Armor manufacturer Point Blank, a Delaware Corporation based in Florida, announced yesterday that it has filed a voluntary petition for Chapter 11 reorganization. The Company also announced that it has reached an agreement for up to $20 million of Debtor-in-Possession (“DIP”) financing, pending bankruptcy court approval. The DIP is a loan to help with the restructuring. At the end of Wednesday trading, the company’s stock had fallen to .05 per share.

The company blames the need to file for bankruptcy on “continued expenses associated with legacy issues from former management, and the lack of financing available to the Company given the state of the credit markets.” Those “legacy issues” are that the former CEO David Brooks is under indictment for fraud and the company itself has been under investigation by the Securities and Exchange Commission as well as the subject of a shareholder lawsuit. All told, this costs Point Blank about $600,000 a month on legal fees.

But let’s face it, they grew rapidly to accommodate OTV and IOTV contracts and then they didn’t sustain the same level of work. It happens. Other companies are dealing with issues in their own ways as well. Maybe they can find a small business shill to get them some work under the proposed IOTV Class Waiver.

First off, what is a class waiver? What you need to know is that it is a determination made between DoD and the Small Business Administration to make a change to what types of businesses may provide goods or services to the government. In this case they are considering a Waiver of the Nonmanufacturer Rule, allowing small businesses who do not manufacture the IOTV to bid on providing them. Normally, a business has to manufacture 51% or more of an item to be the prime contractor on a project and they can then sub the remainder out to other businesses. This normal way of doing business is perfectly acceptable and assists a small business to take on a project larger than what they have the infrastructure to support.

However, I am a bit concerned about the precedence such a waiver might make. What I mean by this is that a decision to allow non-manufacturers to bid on providing goods as a small business could facilitate a win by a company consisting of just one person, with virtually no overhead, teamed with a large company who does all of the work. The preponderance of businesses in America are small businesses and this would essentially undermine the small business set aside. If it looks like it works here, what is to stop them from applying it more liberally? Small businesses are the backbone of the tactical industry and are the fountainhead from which much of the innovation springs. They must be compensated for their hard work and dedication to the military through the awarding of contracts.

If the concern of the federal government is that no small businesses are manufacturing the IOTV this could be remedied by awarding more companies contracts. As it is, the most recent round of awards took a long time and caused upheaval in the armor industry while companies kept workers on staff in anticipation of an award that never came. Award more contracts to both large and small businesses, and large companies won’t need to lobby to alter a system that works. Note to Contracting Officers; there is more than one company in the armor business. Spread the wealth.

Here is the notice on FedBizOps. I encourage businesses who would be affected by such a decision to contact the POC and provide feedback.