There is a category of defense program where the largest contractors in the industrial base are not the best answer. That category is expanding.
The expansion is not driven by sentiment about small business or set-aside policy — it is driven by a set of structural conditions in the current defense acquisition environment that favor small, technically capable manufacturers for specific types of work. Program offices that understand what those conditions are will write better requirements, run more competitive procurements, and get better operational results.
What Changed in the Acquisition Environment
Three changes to the acquisition environment over the last decade have meaningfully altered the competitive dynamics between large primes and small manufacturers.
Other Transaction Authority became a primary vehicle. Section 815 of the NDAA for Fiscal Year 2016 expanded OTA authority for prototype projects. Section 4022 of Title 10 now authorizes follow-on production contracts for successful OTA prototypes without full and open competition. This created a direct path from prototype demonstration to production contract that bypasses the traditional FAR-based competition that large primes are optimized to win. Small manufacturers who can demonstrate working capability — not paper proposals — gain a structural advantage in OTA environments that they do not have in traditional competitive acquisitions.
SBIR became a real commercialization path. The Small Business Innovation Research program has historically produced technology that was commercialized only inconsistently. Recent changes — including expanded Phase II funding, direct-to-Phase-II authority for agencies, and improved transition authorities — have made SBIR a more viable path from early-stage development to program-of-record. Small manufacturers who have built technology on SBIR funding are entering the acquisition pipeline with validated capability and documented government investment that program offices can reference in their acquisition strategy.
NDAA supply chain requirements created a new qualification barrier. Sections 848 and 889 of the NDAA imposed supply chain restrictions that eliminated the cost advantage large primes previously had from sourcing components from Chinese manufacturers. A prime contractor with a lower bid built on NDAA-prohibited components is not a lower bid — it is a compliance problem. Small manufacturers who built NDAA-compliant supply chains from the beginning, rather than trying to retrofit them, have a qualification advantage that is structural rather than temporary.
What Primes Are Not Good At
Large prime contractors have specific organizational advantages: program management scale, deep customer relationships, classified facility access, and the financial capacity to absorb large program risks. For certain types of programs — major weapon systems, large logistics contracts, classified platform development — those advantages are determinative.
They are not determinative for a different category of programs: rapidly evolving technology areas where operational requirements are changing faster than large organizations can adapt their development processes, where NDAA supply chain compliance requires deep sourcing accountability that large organizations with complex global supply chains cannot easily provide, and where the cost and timeline of large program management structures exceed what the mission actually requires.
Autonomous systems. UAS. AI edge inference on operational platforms. Electronic warfare training aids. Counter-small-UAS systems. These are capability areas where the technical development cycle is measured in months, not years — and where the organizations winning the most interesting work are often not the organizations with the largest defense revenues.
The Contracting Officer’s Perspective
Program offices that have run requirements through large primes and experienced eighteen-month timelines to produce a demonstration unit that a small manufacturer built in eight weeks are writing their next requirements differently.
The specific mechanism varies. Some are using OTA. Some are writing SBIR solicitations. Some are using IDIQ vehicles with small business set-asides. Some are disaggregating requirements that were previously bundled into large prime contracts and letting small manufacturers compete on the components where speed and technical depth matter more than program management scale.
The common thread is recognizing that the problem they are trying to solve — getting a capable, compliant, operationally validated system into the field — is sometimes better solved by a small manufacturer with a working prototype than by a large prime with an impressive proposal.
What This Means for Requirement Writing
Program offices that understand the current acquisition environment will write requirements that keep this category of work accessible to the organizations best suited to deliver it.
That means avoiding requirement aggregation that bundles technically distinct work into packages sized for large primes. It means specifying technical outcomes rather than process compliance elements that large organizations satisfy through documentation volume rather than technical performance. It means treating demonstrated operational capability — working systems that exist, not engineering models — as a qualification criterion rather than an afterthought.
It also means engaging the market before the requirement is written. The organizations producing the most technically capable systems in the current UAS, autonomy, and AI edge inference market are often not the ones with the largest procurement offices or the deepest government relations teams. Pre-solicitation engagement with the broader vendor ecosystem, including small manufacturers who may not have responded to previous solicitations, will produce better-informed requirements and more competitive procurements.
The Institutional Resistance
The shift toward small manufacturers for technically advanced capability areas faces predictable institutional resistance. Large primes have deep relationships with program offices built over decades of program support. Contracting officers have established processes calibrated to large prime contracting patterns. Program managers take career risk on decisions that deviate from established acquisition norms.
None of that resistance is irrational from the perspective of the individuals involved. But it is producing a systematic preference for familiar contractors over technically superior solutions in a category of defense work where the technical solution is the determinative factor.
The program offices working around that resistance — using OTA authority, running competitive SBIR solicitations, disaggregating requirements — are getting better capability into the field faster and at lower cost. The pattern is documented in GAO assessments, service-level acquisition reform initiatives, and in the operational experience of units that have received equipment through both pathways.
The question for program leadership is whether their acquisition strategy reflects the structure of the current market — where small manufacturers are producing some of the most capable technology in the defense ecosystem — or whether it reflects institutional habits that were formed when that was not the case.