procurement budget shrinking by 40 or 50 percent. In fact, the procurement budget had returned to the same high level of the early 1990s, with a significantly smaller number of contractors.

It is unrealistic, he affirmed, to expect small businesses to compete with the remaining large systems integrators, except “for bits and pieces of inputs into the systems projects.” He concluded that the faults of the DoD procurement system would not be solved simply by the SBIR program, but would require further analysis. “The competition issue is a real one,” he said, “and ought to be considered. The size and configuration of the defense industrial base is an issue of national importance, and I don’t think that relying on SBIR to provide competition at the margins is going to fix it.”

Richard Carroll said he did not disagree with Dr. Flamm’s general statement—that the SBIR could not be the only strategy for invigorating the procurement system—but he reaffirmed his view that SBIR companies can provide significant competitive pressures against large companies. He recalled the case of IBM, which misread the competitive pressure of Microsoft’s operating system, and reaffirmed the importance of creative transformation and the role of small businesses in bringing it about.



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