Yes, we do need a better procurement model, especially for startups and small businesses. The compliance issue is also a killer, I recall many instances where I was put on the horns of a dilemma - choose between what the government needed and what the compliance regime demanded. Either way, someone was going to be unhappy.
Returning to procurement issues, small business set asides, 8A programs and mentor-protégé programs are intended, ostensibly, to mitigate some of the procurement challenges Phil mentioned in his post. In my experience, those programs just added more administrative burden and were a time suck. I'd do lots of meetings with the government and corporate representatives who ran the programs and no meetings with anyone who actually made purchasing decisions. I can see how those programs could work for small, but established, businesses competing for known requirements or products - especially if you can afford to dedicate half of one of your people solely to working those programs. But when you're bootstrapping a business designed to be innovative and different, it doesn't work well.
I ended up abandoning all those programs and focused on establishing good relationships with decision makers in government and, based on their demand for our services, worked the contracts piece from the inside out, learning as I went.
Rather than adding more programs on top of the existing administrative government burden, a more elegant solution would be to just ease the burden. In other countries where I've done business, there is an $80,000 threshold for going to RFP. Anything less than that simply requires that the government gets three quotes. This allows the government to test new ideas, and new businesses, in a low risk manner. For businesses, it allows the opportunity to establish a track record and relationships with the people in government who need problems solved. No contracting officer, and not many businesses, would want to go through the pain of the USG contracting system for something as 'small' as an $80k contract.
On the flip side, there are some advantages for small businesses in a system that implicitly encourages larger procurements. I'll explore that a little further in my next post.
Whatever happens, we need a model where small businesses can gain access to the government market and innovate but also have opportunities to partner equitably with large firms that have the ability to scale innovative solutions rapidly.