Stirring Commercial Competition in Defense – Taking a Page from NASA’s Playbook

By: Quintarius Bell, Pallas Foundation Fellow

14 December 2023

As the Defense Department grapples with modernizing its acquisition strategy, a chorus of voices from the tech industry signed a letter to Congress urging action to fund non-traditional commercial capabilities for the warfighter. In the face of China’s pacing threat, the Defense Department must inject agility and innovation into its cumbersome procurement processes and increase competition in the defense industrial base – bringing more non-traditional companies to the table will help recover from the consequences of the “Last Supper,” a wave of mergers and acquisitions in the early 90s that created today’s big primes. 

The Defense Department stands at a crossroads reminiscent of NASA’s dilemma in the early 2000s when the agency faced stalled procurement efforts due to a diminished pool of contractors. Lessons from the industrial consolidation of the space industry during this period – and how NASA responded –  are striking and instructive. NASA adopted a public-private partnership model through the Commercial Crew Program to routinely transport astronauts to the International Space Station. This program energized the space industry and helped give rise to the commercial space innovation we see today.  

While the Department has taken steps towards embracing rapid acquisition and fielding for the warfighter through the Defense Innovation Unit (DIU) and, in theory, the establishment of the Office of Strategic Capital, the journey is far from over. The Defense Department must not only adapt but also transform, drawing lessons from NASA's playbook to outpace global adversaries and fuel the spirit of innovation in defense technology.

It’s critical to shake things up in the world of defense contracting. Organizations like DIU and the U.S. Air Force’s innovation arm, AFWERX, are trying to stir the pot by bringing more competition and fresh ideas into the mix. They must prioritize cutting-edge ingenuity and ensure everyone's invited, especially the smaller players who often bring the most innovative ideas to the table. This approach isn't just a nice-to-have; it's a crucial reaction to the Last Supper, and it's a core tenant that organizations like SVDG are advocating for – new sources of innovation for national security. Their main point: let’s ensure the Fiscal Year 2024 Defense Appropriations Act recognizes and supports the kind of vibrant, diverse participation wrought by the establishment of DIU’s Non-Traditional Innovation Fielding Enterprise (NIFE).

It's not just tech industry players that are calling for this change. The White House is on board too. They've been pushing federal agencies to open their doors wider to allow new entrants into the federal marketplace. This idea, a so-called “First Breakfast,” is all about giving a chance to those who haven't been part of the defense business conversation before. And guess what? This isn't just talk. Earlier this year, the Office of Management and Budget rolled out guidelines  to make this happen. It's about creating a level playing field where the best ideas win, no matter where they come from.

Reflecting on NASA's Commercial Orbital Transportation Services programs – a program where NASA acted as both investor and procurer for private companies in the delivery of cargo and crew to the International Space Station – reveals a strategic approach ripe with lessons for the Defense Department. NASA’s pivot wasn’t just a policy shift; it was a paradigm shift that energized the entire sector. Central to this transformation were the Space Act Agreements (SAAs). Under these agreements, the onus was on the contractors to define key milestones and costs, fostering a sense of ownership and urgency. The rule was simple: deliver as promised and get paid. This approach shifted NASA's dependency from international sources to American suppliers, bolstering domestic capabilities and reducing external reliance.

But the real game-changer in NASA's approach was borrowing a page from the venture capitalist’s playbook. Could these companies deliver a new commercial off-the-shelf service to the market? That became the big question. The focus was no longer solely on technical capability but on a company's ability to draw private investment and customers, emphasizing market viability of the technologies being developed. 

The Defense Department could play a pivotal role in driving forward the development of technologies that have both defense and civilian applications. This role as the ultimate investor in dual-use technologies would not only ensure we both counter and keep pace with our adversaries to the East but also stimulate technological advancements in broader US markets, echoing the earlier successes and impact NASA had for commercial space activity.

Quintarius was a Pallas Foundation Fellow in Fall 2023. He is a senior at the University of Miami working towards an Industrial Engineering degree. He has experience with spacecraft and nuclear systems as well as due diligence and market research for venture investing. He is excited to learn about the process of introducing dual-use technologies to the public sector. His interests span technology transfer, space, and venture capital.