Strengthening the DoD’s Innovation Ecosystem through Structured Collaboration across Service Branches

Because emerging defense technology is being applied in critical ways across the globe, the United States needs to consistently invest in and scale the capabilities that would make the most impact in future conflicts. To address the problems hindering the Department of Defense (DoD) from modernizing its portfolio of defense technology, the department should build a pilot program to involve the warfighter early in the diligence process to validate and qualify appropriate emerging technologies under consideration for capital investment.

In response to these concerns, the DoD created the Office of Strategic Capital (OSC), which focuses on leveraging the United States’ comparative advantages in capital markets and economic competition to raise private capital for national security technology supply chains. To accomplish this, OSC partnered closely with the DoD’s Defense Innovation Unit (DIU), which focuses on transitioning relevant prototypes to field capabilities. DIU carries out this mission through follow-on, multi-year production contracts listed on the General Services Administration (GSA) schedule (i.e., Production Other Transactions, Indefinite Quantity Contracts) for end users. From 2016 to 2022, DIU has successfully transitioned 52 technology prototypes into follow-on contracts equating to $4.9 billion in DoD contract dollars. Of those 52 prototypes, 16 have transitioned into a program of record or permanent program, which will provide sustained funding for a specific technology capability.¹ This proposal does not advocate replacing DIU’s model, but instead building a collaborative pilot rollout with innovation units.

OSC faces two issues that are stifling the DoD’s ability to continue to rapidly scale emerging technology that will impact the warfighter’s effectiveness.²

The first is the antiquated and multi-stage funding process required for early-stage defense companies to obtain capital through Small Business Innovation Research (SBIR) grants. SBIRs provide start-ups with capital through a process of phase-based evaluations and assessment intended to identify companies with viable products for DoD and private sector use-cases. Unfortunately, the SBIR process requires companies to rapidly prototype with limited funding to show evidence of feasibility, technical applicability, and commercialization potential. OSC aims to fix this problem by partnering with the Small Business Association to create a Small Business Investment Company focused on raising private capital to provide early-stage companies with more funding in order to survive the SBIR’s “valley of death,” meaning lack of cash during the review process.³ In most cases, the early phases of the SBIR process do not allow for feedback or validation from the warfighter, and this diminishes the efficacy of the start-up’s solution. Instead, the SBIR process should involve the warfighter in the application testing of the technology being evaluated to better qualify the merits of the core offering being evaluated.

The second issue is that the current diligence and evaluation process for assessing if a start-up’s technology fits a DoD use-case is limited to the OSC and the DIU. While the two organizations have made progress, there is room for improvement and opportunities to involve the warfighter in some proposal evaluations. Since OSC’s staffing headcount is low, it has partnered with DIU—which employs subject matter experts, reservists, and ex-corporate defense professionals who understand how to evaluate product fit for a specific use case presented in a request for proposal—to accelerate and expand its efforts to evaluate and transition more companies to more permanent funding solutions. While DIU has led 52 companies to win transition awards out of the 1,700 proposals received in 2022, representing $4.9 billion in contract dollars, the question of how OSC will drive greater impact remains.⁴ Successfully investing in the right innovative defense technologies can be achieved by not only widening the investment pool, but also reassessing how the warfighter will use the technology to better accomplish the mission.

To address these issues, the OSC should build a pilot partnership with a few innovation components across service branches to duplicate efforts in evaluating proposals for funding from emerging technology companies. Expanding on these efforts by utilizing the expertise of adjacent units (the Army Futures Command, AFWERX [Air Force work project], and Marine Innovation Unit) could lead to an effective duplication of effort. This would allow more opportunities for the relevant end user (airman, soldier, marine, etc.) to test and validate an emerging technology in a field environment. Field testing solutions and product offerings would also allow warfighters to make a stronger investment case for a product and provide testimony to evaluators at OSC and DIU to further validate the need for the DoD to award a contract.

A greater capital influx from OSC combined with DIU’s proven model of prototype evaluation is a great start to enhancing the DoD’s innovation arm. The creation of OSC aims to help break through the draconian blockers of outdated legacy defense prime contracts, gated GSA schedules, lack of internal program sponsors, and other issues that have hindered evolution. Relying on the combined OSC/DIU model and allowing for innovation units to create a pilot program could prove to be beneficial in the long run.

It will be critical that the warfighter be involved, hands-on, early in the diligence process, to provide validation of a prototype’s efficacy. Adopting this proposal or a similar one will be of paramount importance in funding the right emerging technology solutions to enhance the nation’s security.

About the Author

Sam Pandey is an Army Innovation Officer assigned to the 75th Innovation Command in the U.S. Army Reserve. In this role he has served as a tech scout interfacing with venture capital, launchpads/accelerators, and academia to source start-up offerings to enhance capabilities for the warfighter. He has served as a mentor/advisor for early-stage defense tech start-ups through XTech and Techstars Starburst Accelerator across artificial intelligence and machine learning, cyber, cloud/infra, and pharma/biotech. Currently his team is focused on use cases to improve processes across periodic health assessments, the Human Resources Command, and recruiting. Outside of his Army service, Sam works on the security portfolio of products for HashiCorp and is a task force leader for Veterans for All Voters.

Acknowledgements

Thank you to the soldiers of the 75th Innovation Command and mentors across the DoD and private sector who provided guidance on this pitch. I am also grateful to the CNAS team for allowing me to write and publish this piece, and for their support.