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Making the case for commercially successful tech

October 3, 2020 / Dcode

Note: this article was originally published at DefenseNews

Despite the Pentagon’s efforts to develop advanced technology to strengthen national security and stay competitive, barriers remain, keeping much of the most promising emerging technology out of the government.

Pockets of success do exist; Air Force acquisition in particular evaluates dual-use technologies through AFWERX and investment arm AFVentures. To truly enhance our national security, however, more needs to be done to fund companies that have proven, viable emerging technologies.

Most nontraditional companies with proven technologies that don’t have national security experience already work with Fortune 500 companies and in highly regulated, complex industries. The problem is that most of these companies are still overlooked for collaboration with the government and the Pentagon.

In an effort to leverage our nation’s commercial innovators, the Small Business Innovation Research program requires federal agencies with large research and development budgets, like the Department of Defense, to set aside funds for small businesses. But the government’s definitions for eligible small businesses can disadvantage tech companies that have already succeeded in the private sector.

The SBIR program has been successful in many ways, but most awards go to companies already focused on the government. Robert Rozansky and Robert D. Atkinson wrote that nearly a fifth of all SBIR awards go to companies that have already won 50 or more times, evidencing failure to reach the most promising technology companies.

A 2019 report from the Alliance for Digital Innovation claimed that the federal government’s failure to adopt commercial technology has wasted $345 billion over the past 25 years. And a report from Govini noted that approximately 59 percent of DoD research and development funding is concentrated in the top 10 vendors, limiting innovation. As calls for public sector innovation remind us, the DoD needs the most advanced technology from the private sector.

There are critical steps the DoD should take to fix this problem.

First, the government should reform the SBIR program and dedicate new, flexible resources to find and utilize viable, commercially successful tech companies.

The National Defense Authorization Act for fiscal 2020 provides additional SBIR flexibility for small businesses more than 50 percent owned by venture capital. But the DoD has yet to fully promulgate this new flexible authority and is missing an opportunity to work with proven, VC-backed companies.

The Small Business Administration should adjust the eligibility standards for the SBIR program to incentivize growth and, more importantly, take advantage of companies with more venture funding and a proven record of past performance. The number of repeat winners indicates that the SBIR program is not casting a wide enough net.

Second, the DoD should further streamline acquisitions, reward acquisition executives who move fast, and expand flexible programs such as AFWERX, SOFWERX and the Defense Innovation Unit. Mike Madsen, deputy director and director of strategic engagement of DIU, said: “What [DIU has] represented is a lowering of those barriers to entry, making it easier for those leading-edge technology companies to get their technology to the men and women in uniform.”

In the National Defense Authorization Act that passed the House, there is a charter for the National Security Innovation Network, which will expand and coordinate these efforts within the DoD. I strongly encourage the Senate to adopt the NSIN charter as well, and ensure its effort remains fully funded.

The DoD alone awarded over 179 contracts in 2018 to nontraditional companies leveraging the other transaction authority, a flexible prototype authority outside of federal acquisition regulations. These contracts represent another way to engage high-growth tech companies. The DoD should continue to leverage OTAs.

Third, the DoD should seek out federally focused accelerators and VCs in the private sector to inform, source and evaluate high-growth tech companies to drive federal missions forward. Federally focused tech accelerators like Dcode, and its investment network Dcode Capital, source promising tech for the government and ensure commercial tech is fully vetted and equipped to succeed in the federal marketplace.

The DoD is also establishing in-house, VC-like programs, with AFVentures as an example. “This has been a year in the making now, trying to make our investment arm, the Air Force Ventures, act like an investor, even if it’s a government entity,” the assistant secretary of the Air Force for acquisition, technology and logistics, Dr. Will Roper, explained.

Buy-in from Congress will also be crucial to the success of these initiatives, starting with the NSIN section of the NDAA. Working with the right private sector partners is vital, and organizations like Dcode reduce risk for the government.

Defense organizations don’t need to reinvent the wheel to work with commercially successful tech. Use what’s available today to reduce barriers and risk, reform existing methods, and increase engagement with trustworthy resources to work with more viable commercial tech companies that can move our country forward.