“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.”
“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.”
“The upcoming Palmetto Tech Bridge will be the sixth office. Other locations include: Newport, Rhode Island; Keyport, Washington; San Diego; Orlando, Florida; and Crane, Indiana.
Michael Merriken, director of the Palmetto Tech Bridge, said the office will be concentrating on autonomous systems, cybersecurity and communications. Specific problem sets will be determined by the Navy, he noted.
Cmdr. Sam “Chubs” Gray, director of Tech Bridges, said the centers are a platform that each of the regional offices can utilize to better connect to different resources. The service wants to tap into Charleston’s advantages, such as the city’s academic community and technology sector, Gray noted.
Charleston’s community will be particularly useful for exploring 5G technologies, Merriken said. The service hopes that will allow it to leverage industry input early in the technology development process.
“5G is a great example of a technology that’s really being led by industry,” he said. “This is where Tech Bridge really comes into play. We want to have that ability to connect with industry and collaborate with them.”
Because some of the Tech Bridge participants will be members of industry, many of the technologies may be dual-use systems that will be profitable for commercial companies as well, Merriken noted.
“We work with these solution sets to then build this product that eventually goes to the warfighter, and then the commercial folks can take that technology and then build it into some product that they can use,” he said.
Initially, researchers will be examining artificial intelligence solutions for network diagnostics, he said.
Merriken said developers are still examining specific locations for the Tech Bridge in Charleston. However, the Navy hopes to find a building that fosters teamwork with features such as meeting rooms and quiet rooms, he said.
“We’re looking for a space that we can have these people collaborate and work together,” he said.”
“The Pentagon is launching a new initiative that will shape its long-term plans for integrating 5G networks into U.S. military operations. The emerging technology is viewed as a potential gamechanger as the United States squares off against China in great power competition.
The term 5G refers to the oncoming fifth generation of wireless networks and technologies that will yield a major improvement in data speed, volume and latency over today’s fourth generation networks, known as 4G. 5G networks are expected to be up to 20 times as fast, according to a Defense Innovation Board study published earlier this year titled, “The 5G Ecosystem: Risks & Opportunities for DoD.”
“The shift from 4G to 5G will drastically impact the future of global communication networks and fundamentally change the environment in which DoD operates,” the report said. “5G has the ability to enhance DoD decision-making and strategic capabilities from the enterprise network to the tactical edge of the battlefield.
“5G will increase DoD’s ability to link multiple systems into a broader network while sharing information in real-time [and] improving communication across services, geographies and domains while developing a common picture of the battlefield to improve situational awareness,” it added.
The improved connectivity may enable a slew of new technologies, such as hypersonic weapons, resilient satellite constellations and mesh networks, it noted.
5G is a top priority for the office of the undersecretary of defense for research and engineering, and the Pentagon is kicking off a new effort to experiment with the technology for various mission sets.
The Defense Department has selected four bases as the first U.S. military installations to host testing and experimentation for 5G technology: Joint Base Lewis-McChord, Washington; Hill Air Force Base, Utah; Naval Base San Diego, California; and Marine Corps Logistics Base Albany, Georgia.
The first round of opportunities will focus on three areas: integrating augmented reality and virtual reality into mission planning and training in both virtual and live environments on training ranges; developing “smart” warehouses to leverage 5G’s ability to enhance logistics operations and maximize throughput; and establishing a dynamic spectrum sharing testbed to demonstrate the capability to use 5G in congested environments with high-power, mid-band radars.
5G could enable the next-generation training paradigm that the services are pursuing, which includes linking virtual and augmented reality systems on a global scale, officials say.
“It’s going to give you better bandwidth, lower latency — so a better, more realistic experience,” Lisa Porter, deputy undersecretary of defense for research and engineering, said in an interview. Porter is overseeing the Pentagon’s 5G efforts.
“For mission training and planning and all of those activities … it has to be as realistic as possible or it’s just not going to be very useful,” she added.
5G could also help drive down the costs of linking systems around the world, enabling them to be more widely deployed, she noted.
“Everybody should be able to have access to this capability … and you’d like them to be able to talk to each other” and experience collective immersion during training events, Porter said. “To do that, of course you have to have the cost low enough that we can afford that.”
Augmented reality, or AR, could have many military uses, said Joe Evans, the Pentagon’s technical director for 5G. The technology transposes data or other digitally created images on top of a real-world field of view.
“We already see that sort of thing at the high end in things like the F-35 helmets,” he said. “This is an opportunity … with the technology getting cheaper to start to be able to push that out to the broader force.”
AR combined with high-speed 5G networks also offers new possibilities for sustainment and maintenance, said a senior defense official who spoke to National Defense on condition of anonymity.
“The ability to assist our technicians in the field and understanding what they’re doing and the complex issues that they’re often involved in in fixing advanced fighter aircraft or cargo aircraft … is a major industrial inflection point,” the official said.
“Now all of a sudden because of the latency [reduction] … we both can test and verify the repair as it’s occurring,” he added. That could help keep cutting edge systems such as the joint strike fighter in the air rather than sitting in a maintenance depot.
The Defense Department envisions 5G streamlining the military’s massive logistics enterprise and improving inventory management if it is employed in “smart” warehouses filled with a variety of sensors that are used for monitoring parts and equipment.
“You want to be able to … have high confidence that you know what is there, where it is going, whether it’s come in or not. You want to make sure it hasn’t been tampered with.
All of these things are further enabled when you have high confidence in the connectivity and your ability to manage it,” Porter said.
Evans said increasing materiel throughput and the speed at which it moves is critical for supplying warfighters with the products they need.
“One of the problems with 4G and even WiFi types of technologies is they really weren’t designed to be having tens of thousands of individual wireless devices talking to the cell site or the access point,” he said. “What 5G is doing is essentially increasing that scale. And so from a single access point, you can now track greater volume of individual items in the warehouse [and do] the finer grain tracking.”
As 5G technology is rolled out, the Pentagon wants to pursue what it calls dynamic spectrum sharing between the military and industry, especially as it relates to the mid-band part of the electromagnetic spectrum that the Defense Department uses for radars and other systems.
Portions of the mid-band are a “sweet spot” for 5G because the frequency enables more bandwidth and greater range, Porter explained.
“The Department of Defense and other federal agencies and then industry, particularly the carriers … are all clamoring for access to a very limited amount of what you might call real estate” on the spectrum, she said.
Today, the military is assigned a certain number of frequencies to operate in the United States. Companies are granted licenses by the Federal Communications Commission and parts of the electromagnetic spectrum are auctioned off for their use. But at any given time, much of the spectrum is not being used, she noted.
“There’s actually a lot of opportunity here,” Porter said. “When I’m not using my spectrum, can someone else use it? Can we develop some sharing rules that allow [the military and the private sector] to use each other’s spectrum … in an efficient way?”
Opening up the spectrum would create greater capacity for users. But the challenge is to do it in a way that military and commercial systems don’t interfere with each other, she said. “It requires some kind of agreements about how we’re going to operate.”
Artificial intelligence will be a critical component of dynamic spectrum sharing, she noted.
“Artificial intelligence allows you to speed this up because if you rely on a person trying to figure this out, it’s too slow,” she said.
The Defense Advanced Research Projects Agency recently held a Spectrum Collaboration Challenge with industry that involved AI. The results will help shape the Pentagon’s 5G initiatives.
“The DARPA Spectrum Collaboration Challenge provided some of the technology underpinnings to make those decisions on how you share those spectrum bands,” Evans said.
“What we want to do is take some of those capabilities and then apply it to this mid-band types of spectrum.”
Defense officials will be going out to test ranges at Hill Air Force Base to explore how a 5G system could operate effectively in coexistence or in coordination with mid-band radars.
Dynamic spectrum sharing could give the military a leg up over its competitors such as China, which is rolling out its own 5G networks, Porter said.
“If the United States figures this out especially with our allies and partners, this puts us in a very strong competitive posture globally,” she said. “We’re going to be able to do things with far more capacity and far more efficiency.”
Dynamic spectrum sharing won’t just have implications for military operations. It will also affect acquisitions, the senior defense official noted.
“By understanding and getting down to the science required, the policies required, it helps then inform and postures us for the next generation of systems that we’re researching and then acquiring,” the official said.
As it builds out its 5G capabilities, the Pentagon wants to leverage the hundreds of billions of dollars that the commercial sector is investing in the technology to enable ubiquitous connectivity, lower latency, higher bandwidth and edge computing. However, that creates security concerns, Porter noted.
“When you start connecting everything to everything else, wow, that’s a lot of complexity,” she said. “We don’t know every vulnerability that’s going to emerge, but we’ve got to try to understand that and then develop an architecture, if you will, that allows us to mitigate and to do risk management smartly.”
The Pentagon, the defense industrial base and the commercial companies building the nation’s 5G networks need to work together to develop protocols for protecting networks, she said.
Meanwhile, the Defense Department plans to use other transaction authority agreements for its upcoming 5G initiatives. The RPPs will go through the National Spectrum Consortium. Companies that aren’t a member of the consortium can still participate as a subcontractor for members that win a contract award, Porter noted.
The number and timing of contract awards will depend on congressional funding and the quality of the proposal submissions, she said.
The Defense Department plans to add new 5G opportunities roughly every quarter. As of press time, the focus areas for the next round had yet to be determined.
Porter declined to say how much money the department plans to invest in these initiatives.
“I don’t like folks to try to game to a number,” she said. “I want them to give us their best ideas and a realistic execution plan against that idea … and we will work to make sure that the best of those get funded.”
While the Pentagon has ambitious plans for 5G, it plans to take a “crawl, walk, run” approach to rolling out the technology, Porter said.
“We’re going to start here in the U.S because that makes the most sense,” she said. “We’re going to start with four [bases], … learn and then expand.”
“The National Oceanic and Atmospheric Administration’s Big Data Project won the Best in Class award for federal civilian efforts. NOAA’s project, which this year completed its experimental phase and is moving into production in 2020, has made massive data sets publicly available at minimal cost to the agency by partnering with multiple cloud service providers.
Among state and local efforts, Virginia’s Framework for Addiction Analysis and Community Transformation was named Best in Class. A project of the state’s Department of Criminal Justice Services, FAACT protects individual privacy while giving state and local officials the ability spot and respond to dangerous trends in opioid abuse in near-real time.
And finally, SAIC won Best in Class among the Industry Innovators for its Battlefield of Internet Things solution. The program incorporates sensors, mobile broadband and networking, cloud computing and other technologies to allow Defense Department organizations to collect and process massive amounts of sensor data, turning it into actionable intelligence.
On the industry side, Chris Sexsmith, Cloud Practice Lead for Emerging Technologies at Red Hat, says it’s reached the point where companies are becoming more concerned with a second layer: It’s not only about leveraging AI itself, but also how to effectively manage the data.
“What are some of the ethical concerns around using that data?” Sexsmith asked. “Essentially, how does an average company or enterprise stay competitive in this industry while staying in line with always-evolving rules? And ultimately, how do we avoid some of the pitfalls of artificial intelligence in that process?”
But one of the biggest concerns right now is the “black box.” Essentially, once an AI has analyzed data and provided an output, it’s very difficult to see how that answer was reached. But Sexsmith said agencies and organizations can take steps to avoid the black box with Red Hat’s Open Data Hub project.
“Open Data Hub is designed to foster an open ecosystem for AI/ML – a place for users, agencies, and other open source software vendors to build and develop together. As always at Red Hat, our goal is to be very accessible for users and developers to collectively build and share this next generation of toolsets,” Sexsmith said. “The ethical benefits in this model are huge – the code is open to inspection, freely available and easy to examine. We effectively sidestep the majority of black box scenarios that you may get with other proprietary solutions. It’s very easy to inspect what’s happening – the algorithms and code that are used on your datasets to tune your models, for instance – because they are 100% open source and available for analysis.”
Open Data Hub is a machine-learning-as-a-service toolbox, built on top of Red Hat’s OpenShift, a platform for managing Linux containers. But it’s designed to be portable, to run in hybrid environments, across on-premise and public clouds.
“We aim to give the data scientists, engineers and practitioners a head start with the infrastructure components and provide an easy path to running data analytics and machine learning in this distributed environment,” Sexsmith said. “Open Data Hub isn’t one solution, but an ecosystem of solutions built on Openshift, our industry-leading solution centered around Kubernetes, which handles distributed scheduling of containers across on-prem and cloud environments. ODH provides a pluggable framework to incorporate existing software and tools, thereby enabling your data scientists, engineers and operations teams to execute on a safe and secure platform that is completely under your control.”
Red Hat is currently partnered with companies like NVIDIA, Seldon.io, and PerceptiLabs on the Open Data Hub project. It’s also working on the Mass Open Cloud, a collaboration of academia, industry and the state of Massachusetts.
But Sexsmith sees a lot of possibilities in this space for federal agencies to advance their AI capabilities. Geospatial reconnaissance, law enforcement, space exploration and national labs are just a few of the federal missions that could benefit from AI’s ability to process massive amounts of data in an open, ethical way.
“Federal agencies obviously have a lot of restrictions on how data can be utilized and where that data can reside,” Sexsmith said. “So in this world of hybrid cloud, there is a need to be cautious and innovative at the same time. It is easy to inadvertently build bias into AI models and possibly make a bad situation worse. Full control of data and regular reviews of both code and data, including objective reviews of ML output, should be a top priority. At minimum, a human should always be in the loop. And while the simplicity of a proprietary service is often appealing, there is danger in not fully understanding how machine-learning results are reached. Code and data are more intertwined than ever, and the rules around data and privacy are always evolving. Maintaining control of your data in a secure open source environment is a smart move, and a primary goal of Open Data Hub.”
“The Veterans Health Administration’s second annual Innovation Experience later this month will include interactive exhibits for the first time, as part of the agency’s overall plan to put emerging technologies in the hands of its medical centers, other agencies and the public.“
“The iEx, as the event is known, is one of several ways the agency tries to promote the innovations that spring from its 172 medical centers. VHA is responsible for a number of medical-technology advancements, including the nicotine patch, barcoded medication administration and implantable cardiac defibrillators.
The agency launched the Innovators Network in 2015 to connect the medical centers and scale successful projects and human-centered design, Ryan Vega, executive director of the VHA Innovation Ecosystem, told FedScoop. The annual exhibition is designed to bring more energy to that process.
“Evidence-based solutions or practices sometimes take a decade,” Vega said. “That’s just far too long.”
The event technically started four years ago as Demo Day, where organizations across the country pitched their products and services — but it was a logistical nightmare, Vega said. VHA reorganized it as iEx last year and hosted it at the National Press Club in Washington, D.C. This year’s version returns there Oct. 22-23.
All of the interactive exhibits are tied to nascent VHA technologies and projects from either the Innovators Network or the Diffusion of Excellence, a program that disseminates employees’ clinical and administrative best practices throughout the system. The exhibitions will include displays on 3D printing as well as virtual and augmented reality.
VHA medical center personnel will be able to see what other technologies are out there and how they might apply to their own use cases. Industry attendees will be encouraged to consider how they can further such projects and services.
Lesser-known areas of study like proteomics — analysis of proteins in the body that might indicate risk of cancer, Alzheimer’s, heart disease, or diabetes — also will be represented. A pad will be demoed that patients can step on and have biometric sensors detect skin breakdown or ulcers associated with various ailments, Vega said.
The biggest announcements will also be live-streamed on VHA’s YouTube channel.
“We can do the necessary [research and development] to get these technologies to the point where we can operationalize them,” Vega said.
Vega said this year’s 3D printing booth shows how far medical modeling has come. VHA’s work with the technology actually began with incremental funding from the Innovators Networks’ Spark-Seed-Spread program for off-the-wall ideas.
The Puget Sound Health Care System first experimented with 3D printing. Beth Ripley, a radiologist there, now chairs VHA’s 3D Printing Advisory Committee.
A CT scan or MRI creates layers of anatomy to form an image, which can be 3D printed layer by layer into a medical model for surgeons to examine and show to patients. What’s more, layered printing increases the tensile strength of objects — making the process great for developing more affordable, synthetic prosthetics tailored to patients’ anatomies.
Now 25 VHA medical centers use 3D printing, though the excitement lies with bioprinting of tissue and even bone grafts converted from fat cells, Vega said. He believes the printing of fully functional organs will happen within his lifetime.
But VHA doesn’t just want to roll 3D printing out in every medical center because that’s inefficient, Vega said. Instead the agency will only scale the technology where facilities have the right infrastructure, equipment and training.
Medical centers can decide for themselves whether they’re ready after being exposed to 3D printing at iEx. One VHA center can always ship a medical model or prosthetic to another, ensuring technologies reside only in places where quality can be assured, Vega said.”
“Today, our technical leadership is being challenged by near-peer adversaries, particularly in areas related to national security – such as cyber, artificial intelligence, hypersonics and space capabilities.
This challenge, similar to the race to reach the Moon, creates a clear opportunity for America: to establish a vision and rededicate itself to invest in the innovation and talent necessary to deliver new technologies that will extend our leadership for decades to come. “
“The 50th anniversary of the Apollo 11 Moon landing celebrated our nation’s technical prowess and rekindled the spirit of pride Americans share when we achieve great things.
The United States’ well-deserved reputation as a global technology leader stems in part from government and industry’s strong investment in innovation and talent. This is most evident in the aerospace and defense industry, where government agencies and A&D partner companies develop world-leading aviation, space and defense technologies. Many of these evolve into popular commercial applications that we use every day, such as GPS.
The first step is establishing a stable funding platform that allows government agencies and partner companies to plan for and invest in the technology and highly-trained people that make breakthrough innovations possible. Innovation, whether for commercial or government markets, doesn’t occur overnight. It requires sustained, multi-year investments.
The Aerospace Industries Association (AIA), and leaders from its more than 330-member companies, are encouraged by the recent bipartisan congressional deal raising the BCA caps over the next two years. It sends a strong signal to industry and represents a significant move in the right direction.
Completing the appropriations process will go a long way to spur government and industry partners to invest in the innovation that will help secure our country.
Another important step is streamlining the current cumbersome acquisition process, which is based on complex rules that challenge government and industry partners alike.
DoD acquisition leaders are looking into ways to overhaul the rules and simplify the process. They advocate for changing their culture to one that takes smart risks and champions rapid prototyping and agile acquisition.
Engineers recently used the iterative DevOps software approach to develop a new mid-size robot designed to remotely dispose of improvised explosive devices (IEDs) – safeguarding warfighters on the battlefield. Leveraging DevOps helped reduce software build times by half, enabling developers to quickly add advanced features and field the final system faster than traditional software approaches.
In addition, government and industry need to step up investments in the talent that will drive this innovation. Every day, thousands of high-paying technical positions remain unfilled due to a lack of available talent.
Government, industry and academia are working to close this workforce gap – dedicating funding and initiating a variety of programs, such as apprenticeships that provide more affordable pathways to good paying jobs and workforce partnerships to develop a steady talent pipeline that meets the changing needs of growing industries.
But we need to do much more to close the gap, particularly among women and minorities who are significantly underrepresented in STEM professions. Research shows women make up only 16 percent of the engineering workforce and African Americans and Hispanics occupy 5 and 6 percent of STEM professions respectively.
Reauthorizing the Higher Education Act would help by expanding access to Pell grants, streamlining regulations, creating incentives for employer-academia partnerships and producing more opportunities for students to learn different skills.
The challenge before us is significant, but not insurmountable. Throughout history, our nation has proven our ability to accomplish great things once we first establish a clear vision and strong commitment to succeed. Now is the time to rededicate ourselves to invest in the innovation and talent that will return us to the Moon and beyond, maintain our national security and sustain our technology leadership for generations to come.”
“The Army’s Cybersecurity Defense Operations and Research (CDOR) Branch wants to increase battlespace awareness, securing operating areas, command and control, and network defense with the general help of contractors, according to the sources sought document. “
“The Army is seeking is to provide “friendly forces” more intelligence on threats from adversaries. The work includes differentiating adversaries and allies in order to understand the scope of a cyber battlefield and network needs.
“The Government’s efforts are focused on innovative support that enhances battlespace awareness to provide friendly forces the information required for decision-making that gains or maintains an advantage over an adversary,” the document states.
Securing cyber operating areas would include risk assessments and response to warning signs, part of which a contractor would contribute research to. The document also references a need to continually reinforce cybersecurity for commanders to “defend forward,” the military’s overarching theory on action in cyberspace.
The Army is seeking the ability to disrupt an adversary’s ability to disrupt its own network, a part of the defend forward theory. A part of commanders’ ability to defend forward is to delegate enterprise information technology to contractors, the document stated.
A potential contract would be awarded for a year with a four-month extension after that for full-time services.”
“A recent Washington Technology article highlights some big moves in its annual Top 100 list, which ranks the largest government contractors in the federal market based on prime contract obligations during the previous fiscal year. A few of these big moves are thanks to acquisitions such as United Technologies jumping from No. 57 in the 2018 ranking to No. 27 after it acquired Rockwell Collins.
Emerging technology areas such as machine learning and artificial intelligence are advancing faster than it takes to land a meeting inside a government building. But you already know that the private sector tech market is outpacing the government. What might be less obvious is the impact on incumbent government contractors.
Government’s appetite for commercial tech
Last year venture capital investment in U.S. companies hit $130.9 billion, surpassing that of the dot-com years. Now, the federal budget for 2019 has $118.1 billion allotted for R&D. Evidently, the government has noticed how far behind it is technologically compared to the private sector.
Federal agencies — including the Department of Homeland Security, the Department of Defense, and many in the intelligence community — have offices in major tech hubs such as San Francisco, Boston, and Austin. Even the U.S. Geological Service has an innovation shop out west.
DOD alone awarded over 179 contracts in 2018 to non-traditional technologies leveraging the Other Transaction Authority (OTA) contracting method. The government also awarded millions through challenges it launched in search of non-traditional technologies to support objectives such as the Air Force’s multi-domain operations. NASA has also shifted its focus to companies such as SpaceX instead of building capabilities in house.
We are witnessing this shift in government firsthand at Dcode. In just the last three years, we’ve worked with 70 private sector tech companies and dozens of government organizations, driving 52 new implementations of commercial technology in government. Having hosted cumulatively more than 500 government leaders at our accelerator and innovation training programs, we see that the government is hungry for something different and increasingly willing to take chances on emerging tech solutions.
The government leaders who come in for our three- or four-day innovation training program also tell us that they are less and less interested in paying contractors to build solutions from scratch that already exist in the private sector for a fraction of the cost and at exponentially higher quality.
We hear war stories of antiquated technology solutions holding federal agencies hostage, and government leaders are motivated to find new ways to improve the way their agencies operate.
Not lost on the contractor community
Just as the government has taken notice, so have federal contractors.
The evidence is in the analysis of the Washington Technology Top 100. Deloitte has a newly reinvented innovation office and a new chief innovation officer. Booz Allen Hamilton is investing in artificial intelligence. BAE and Accenture have commercial tech plans. Lockheed Martin has a venture capital arm.
Federal contractors now understand what we know to be true: Finding private sector tech companies that can address government needs and that also know how to work in the federal market is easier said than done.
The growing number of prime contractors calling us to connect with emerging tech companies also indicates growing awareness and concern over the shifting dynamics. More than 50 systems integrators and technology partners engaged with our accelerator cohort of advanced analytics tech companies, and we have facilitated partnerships for dozens of OTA calls.
New business models on the block
A new type of prime contractors is also on the rise.
For example, Anduril, which successful Silicon Valley entrepreneurs and venture capitalists founded, touts the ability to “move fast and fix things.” Tackling interesting AI and UAS problems at agencies such as U.S. Customs and Border Protection, Anduril leverages existing commercial products to build defense solutions swiftly.
Referred to as the Defense Innovation Base, these new types of systems integrators and product companies are on a mission to disrupt the existing primes and industrial base. The existing prime contracts business model will have to shift from the traditional “butts-in-seats” approach to revenue models centered around private sector technologies if they want to stay competitive.
While the legacy powerhouses will likely continue to dominate the large industrial market of building plants, tanks, and heavy artillery for the foreseeable future, they will not be immune to this shift either.
For instance, in our accelerator cohort of space tech companies, we worked with cube satellite company Kepler Communications that went from napkin to orbit in under $1 million dollars and is already pushing live commercial data. For those still operating in the world where a satellite runs in the hundreds of millions of dollars to build, commercial alternatives like Kepler Communications should be a wake-up call.
For now, the traditional culture, bureaucracy, and incentives around contracting remain within the large incumbents, even those with budding in-house innovation groups. The change might not come suddenly overnight or even in the next year, but we will see a shift in the Top 100 list. The contractors that embrace new business models and the changing needs of government will thrive, and those who don’t will face an uphill battle.”
Meagan Metzger is the CEO of Dcode, a tech accelerator with the mission of breaking down barriers between innovative private sector technologies and government. Dcode has accelerated over 65 technologies to-date, resulting in over 45 active implementations and $55M in contracts thus far. For her work at Dcode, Meagan was recognized as one of FCW’s Federal 100 winners and one of 2018’s Top Women in Tech by Fedscoop. Prior to Dcode, Meagan served as Chief Operating Officer of a government-focused mobile and cloud company helping to grow it by over 200% in its first two years. Prior to that she served as Chief Strategy Officer for a government-facing IT consultancy, helping establish it on Washington Technology’s Fast 50 as one of the fastest growing small businesses for three years in a row. Meagan has worked closely with senior leadership across DoD and civilian agencies, serving as – among other things – the program manager for the execution of billion-dollar IT program with an expertise in federal IT acquisitions.
In her spare time, Meagan serves as the chair of the Career Advisory Board in the athletic department at her alma mater, The George Washington University, where she was captain of the Division I gymnastics team on a full athletic scholarship and majored in engineering and marketing.
“The standard tactics include simply buying a smaller company to gain its technology or investing in a startup in order to control the direction of its research. Instead, BAE’s FAST Labs is attempting to serve as a middle man connecting startups with DoD customers and BAE’s various units.
“By giving [the startups] the feasibility money, we can expose them to those harsh requirements that exist in the aerospace and defense world, but we can also in turn do social engineering inside our company,” Jerry Wohletz, the vice president and general management of BAE FAST Labs, told me. The idea is to introduce the startups’ designs to BAE’s factory and engineering work force, he said, “because we need to get it out of R&D land and get it into those products and services” that BAE knows its defense customers are looking for.
FAST Labs is focused on research related to next-generation electronics, intelligent autonomous systems, cyber, electronic warfare, and sensors and processing. Wohletz explained that BAE does in-house research on capabilities that are solely of interest to DoD and the Intelligence Community, but it is reaching out to startups in order to partner on products and services based on commercial market needs.
“A lot of aerospace and defense companies have venture capital funds,” Wohletz said. “That’s not what we are trying to do. This is not an equity play to drive bottom line performance. We talk here about innovation velocity. We want speed to market.”
Therefore, BAE is also putting its money — but more importantly its time — into a number of technology accelerators, such as Techstars in Boston, Capitol Factory in Austin, Texas, and MASSChallenge with hubs in both cities. FAST Labs has a team of scouts whose job is to attend pitches all across the country. “This is not based on ownership. We leave them their freedom,” Francesca Scire-Scappuzzo, who heads the scout team, told me. “We want innovation not just to support our market, we want to support their own innovation” for the commercial market.
“Other defense contractors are trying to get involved with venture capital, but they for the most part don’t really get it. BAE was in early, and they had the benefit of being linked with us,” Lt. Col. Dave Harden, chief operating officer of AFWERX, the Air Force’s innovation hub, told me during the Techstars Air Force Accelerator Demo Day here last Thursday. Indeed, BAE cosponsored the event, and put upfront investment in at least three of 10 start-up companies participating.
Neither Wohletz or Scire-Scappuzzo would tell me the size of BAE’s budget for startup investment, but Wohletz said “it’s getting bigger every year.” Further, the company is using accelerators not just to help itself innovate, Wohletz said, but also to find foreign companies to partner with in bids where the buying country requires offsets, such as India. “It’s a completely different way of looking at this than we have done in the past,” he summed up.”