Tag Archives: small business technology

COVID – 19 Adversarial Capital Threat to Defense Industry Small Business

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FCW

“Adversarial capital” is the latest buzz phrase used to describe the security problem that can occur when foreign rivals, especially China, take advantage of the relatively open U.S. investment marketplace.

“We simply cannot afford this period of economic uncertainty to lead to loss of American know-how on critical technologies,” – Jennifer Santos, DOD’s deputy assistant secretary of defense for industrial policy.”

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“The Defense Department is hoping steadily engaging small businesses will help shield them from shady foreign investments during the global COVID-19 crisis.

[At risk are] nascent technology firms whose work may have security applications but don’t yet fall under the aegis of the cross-agency Committee on Foreign Investment in the United States (CFIUS).

“We simply cannot afford this period of economic uncertainty to lead to loss of American know-how on critical technologies,” Santos said during an April 28 webinar on coronavirus supply chain challenges hosted by the Intelligence and National Security Alliance.

Additionally, DOD has been hosting teleconferences multiple times per week with industry trade associations and continued to host virtual Trusted Capital Marketplace events to help ensure companies have access to “clean capital” and avoid foreign investment conflicts.

Ellen Lord, DOD’s acquisition chief, warned in March that the defense industry base, their technology, and intellectual property were vulnerable to “nefarious” foreign investors.

As the coronavirus pandemic worsened, DOD has struggled with multiple plant closures — 93 out of 10,509 prime companies with 141 that closed and reopened and 427 out of 11,413 vendors, with 237 that have closed and reopened. Those closures have significantly affected aviation, shipbuilding and small space launch supply chains.

Santos said several companies in Mexico have “impacted our major primes” and DOD is working to identify those companies and work with the Mexican government supporting various technologies, including airframe production.

But foreign investment remains one of the more pressing priorities in defense acquisition, Santos said, adding that suspicious transactions in vulnerable areas are mitigated or blocked if a risk is found regardless of the pandemic.

That is an acute problem for small manufacturers, Lord said.

“Typically the most problematic areas we have now are some of the smaller manufacturers who, maybe from a dollar value, don’t do huge numbers but they are providing critical components across aircraft and naval applications. That’s where my biggest concern is; sort of the weakest link in the system,” Lord told reporters April 30.

The acquisition chief also worried some smaller companies “might end up with some significant financial fragility” and is looking across interagency and in the Trusted Capital Marketplace, a partnership that links private investors with defense companies, to keep those with “critical technology, talent, and facilities together with those investors.”

Lord’s concern extends overseas, as well, particularly in Europe, regarding what Lord called “nefarious” mergers and acquisition, where shell companies have known U.S. adversaries as beneficial owners. To protect against that, the Pentagon wants stronger foreign legislation from Congress to make the CFIUS process more stringent, Lord said.

In addition to pursuing stronger legislation, DOD has bolstered and expanded national security investment reviews, which can take 45 days and are reviewed by the Director of National Intelligence, and increased engagement with businesses using the newly stood up industrial base council.

Santos said the council helps address the industry base’s existing gaps and risks by aligning their priorities with DOD’s, identifying authorities that can be used to solve any issues, and drawing up policy as needed.

“We need to protect our industrial base from what could be adversarial capital and during COVID, we maintain the same due diligence,” Santos said, “It’s what keeps me up at night most nights.”

https://fcw.com/articles/2020/05/04/dod-adversarial-capital-williams.aspx?oly_enc_id=

“Adversarial Capital” Threatens Small Business Industrial Base

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“The Defense Department is concerned that foreign investment will take advantage of small businesses in the defense industrial base reeling from the COVID-19 pandemic.

The defense industrial base, which consists of more than 300,000 companies, is “vulnerable to adversarial capital,” and DOD wants them to “stay in business without losing their technology” or be subject to intellectual property theft.

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“Ellen Lord, DOD’s top acquisition executive: “The foreign investment issue is something that I have been tracking for the last couple years. There is no question that we have adversarial capital coming into our markets through nefarious means,” Lord said.

“So what we are doing, on the defense side, looking at [the Committee on Foreign Investment in the United States], on the offensive side, we’re looking at our Trusted Capital mechanisms.”

DOD has been conducting periodic Trusted Capital Marketplace virtual events to pre-empt CFIUS concerns and ensure companies’ access to “clean capital.”

Lord said the global outbreak of COVID-19 has created instability and uncertainty, especially for small businesses that aren’t sure if government contracts will continue.

“I think it presents a greater attack surface as there is greater uncertainty, especially to small businesses as to whether their contract will continue,” Lord said. “So we want to basically mitigate that uncertainty.”

DOD under the Trump administration has been pushing for more domestic manufacturing and reducing foreign investments, namely with drone production. It has also been adamant about finding U.S.-based solutions for telecommunications services and hardware production, barring the use of Huawei and ZTE products because those companies have ties to the Chinese government and military.

These moves, especially as the global health crisis persists, could have broader implications and shrink direct foreign investment up 15%, according to a United Nations report.

The Defense Department has also created a new task force to synchronize its COVID-19 efforts led by Stacy Cummings, the principal deputy assistant defense secretary and leader of the Acquisition Enablers office.

The Joint Acquisition Task Force will coordinate with military services and agencies’ acquisition resources and field requests from the Federal Emergency Management Agency, the Departments of Health and Human Services and  Homeland Security and other federal agencies for medical resources and personal protective equipment.

The task force aims to identify weak points in workforce and industrial capability and ultimately reduce companies’ reliance on foreign supply sources. It will also direct use of Defense Production Act authorities, which include being able to use economic incentives and priority-rate defense contracts to best serve the need of troops in the field and team with industry to boost commercial capabilities.”

https://fcw.com/articles/2020/03/25/defense-china-cfius-corona-lord.aspx?oly_enc_id=

GSA Begins Pilot OTA-like Streamlined Process

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The General Services Administration announced its client support center for acquisitions will use a streamlined process, designed to attract startups, to procure innovative, commercial solutions.

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“As part of a pilot, GSA’s FEDSIM innovation team will rely on the commercial solutions opening (CSO), a solicitation outside the Federal Acquisition Regulation, to acquire technologies and services in the production phase or adapted from existing products from “traditional and non-traditional government contractors.”

“The goal of this pilot program is to provide a streamlined approach for acquiring innovative commercial products and services,” GSA says.

CSO is a recently created tool with simplified contract terms, which Section 880 of the National Defense Authorization Act for fiscal 2017 authorized GSA to create the pilot. It’s similar to the Other Transaction Authority of defense agencies but differs in that it’s not legally binding, GSA says.

FEDSIM will post solicitations from client agencies for specific projects of technical areas of interest as they open.

New technologies, processes, methods, applications, and adaptations at the time a proposal is submitted will be considered.

The CSO process consists of submission of a written solution brief, an oral presentation if applicable, and a request for proposal.

Currently, FEDSIM is accepting briefs for three Defense DepartmentCSO solicitations: AFWERX Hub, Marine Maker and the Joint Artificial Intelligence Center Humanitarian Assistance and Disaster Relief DAMAGE.

The Defense Innovation Unit also uses CSOs to speed up vendor selection for innovative needs.”

Other Transaction Agreements (OTA’s) Change Defense Acquisition For The Duration

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FEDERAL NEWS NETWORK

“For some time the DOD has been trying a number of ways to speed up the identification and acquisition of … innovative? non-traditional? prototypical? …  technologies or capabilities. It wants a third offset, a reasonable aspiration.

The OTAs can be a way to trap it in a way open competitions or wired traditional acquisition and their seemingly inevitable protests cannot.”

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“Can a defense acquisition approach restore the military advantages Pentagon planners say the U.S. has lost over the past 30 years? If so, contractors should get used to living with two parallel acquisition systems. The regular Defense version of the Federal Acquisition Regulation. And, of course, the burgeoning Other Transaction Authority (or Agreement).

“Other” can be a scary word. Everyone professes loathing for the FAR and the DFAR because how they ostensibly slow everything down. But whole armies of sales and business development people have invested careers and gotten wealthy by playing the traditional FAR and defense acquisition systems the way Paganini played the violin. OTAs threaten that.

Not that OTAs are new. They date to the early 1960s. But they’re like an unused kitchen utensil that, when re-discovered, finds all sorts of convenient uses. For defense acquisition, OTA’s are out of the rummage drawer.

Congress has encouraged OTAs for obtaining non-traditional technologies from non-traditional vendors. It’s given DoD greater explicit authority to use them. Some OTAs have looked, at least on the surface, like regular deals for regular companies. Two recent awards to Perspecta (old company, new name) from the Defense Information Systems Agency to build the background investigation system come to mind. I’m not prepared to second guess DoD on this one, but OTAs are available to traditional companies doing non-traditional or prototypical things. But not, one hopes, to non-traditional companies doing ordinary things.

A deep data analysis by Govini shows OTA activity in DoD having grown by a compound annual rate of 57% for the last six years. The base is small, but in 2018 they amounted to $3.4 billion. OTAs aren’t the only approach DoD uses for its research, development, test and evaluation investments. They only represent 8% of RTD&E spending. But the only part that’s growing. You could say they represent real money.

I mention all this, prompted by the round-number anniversary of D-Day approaching. OTAs fit in with a strategy having to do with numbers.

On D-Day, I think of those numbers. The sheer tonnage of platforms, materiel and, of course, human troops thrown by nations at one another produces wonder to this day. The D-Day invasion consisted of about 175,000 troops including 57,500 Americans. That’s just for the first few days of one piece of the plan to pinch Germany.

Warfare is totally different today because of technology. One 21st century precision bomb can inflict more real damage on an enemy than a squadron of bombers dropping hundreds of bombs over the course of an hour during the 1940s.

If from the Civil War to World War II sheer numbers dominance was the essential element for victory, later that dominance came from the sorts of technological advantages that produce greater lethality per troop. You might call it military productivity. In recent decades, the U.S. has attributed its advantage to technologies such as stealth and precision guidance, developed during the “second offset” of the 1970s. Offsets decay. How long did the atomic bomb offset last?

Military leaders have been hunting diligently for evidence of technology that could lead to an offset. They theorize such technologies exist within companies unknown, at least, to the military. The OTAs can be a way to trap it in a way open competitions or wired traditional acquisition and their seemingly inevitable protests cannot. “

Modest Small Business Innovative Research Program (SBIR) Investments Bring Big Benefits

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Blackbox Biometrics’ Blast Gauge System

“NATIONAL DEFENSE MAGAZINE”

“The Small Business Innovation Research (SBIR) program makes funding available to small companies to develop technologies to meet warfighting requirements and that can transition to a program of record and commercialization.

The Small Business Technology Transfer (STTR) program is similar to SBIR, but requires the small business to formally collaborate with a research institution.

The defense industry is big, technologically complex and highly competitive. The bar for entry can be high. For small companies who think they have something new or different to offer, vying for a chance to compete can be daunting.

The cost and risk involved with science and technology and research and development to bring a new product or service to market can exceed the ability and resources of many small businesses. So special funding is available to help them develop their ideas and prove their technologies. Meanwhile, program managers and prime contractors have incentives to bring small companies to the table.

Then-Assistant Secretary of the Navy for Research, Acquisition and Development Sean Stackley said in a 2015 memo that a competitive, healthy small business industrial base is vital to the long term success and affordability of the service. “Where affordability is paramount, a strategy that includes small business creates more affordable outcomes and promotes innovation and technical advancement,” he said.

Bob Smith, director of the Navy’s SBIR/STTR program, said in May 2016 that the service announces topics three times a year. It issued about 170 topics in its most recent cycle. From that it received about 2,800 proposals. It reviewed, evaluated and prioritized each one, and selected two proposals for each topic. One of the two is chosen to go forward as a Phase II project. The Navy looked at 252 Phase II proposals, and selected 137 Phase III awards to help those technologies transition.

“These might seem like low numbers, but if you talk to any venture capitalist, that’s a pretty good track record,” Smith said.

While SBIR can help small companies introduce and develop their new technologies, Smith said companies should not focus solely on winning these awards. “Do not make SBIR your only business model. It will not work.”

For Midé Technology Corp., a small business in Medford, Massachusetts, SBIR efforts have led to some surprising developments. From missile instrumentation to bulkhead shaft seals to smart wetsuits, Midé has seen SBIR grant activity evolve into further opportunities including the development of products for the military and commercial markets. One good idea has led to another.

“We know the cycles when the topics and solicitations come out from the different agencies and departments,” said Midé’s Vice President of Corporate Programs Rick Orlando. We have a process in our company that ties into their schedules. We look at the topics, and glean the ones where we have interest and are suited to submit a proposal.”

In general, Orlando said a high proportion of Midé’s R&D work is funded by SBIR funding. “It’s about 80 percent of our R&D expenditures, but that doesn’t count our product revenue.”

A small company in Melbourne, Florida, has used SBIR to match existing technology with a requirement to provide communications relay radios between unmanned systems and host platforms.

“We had the technology, but we had to find a way to militarize it. It had to handle the vibrations and temperatures, and be small enough to fit inside an unmanned aerial vehicle,” said Emilio Power of RSS Technology.

The RT 1944 U radio was developed by RSS using a Navy SBIR investment. Power says the RSS radio is now part of the littoral combat ship program, and the company’s equipment is on the ship and its off-board vehicles, such as the MQ-8B Fire Scout unmanned aircraft.
SBIR and STTR projects require a technology transition plan, that specifies the “fiscal and transition commitment of participants in the transition stream to develop, deliver and integrate a technology/product into an acquisition program.”  It calls for a “seminal transition event,” to test the technology in a mission environment before it can be used by the warfighter.

“Our Phase III funding is allowing us to finish our software and conduct the seminal transition event, which is to do 80 MB at 30 miles. We’re getting ready to put that radio into production,” Power said.

RSS Technology is taking advantage of a related funding mechanism, the Rapid Innovation Fund, to further validate the concept. The Navy’s RIF enables participants to develop concepts and technologies to meet operational or national security needs, and invests in ways to reduce technical risk and cost.

“The SBIR program is fantastic,” Power said. “But one has to know how to work it. There is only a certain amount of money. But that investment can make the difference between an idea and a reality.”

Powers understands the importance and value of working with big companies. But being smaller is an advantage. “A lot of the big guys have tried doing some of these projects, but it takes a long time. A small company can act and react faster.”

Janet Hughes with Robotic Research of Gaithersburg, Maryland, said her company has participated in SBIRs for a number of agencies, such as the Army, the Defense Advanced Research Projects Agency and the Department of Homeland Security.

“We’ve had success moving to Phase II and III by working closely with the TPOCs (technical points of contact),” Hughes said. “We’ve taken technologies developed through one agency’s SBIR program and transitioned them into other agencies.

“Today we use SBIR funding almost exclusively for our research and development,” added Hughes.

Rochester, New York-based BlackBox Biometrics (B3), has been selling the Blast Gauge System, a small, wearable sensor that can detect and measure overpressure from explosions such as artillery or bombs, that can cause brain injuries. According to B3’s Scott Featherman, the Blast Gauge technology was first developed with DARPA, and was adopted by the Army. Now, because of a SBIR from the Marine Corps Systems Command, BlackBox has demonstrated the effectiveness of the technology to the service.

“We’re completing our Phase II now and getting ready to enter Phase III, and begin commercial sales,” Featherman said.

Once a company wins a Phase II SBIR award, the Navy SBIR program offers a course to the company to learn how to create a business plan and navigate the complex Defense Department business structure. This is called the SBIR/STTR Transition Program (STP).

A good percentage of NAVSEA’s SBIR companies participate in the program, Smith said. “We teach them how to be a success. That’s what STP does; we foster the relationship between the Navy and the company and teach these companies how to transition their technology.”

“Our naval acquisition community considers SBIR/STTR part of the solution for delivering quality innovation to our warfighters — quickly and cost-effectively,” said Smith. “The Navy cares about our small businesses, and we care about them succeeding.”

Tad Dickenson, Raytheon’s director of the company’s SPY-6(V) Air and Missile Defense Radar program, said Raytheon has some big reasons why it embraces small business. “Small companies offer more diverse input, and help us to think like a smaller company.”

Raytheon has developed the radar with open architecture to be flexible.  “There’s nothing proprietary, and any-sized company can be involved in the program. In fact, we can insert different algorithms for the same function next to each other to see which works best. We can select one, or both. And we can easily put in new functionality, or replace something with a better version.”

Raytheon’s SBIR teammates bring important attributes to a project, Dickenson said, because they are lean and agile, and can produce results quickly at a lower cost. “Their ideas evolve very quickly, and we can leverage that innovation. That adds up to better capability, performance and affordability for the Navy.”

Dickenson said the SBIR program creates win-win-win situations that benefit the Navy, Raytheon and the small businesses. “We look to nurture these relationships. We learn a lot from our small business partners, and we think we can offer them a mentorship relationship with our experience and expertise.”

http://www.nationaldefensemagazine.org/articles/2017/4/5/modest-sbir-investments-bring-big-benefits