DoD Must Move Faster to Leverage Commercial Technology

One of the defining features of our New Cold War with the Chinese Communist Party is that, perhaps even more so than during the Old Cold War with the Soviet Union, economic and technological competition is front and center. In theory, this plays to one of our greatest sources of national advantage: the U.S. commercial technology sector. In practice, when it comes to the allocation of resources and programs, DoD is habitually under-invested in commercial technology and more reliant on the capabilities it develops alongside traditional defense contractors. As a result, DoD is failing to leverage the full breadth of tools at its disposal to tap into the U.S. innovation ecosystem and ensure American technological dominance for decades to come.

Where the Department is looking at capturing private sector innovation, it is doing so in the wrong places. The Pentagon directs more than $2 billion annually toward the Small Business Innovation Research (SBIR) program, which is targeted at companies with less than 500 employees. Last December, Secretary Austin called for “doubling down” on these investments in order to better help recipients bridge the so-called “valley of death” between prototypes and final products that end up in warfighter hands.

The problem is that while SBIR funding can help the Department meet niche defense needs, it is a poor fit for fostering innovation at scale. With tranches of grants usually totaling a little over $1 million, SBIR funding tends to be spread too thin across too many recipients. The result is that only about 10% of SBIR-funded companies ultimately end up producing new warfighting capabilities. While the Biden Pentagon is seeking to raise the ceiling for SBIR awards in the hope of placing bigger bets on promising technologies, even with more money, the defense-specific nature of SBIRs—not to mention growing questions over China’s ability to acquire the resulting technology—makes them unlikely to lead to transformational change.

Instead of doubling down on SBIR programs, to modernize faster and build a stronger defense industrial base, DoD must focus instead on expanding its adoption of commercial technologies by an order of magnitude. In recent testimony to Congress, outgoing Defense Innovation Unit Director Mike Brown outlined a strategy for how the Pentagon can gain rapid access to commercial technological innovation. Brown’s “Fast Follower” strategy has at least three components.

First, the Pentagon needs to think outside the box when it comes to acquiring commercial technology. Rather than the traditional “program of record” model, which effectively locks the Department into set requirements and a single vendor, the Pentagon should opt for a “capability of record” approach which would cut across all the services and allow the Department to continually assess and purchase commercial technology. Establishing a capability of record for key commercial technology areas such as UAVs or satellite imagery would empower the Pentagon to cycle between vendors on an as-needed basis to best harness commercial innovation to meet the Department’s needs.

Second, DoD must overhaul its existing requirements process when it comes to commercial technologies. Currently, onerous requirements limit competition while mandating an inflexible multi-year budgeting process. Instead, the Pentagon should adopt a commercial-unique requirement system that substitutes detailed specifications for products that already exist in the commercial market with a much simpler demonstration of need.

Third, the Department needs to better utilize existing tools that can accelerate the identification, prototyping and adopting of commercial technologies. The Defense Innovation Unit and Special Operations Command both leverage Commercial Solutions Openings, which promote open competition across the private sector, both at home and in allied and partner nations. This process relies upon Other Transaction Authority and enables contract awards as quickly as three months. The Defense Innovation Unit alone has transitioned 43 capabilities to solve real-world problems. As an added bonus, this investment often leads to a multiplier effect where each dollar awarded in a prototype contract ultimately results in venture capital infusions that replicate the original award many times over.

With storm clouds gathering in both the Indo-Pacific and Europe, commanders need capabilities that can be fielded now—not in a decade. Dual-use technologies offer solutions that can be in the hands of our men and women downrange in just one or two years. It is long past time for the Department to better harness the close-to $400 billion in commercial venture-backed research and development investment to support our national defense, and the Fast Follower strategy offers a promising path forward. While in some cases DoD will need new authorities to take advantage of this ecosystem, in others, the Department already has much of what it needs to work with venture-backed startups that want to support the mission. With an increased tolerance to leave its traditional comfort zone, the Department can move quickly, foster innovation, and better benefit from the commercial technology sector that serves as one of our enduring sources of national advantage.

Congressman Mike Gallagher represents Wisconsin’s 8th District in the U.S. House of Representatives, where he serves as ranking member of the Military Personnel Subcommittee of the House Armed Services Committee and as a member of the Transportation and Infrastructure Committee. He served as co-chair of the congressionally mandated Cyberspace Solarium Commission. Prior to taking office, Congressman Gallagher served for seven years on active duty in the United States Marine Corps, including two deployments to Iraq. He earned a bachelor’s degree from Princeton University, a master’s degree in security studies from Georgetown University, a master’s degree in strategic intelligence from the National Intelligence University, and a Ph.D. in international relations from Georgetown.

[i] Pitchbook data retrieved May 10, 2022