If you really want to increase small biz participation, increase the use of Section 845 Other Transactions Agreements. It's a great way to encourage non-traditional small biz participation, eliminate a lot of DCAA accounting issues, and keep innovation flowing.
The ones my company has been involved in have been very successful.
Also, expand the OTA to allow for manufacturing as well as prototyping.
Moving away from DFARs-based procurement vehicles would REALLY make it easier for small biz to participate.