Release of the "Doing Business with the U.S. Defense Department" Report
Results from survey illuminate barriers companies face in converting disruptive commercial technologies into widescale capabilities...and what DoD can do about them.
Hey everyone! If you are receiving this, you either completed the “Doing Business with USG” survey, or are a new subscriber to the Front Door substack.
We’re thrilled to be able to share an early look of complete survey results with this audience before its available to the general public.
Below is the executive summary (also available here with crosstabs). You can find the full report online at the Texas National Security Review here.
If you have questions, comments, or want to discuss with the authors (Jeff Decker and Noah Sheinbaum), just reply to this email and we’ll be in touch.
Doing Business with the U.S. Government
Executive Summary
On Jan. 11, the Defense Department released its first National Defense Industrial Strategy (NDIS), laying out four strategic priorities to modernize and expand the U.S. defense industrial ecosystem. But the goals of reform should not be just an “increase in number of suppliers newly doing business with the Department,” as the NDIS states. Rather, the goal should be the rapid and widespread adoption of more advanced technologies to accomplish essential mission objectives.
The Doing Business with the Government report presents data collected from 859 respondents to a 10-question survey offered from October – November 2023 about the issues companies face when partnering with the government. The survey was distributed to a network of Small Business Innovation Research (SBIR) and Small Business Technology Transition (STTR) grant recipients, consortiums supporting Other Transaction Authority opportunities, venture capital portfolios, personal networks, and public requests via LinkedIn and emails to companies previously or currently doing business with the U.S. government or seeking to do so. It received 859 responses.
Our survey and research yielded five key findings on the most pressing needs and significant challenges companies face when working with the Defense Department.
Policymakers and defense personnel will benefit from this work as it offers empirically based insights on the needs of companies as well as recommendations for how to improve the U.S. government’s ability to adopt commercial technologies. Both insights and recommendations are essential to informing U.S. defense and industrial policy. Each individual recommendation would be a step forward, even if the entire package is not adopted.
Findings
Finding 1: Partnering with different types of companies requires different tactics. The government must develop unique approaches for partnering with each type of company. Speed to award is crucial to smaller companies and startups (36% prefer faster time to award), while size is more important for companies with commercial revenue (67% prefer larger contracts, vs 61% who prefer speed).
Recommended Government Actions: The Defense Department must offer larger, more secure revenue for firms with existing commercial products, while helping newer companies get on contract much faster. To partner with companies at different stages, the government should:
Publish an Annual Transition Playbook detailing successful company transition pathways to serve as guides for similar companies and program offices (note: for more on this, subscribe to Front Door Defense and the Crossing the Valley podcast… coming soon)
Clarify acquisitions to attract the right companies for the capability - and help companies determine when not to bid.
Finding 2: Defense Department partnerships with new entrants to the federal market falter because companies and buyers are disconnected. Companies are hungry for greater connectivity to program officers. 43% of all respondents rank a program officer as the most helpful introduction, vs. 27% who prefer end-users.
Recommended Government Actions: Having end-user support, while necessary, is insufficient to winning production contracts with the government. Even seasoned entrepreneurs with government experience struggle to navigate the Defense Department’s acquisition bureaucracy, to turn end-user enthusiasm into programmatic requirements and meaningful business. To connect companies with program officers, the government should:
Create more meaningful opportunities for companies to collaborate with program offices pre-contract.
Identity, engage, and share information with relevant program offices from the start of pilot contracts.
Finding 3: New entrants are unprepared to meet government technical transition requirements, especially compliance requirements necessary for production contracts. Just 43% of respondents received a government license or certification; 47% have not. Companies are often unaware that compliance requirements exist and face difficulty in satisfying the steps required to obtain certifications and licenses.
Recommended Government Actions: To prepare companies to deploy their capabilities at scale, the government needs to help them better understand the array of licenses and certifications they will need to deploy their capabilities, and on what timeline. To do this, the government should:
Provide a compliance checklist when companies receive pilot contracts
Create a category of supplemental SBIR / STTR funds for testing and evaluation
Finding 4: The Government’s stance on Intellectual Property rights slows awards and shrinks the pool of companies willing to sell to the Defense Department. Companies entering the federal market are concerned about protecting their IP. Yet, these survey results indicate a willingness to give up more IP rights than experts and observers might expect (67% of survey respondents indicate they would be willing to accept Government-Purpose Rights, while just 24% indicate they would require restricted rights). This divergence highlights the confusion companies have about IP rights language used by the government.
Recommended Government Actions: To protect companies’ IP rights in order to attract them to the federal marketplace, and allow them to scale from pilot contract to production, the government should:
Create template IP rights frameworks for different business models to facilitate transition from pilot to production.
Default to Other Transaction Authority (OTA) for SBIR awards and sanity check IP rights for clarity and practicality.
Finding 5: Access to classified environments limits the government’s exposure to new / commercial capabilities. 43% of respondents ranked “accessing classified environments” as a “most challenging” barrier to working with the government. Classified environments prevent companies entering the defense market from bidding and performing on contracts. Classified environments remain an anti-competitive moat, frustrating these companies’ ability to bid on new opportunities and deliver on existing contracts.
Recommended Government Actions: To broaden participation in the defense industrial base, the U.S. government must solve the challenge of accessing classified facilities for qualified participants. In order to attract a broader base and allow them to compete, the government should:
Co-locate security officers, industrial security specialists, and Defense Counterintelligence and Security Agency (DCSA) liaison officers within innovation units (e.g., AFWERX, DIU, etc.).
Use non-military sites to create Secure Compartmentalized Information Facility (SCIF) sites across the country for company use.
Conclusion
Success for the government means building the infrastructure that allows a parade of mission-driven entrepreneurs and company builders to develop, deliver, and scale disruptive technology and services to benefit the warfighter and strengthen U.S. national security. Achieving this goal means better aligning government policies and personnel with companies, making access easier, and eliminating the myriad obstacles that dissuade many from entering and thriving in the defense market. Company success in the defense market is inextricably linked to the military’s success on the battlefield. A smaller vendor pool with less competition risks widening the defense technology gap between the United States and its adversaries. The potential harm to U.S. national security could be immense. Failing to address the obstacles companies face will result in companies losing interest, investors losing patience, and a government starved of the resources it so desperately needs to project power and establish security at a time when global insecurity is the norm.
Now is the time to move from purely recruiting new Defense Department suppliers to becoming a better technology transition partner.
Jeff Decker, Ph.D. is managing director of Tech Transfer for Defense at Stanford University’s Doerr School of Sustainability and is a co-instructor of the graduate-level Hacking for Defense course. Follow his work at Stanford’s Hacking for Defense blog.
Noah Sheinbaum is the founder of Frontdoor Defense, a platform to simplify the defense industry for mission-aligned builders and operators. He also co-founded Defense Tech Jobs, a jobs board for defense technology companies, and consults for various purpose-driven companies.