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Summary of "Improving the Air Force Small-Business Performance Expectations Methodology"

Core Content

This report evaluates the Air Force's current methodology for setting Performance Expectations (PE) for small-business use and provides recommendations to improve its accuracy. The Air Force aims to increase small-business use to meet the federal goal of 23 percent of all eligible contract dollars. However, in 2013, its actual small-business use was 14.5 percent, falling short of its own 15.0 percent target.

The methodology is based on the concept of "markets," defined by combinations of NAICS (North American Industry Classification System) codes and PSC (Product or Service Codes). It identifies Accessible and Inaccessible markets based on the percentage of small-business spending relative to total goaling dollars. Accessible markets are those where small-business spending is at least 1 percent, while Inaccessible markets have less than 1 percent.

The methodology also identifies High-Oportunity Target (HOT) Spots, which are markets where DoD small-business use (excluding the Air Force) is more than double that of the Air Force. These are areas where the Air Force has significant potential to increase small-business use.

The report recommends refining the methodology by introducing "More Accessible" and "Less Accessible" market classifications, incorporating budget categories, and identifying "Saturated Markets" where small-business use is already high (at least 90 percent), limiting further growth. It also suggests comparing the Air Force's spending with the Army and Navy, rather than with the entire DoD, to better identify relevant trends and opportunities.

Main Points

• Federal Goal: The federal government aims to award at least 23 percent of all eligible contract dollars to small businesses.
• Air Force Shortfall: In 2013, the Air Force's actual small-business use was 14.5 percent, below its target of 15.0 percent.
• Performance Expectations (PE): The Air Force uses a methodology to set annual PE targets for MAJCOMs and PEOs, based on past spending patterns and potential for growth.
• Market Classification: Markets are defined by NAICS/PSC combinations. Accessible markets have at least 1 percent small-business use, while Inaccessible markets have less.
• HOT Spots: These are markets where DoD (excluding Air Force) small-business use is more than double that of the Air Force, indicating potential for improvement.
• Expiring OTSB Contracts: The methodology focuses on expiring contracts with other-than-small businesses (OTSB) that could be shifted to small businesses.
• Refinements Recommended:
  • Use "More Accessible" and "Less Accessible" instead of "Accessible" and "Inaccessible."
  • Incorporate budget categories to better tailor performance expectations.
  • Identify "Saturated Markets" where small-business use is already high.
  • Compare with Army and Navy rather than the entire DoD to better reflect relevant purchasing trends.

Key Information

• Methodology Overview: The Air Force's PE methodology is an eight-step process, starting with past performance data and moving toward identifying potential areas for improvement.
• Data Sources: The methodology uses data from the Federal Procurement Data System-Next Generation (FPDS-NG), which includes all DoD goaling dollars.
• Challenges Identified:
  • Some industries are too broadly defined to easily identify areas for small-business use improvement.
  • The current methodology does not account for budget categories, which can affect the compatibility of small-business procurement.
  • The Air Force needs to continue examining other aspects of its purchasing that influence small-business use, such as breaking out components from large weapon systems.
• Recommendations:
  • Introduce "More Accessible" and "Less Accessible" market classifications.
  • Use industry/PSC/budget-category groupings for more precise identification of opportunities.
  • Exclude Saturated and highly consolidated markets from the calculation of Performance Expectations.
  • Compare with Army and Navy to identify relevant trends and lessons.

Structure

• Introduction: Background and purpose of the report, including the federal small-business procurement goal and the Air Force's initiative.
• Current Methodology: Details of the eight-step process, including the identification of markets, HOT Spots, and expiring OTSB contracts.
• Small-Business Spending Analysis: Examination of spending by MAJCOM and PEO, industry, PSC, and budget category.
• Refinements to the Methodology: Recommendations to improve accuracy and effectiveness.
• Conclusion: Summary of findings and the importance of continuing to refine the methodology.

Conclusion

The Air Force's current Performance Expectations methodology provides a useful framework for setting small-business use goals. However, it can be further refined to increase accuracy and effectiveness. The recommended changes include better market classification, incorporation of budget categories, and exclusion of saturated markets. These refinements will help the Air Force more effectively identify areas where it can increase small-business use and achieve its procurement goals.