It is no secret that U.S. Department of Defense has long struggled with getting advanced technology into the hands of military end users quickly.
Under Secretary Heidi Shyu, the DoD’s Chief Technology Officer, has made speeding up technology transition a priority. Last year her office released the National Defense Science and Technology Strategy which included as one of its 3 strategic tentpoles: “accelerating the transition of new technologies into the field”.
In recent years, many efforts have been made by various defense components to speed up technology transitions from high-tech small businesses. Focusing on Dual-use commercial technology, use of other transaction authorities, or OTAs, and enticing Venture Capital-backed firms with matching funds are some of the ways that the DoD and its services have tried to accelerate technology transition and insertion. Some of these initiatives have shown moderate success, but the problem still persists.
While it is useful to continue to look for ways to streamline the relationship between DoD and high-tech small businesses, most of these efforts fail to address the most important pathway for speedy technology transition to DoD: the large prime contractors.
Prime contractors control the majority of DoD programs of record. The top 5 DoD contractors combined made over $120 billion in Defense contracts in 2022 alone. These large prime contractors have no incentive to insert any technology not developed inside the prime into its program when they believe they could reinvent it themselves on the government’s dime. It’s slower and less innovative for the government, but a lot more profitable for the large primes.
The point here is simply to illustrate that their incentives to utilize SBIR proven small business technologies or any other technologies from any source outside the prime do not exist. If DoD wants to fully unlock the innovative power that small businesses are capable of providing, there needs to be a paradigm shift.
There are more than 25,000 small businesses that participate in the defense industrial base, while the number of primes has shrunk from around 50 to 5. Building in incentives to adopt small business developed technologies would not only speed up innovation but also benefit the prime contractors long term by ensuring a healthy defense industrial base and supply chain.
Incentivizing the primes to insert small business technology into their programs of record has proven to be a game changer in the past. A decade ago Lockheed was facing major setbacks with its Joint Strike Fighter (JSF) program. The program was massively over budget and behind, and the Air Force was desperate to speed up development any way they could.
Under the leadership of the JSF PEO General Bogdan, Lockheed and Air Force began inserting small business developed technologies from the SBIR program to solve the various problems they were having. These technologies helped get the JSF program back on target, and led to over $500 million in savings from the program.
The incentives that drove Lockheed to insert small business technology into its JSF program were necessity and desperation, which unfortunately meant this example was a one-off, rather than the beginning of a trend. In prior years, PEO Subs utilized SBIR to produce similar efficiencies for the Virginia Class Submarines.
The law already permits “any incentives in effect” or to create new incentives and required reporting by primes of use of SBIR technology. DoD and the Services would do well to learn from this experience and create a more formalized reporting and initiative to incentivize primes to insert SBIR or other small business technology into their programs.
The Army, for its part, has unrolled a program designed to create incentives for large primes to insert SBIR-funded technology into its contracts. Called Project VISTA, it will grant source-selection credits to proposals that include technology funded through the SBIR program. While they are starting small, it is a good first step to addressing this program, and hopefully will lead to greater things. Much more needs to be done to meet the challenges of wars in the Middle East and Ukraine, as well as growing threats from China.
It is incredibly difficult to even know what SBIR-funded technology is being used by primes. The DoD approves more follow-on Small Business Innovation Phase III contract dollars than it spends on SBIR contracts each year, but how many of these technologies get into programs of record? Requiring primes to report the number, amount, and significance of each small business developed technology the primes use in their systems would help give us a better understanding of how important small businesses are to the Defense innovation system, as well is highlight where small business can better support defense programs.
Secondly, DoD should implement incentives for prime contractors to insert SBIR funded technology into their programs of records and other contract awards. There are a number of different kinds of incentives that DoD could consider, from preferential scoring for proposals that include SBIR technology like Project VISTA, to financial incentives such as bonuses or increased fees. Whatever the DoD decides, it must be impactful enough to ensure primes to take on innovative small business developed technology.
Getting cutting-edge, advanced technology into the hands of military end users quickly and efficiently requires full integration and cooperation of all participants across the defense industrial base: large primes provide capability and resources to manage major programs while small businesses bring nimbleness and rapid innovation.
As long as these two forces are separated, DoD will continue to struggle with speedy technology transition. Incentivizing the major primes to incorporate small business technological solutions needs to be the first step in fully harnessing America’s small business innovative power, and ensuring the DoD’s innovation ecosystem remains the most advanced in the world.
Jere Glover is the Executive Director of the Small Business Technology Council (www.sbtc.org), a non-partisan association of small, technology-based companies in diverse fields. He previously served as Chief Counsel for Advocacy under President Obama and has been involved in innovation, technology, and procurement policy for over 40 years.
