The Pentagon Is Ignoring Small Innovators

If the Defense Department is to compete with a Chinese military backed by a whole-of-nation strategy, it must stop refusing to take advantage of our nation’s most fundamental economic advantage: entrepreneurial innovation. Too many entrepreneurs report that the Pentagon is more interested in transferring their IP to an established defense giant, or bringing it in-house, than allowing a small, nimble company to grow it and succeed. This is not a new idea; various laws have sought to encourage DOD to foster entrepreneurial technology for several years. But it’s not happening. 

One of the main ways lawmakers have tried to push the Pentagon toward better engagement with our nation’s innovators is the Small Business Innovation Research, or SBIR, program, which can be used to issue awards to fill research and development needs. Congress and the Small Business Administration have issued guidance and clarification several times to smooth the path and provide acquisition preferences for SBIR companies, most recently in May, but to no avail. Unfortunately, after many years of observing, writing about, and working with defense officials, it is clear that the system will not change itself. Like any organization, there is little incentive to change without outside pressure. 

In light of this institutional resistance, I will be introducing legislation that would require the services to identify and report to the Congress each year the most promising SBIR entrepreneurial innovations and how they intend to help those entrepreneurs improve and scale the innovations for the military market. 

The legislation will allow SBIR awardees that have completed SBIR Phase II — that is, who have proved out the scientific, technical and commercial merit and potential of the idea — to apply for a special designation: Entrepreneurial Innovation, or Ei. Each year, at least ten Ei project candidates per service branch will be selected by a panel run by the Pentagon’s SBIR office and comprised of independent and un-conflicted technical and business advisers with an entrepreneurial perspective.  Each of these will receive a DOD agency Ei Advocate. Currently, SBIR companies that achieve Phase III — those that have readied their idea for sale but received no production funding — are left to be their own advocate and often experience the DOD entrepreneurial death spiral. The selected candidates will develop an Ei Project Plan with stretch goals, projected funding needs, and schedules. (Candidates not selected will receive feedback.)

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The Agency Review Panel will also select a minimum of five project plans per service to get an Agency Ei Program Manager and a Resource Sponsor. Each project plan will be presented in the same format as the DoD justification documents that accompany the President’s Budget and cover the FYDP. These will be reported to Congress annually, giving the selected companies an opportunity to interact and advocate for themselves with their federal representatives in Congress. 

By forcing the DOD and the services to select, plan, and support the best SBIR ideas, the Ei designation will help America’s best entrepreneurs to engage. My legislation will fulfill the unkept promise in current SBIR Law. 

It will also form part of an urgently needed disruption to a DOD system that too often rejects innovators in favor of a military industrial complex highly vested in existing, hard-to-modernize, and increasing irrelevant systems. If America is to maintain its military superiority, the Pentagon must be ready and willing to disrupt itself and its processes.