Supply Chains, Small Businesses, and Cyber Compliance
Hint: The answer draws a direct linkage from labor shortages to policy compliance challenges.
Discoveries in a First-Grade Classroom
What have you learned from a first-grader lately? Those who follow me on LinkedIn and Instagram know that I spent part of Veterans Day in our daughter Rachel’s first-grade class. Those who know me well, know that Rachel is the teacher, not a first-grader!
I was invited to come read a book and talk about Veterans Day. Rachel had selected an age-appropriate book, and, to my surprise, had a picture of my last ship command, USS PHILIPPINE SEA (CG 58), up on the large TV screen.
Curious Minds and Ship Questions
When it was revealed that the TV image was a ship that I served on, the questions started rolling.
“Are there dogs on ships?”
“Where do the people go?”
“How old is Mrs. Smith (Rachel’s married name)?”
Then, the commentary from the kids began.
“My uncles were in the military.”
“We used to have four dogs, but now we have three.”
“My brother pushed one of our dogs off the bed; now it walks sideways.”
You get the idea. First graders have lots to say and can’t wait to be called on to say it. Then a seemingly easy question was asked,
“How many people does it take to build that ship?”
I thought for a second and said, well, at the shipyard where that ship was built, there were thousands of workers working together to build a few ships at the same time.
Blank stares from the kids, but one child’s eyes popped wide open. He had previously guessed the ship weighed one million pounds, so he was impressed with the numbers.
We moved on.
The Workforce Challenge in Shipbuilding
I realized after the classroom session that the young boy asking about the workforce was focused on the right problem of our time. It’s now common knowledge in the shipbuilding industry that multiple shipyards are in search of thousands of employees—each!
It’s not just about shipyards, though. Look further to our ever-shrinking industrial base. The suppliers of those shipyards are dwindling before our eyes.
We thought the industrial base was contracting after sequestration, and the uncertainty of defense budgets from 2011-2020 whipsawed stops and starts of major programs. At the time, it was estimated to have contracted by 15%.
The Impact of COVID-19 on Supply Chains
Flash forward to the COVID-19 pandemic, and the supply chain disruptions caused further contraction. In 2021, as much as 5%. From 2020-2022, at least 10%, likely more. The numbers get confusing. Here’s why.
During the pandemic, there was a dramatic upsurge in the number of new-start Limited Liability Corporations (LLCs). In 2022, the OSD Director of Small Business Programs, Farooq Mitha, proclaimed at a DLA conference in Richmond, VA that over 10 million such companies had applied for LLC status. All is well was the undertone.
Far from it.
Academic research confirms the defense industrial base is slightly fewer than 1 million companies, nowhere near the 10 million some imagine. Companies eligible to work within the defense industry are far fewer. When you look even more closely at where the dollars go, the number of companies is far, far fewer than 1 million.
Concentration of Power in The Defense Industry
45 companies receive 50% of all acquisition dollars, and as you might imagine, they are the biggest defense companies in the world.
We don’t have millions, let alone hundreds of thousands, of companies entering the federal space.
Because we make it pretty difficult, and costly, for companies to enter. Accounting and cyber compliance alone are pretty expensive propositions in the federal. We can do better and should do better.
A Proposal for Change
One idea that could help is for the government to pay companies to become cyber-compliant. It is a national security imperative to protect intellectual property and prevent cyber theft. Asking companies to foot this bill that can reach tens of thousands of dollars before revenue starts to trickle is an extra weight that slows entry.
The first grader’s question was prescient. How many people does it take?
More than we have right now. Something has to change. This is low-hanging fruit.
For a copy of my book, Pitching the Big Top: How to Master the 3-Ring® Circus of Federal Sales, and more information on federal sales, visit Capitol Integration.