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Wittman: It’s time for Congress to bring back ‘Defense Valley’
Washington, September 28, 2022
Tags: National Defense
We find ourselves at an unprecedented time in history — one that demands material progress in transitioning critical commercial technology into the U.S. Department of Defense.
As the largest ground war since World War II rages on NATO’s borders—a war to which the United States has already committed $15 billion in security assistance to Ukraine at the time of writing—our own once unparalleled defense industrial base is lagging in the global competition for the adoption of emerging technologies.
Yet, scores of emerging national-security-focused technology companies are quietly strengthening Ukraine’s ability to navigate the operational environment, for far fewer dollars than governments are expending in the same pursuit.
Congress must ensure that our warfighters gain the most value possible from government and private sector technology development. Unfortunately, it is still challenging for companies to work with DoD due to years of unrealized reform proposals.
This issue is becoming acute. Existing DoD systems and process do not allow the Department to take full advantage of advancements derived from private investment in startups outside of the traditional defense supplier ecosystem. DoD must become a better buyer and customer of commercial products; one that understands industry incentives and market drivers.
I recently traveled to California to discuss and learn what DoD’s current roadblocks mean for our national defense with key stakeholders, including the Silicon Valley Defense Group, a nonprofit that connects the founders, capital and ideas that are driving promising techno-security developments with DoD. Like SVDG, I am invigorated by the bipartisan support for exploring how dual-use technologies and private capital will advance a broad mandate for defense innovation.
I am committed to finding solutions—the U.S. remains the most innovative country in the world, powered by its private sector, yet DoD is not taking advantage of the incredible innovation ecosystem at its disposal. And what has become abundantly clear in recent years, is that it will never do so unless Congress holds the Department accountable through consistent oversight. It is imperative that the 118th Congress step up and take the lead, leveraging its unique authorities and critical oversight mission to drive the development of cross-cutting relationships between startups, investors, and the defense ecosystem.
Silicon Valley’s earliest focus was on pioneering defense technology, and Congress must reinvigorate this partnership to meet 21st-century challenges. To this end, I propose three areas of focus for the 118th Congress to rebuild a “Defense Valley” that supports and promotes innovation to advance our national defense.
Planning, Programming, Budgeting and Execution
PPBE is the framework and methodology by which DoD allocates resources, resulting in an annual defense budget request. Developed 60-plus years ago when DoD could still largely dictate technology markets and trends, today it is woefully anachronistic.
A new model is required; one that marries agility with reimagined incentive structures for risk-tolerance, innovation, creativity, and fiscal responsibility. I am encouraged by the thoughtful appointments to the newly-formed Commission on PPBE Reform, and I eagerly await its findings and recommendations, particularly in such areas as the ‘color’ of money, and ‘use-it-or-lose-it’ funding, all of which are inflexible, outdated components of a process that no longer serves DoD’s need for agility and speed.
Small Business Innovation Research Program
The SBIR program is a conceptually useful but practically challenged acquisition mechanism for procuring innovative technologies. Despite being promoted as “America’s Seed Fund,” the program is not designed for startups that want to scale rapidly.
Restrictions, like limiting entrants to companies with less than 50% VC equity-ownership, create a high barrier to entry for startups that have already relinquished ownership stakes as they pass through rounds of funding. Further, some companies are granted multiple awards without commercializing or scaling into programs of record—compounding the program’s challenges.
Acquisition mechanisms reforms have a role to play in fueling defense innovation but must be implemented in ways that further that outcome. To that end, I recommend: eliminating the 50% restriction on institutional investment equity-ownership to compete for SBIR grants; exploring effective incentives for companies to focus on progressing and scaling from the early-stage research and development SBIR grants they receive; and aligning incentives between public and private stakeholders to explore a new program to access and scale private sector R&D for DoD purposes, but specifically focused on high-growth startups.
Defense Innovation Unit
Created in 2015 and called “America’s most promising effort to bridge the divide between pressing national security requirements and commercial technology,” DIU is tasked with accelerating DoD commercial technology adoption through partnership with cutting-edge startups.
Born as an experiment, DIU has succeeded beyond expectations, beginning over 175 projects, and transitioning capabilities from 48% of those projects across DoD. Leveraging relationships in Silicon Valley and other tech and VC hubs across the country, DIU realized over $100 billion in R&D for critical emerging technologies—proving the viability and efficacy of its “Fast Follower Strategy” for DoD and American taxpayers. But DIU’s funding profile in recent years does not match its proven successes nor its recent Congressional validation.
Moreover, whereas DIU once reported to the Secretary of Defense (SecDef)—signaling its importance to the Department’s success—it now sits under the Under Secretary for Research and Engineering, a component focused on prototyping versus scaling, thus significantly decreasing its organizational effectiveness.
Between manpower shortages, degraded contracting authorities, and indefensibly low funding, DIU is not positioned to make the difference on which our national security depends. To that end, I recommend: realigning DIU to report directly to the SecDef; correcting the unsatisfactory FY23 President’s Budget request; and ensuring that DIU receives stable and adequate future funding befitting of its critical role.
The Pentagon has proven that the only way it will begin to adopt the necessary best practices in acquisition and procurement is if Congress meaningfully holds it accountable for doing so. The 118th Congress must act to empower DoD decision makers prepare for long-term strategic competition.The sooner Washington realizes that the U.S. is losing its competitive edge against China and that “business-as-usual” will unequivocally lead to defeat, the sooner we can course correct.