phase I requirements are typically (but not always) that you have to produce a report that you did feasibility research on the problem. Sometimes a working prototype is the Phase I deliverable. Usually Phase II is where the working prototype is and Phase III is a delivered working system (though for larger projects, Phase III is just the prototype or improvements to Phase II's prototype).

Typical payouts for the phases:

Phase I - 75-100K

Phase II - 750K

Phase III - 2 mil

Most of these projects are challenging enough that for 75K, you're not going to be able to deliver much more than a report. Once you factor in overhead, that's about 4-6 man-months.

I agree with you wholeheartedly, though, that it is greatly taken advantage of -- on a very large scale, and the relationship between companies and granting Program Managers is a big, big deal.

There are definitely companies that play the "we'll do nearly anything" open-ended engineering game and pay themselves using Phase I's.

I have seem some legitimately great work come out of NSF SBIRs, which are similar, but quite a different game in many ways from military SBIRs.

I worked for a company writing military SBIRs for 10 months. Worst job of my life, probably. It was also mind-blowing how OK with all of this that most people of all levels of that chain were.

EDIT: formatting, minor content

What you're saying is true.

In a Phase II, the deliverable is normally a prototype. But since it is by definition research, it's expected that some of these projects come against problems that are not reasonably solvable. Therefore, you can fail on your deliverable and have that be completely ok.

I worked for a Woman/Minority Owned Small Business. Believe me, it was the ol'govt'boys network, just at a smaller scale. We had a lady who's job description basically boiled down to being something pretty for our money/government guy to look at.

After $17 million-ish in projects, we produced nothing but a bunch of 'research'. And trust me, there were a few of us developers that really tried to do something useful. Management had no interest in what was produced other than more proposals to get more money. Your bonus/promotion was totally tied to how many proposals you wrote (and this was a software company). Your bonus/promotion had zero to do with how much or how well you wrote code.

Every single time I've come across a WOSB, SDVO, or HUBZone business, it's essentially been a scam, using some technicality to just barely qualify for the program while the contractor is actually run as the standard good ol' boys club that they usually are.

I own a Service-Disabled Veteran Owned Small Business (SDVOSB) and am also a "minority" Hispanic/East Asian female.

From years of experience in Iraq in particular, I believe I am in the minority of small businesses that do not abuse certifying programs like 8(a) for profit in the world of defense contracting.

Yeah, I worked for a small tech company in Illinois whose owner's Asian wife became the owner for the right contracts and who put the minority receptionist in a suit and introduced him as a... president (I think it was) for different state contracts.

Very impressive program.

If you actually try to "undercut these large, wasteful, stupid and taxpayer moneysucking behemoths," you'll have federal policy at your back.

What about the billions of no-bid contracts awarded to the likes of Halliburton? The kind of companies you would be competing with have a revolving door to the freaking whitehouse!

> That concern is exactly why the U.S. Small Business Administration exists.

Good point, it exists and it is a good thing. I see a lot of bids from companies specifically tagged as being those entities. Sometimes they get the contract sometimes they don't.

> winning contractor is required to provide the agency contracting officer with a written plan that establishes a small business subcontracting goal.

So they have to find a way to recruit all their college buddies, cousins and friends. Yes on paper it all looks legit, no doubt, it is the loopholes and what goes around the paper trail that makes the difference.

For example for contract jobs there are written requirements, then there are the real requirements. If you don't know the real requirements (which you find out by knowing so-and-so from back-in-the-day ...) you won't get the contract. When it comes to pick the bid surprise! they made a "best effort" but alas, this other bidder "just happened to guess exactly what we need". Well that other bidder might turn out to be a neighbor who needed a favor returned and so on.