Pentagon Struggles to Attract New Entrants into Industrial Base

The Defense Department has for years been plagued by a perennial problem: attracting new entrants into the defense industrial base.

Injecting the DIB with the innovation that small businesses, nontraditional companies and startups bring is critical if the Pentagon wants to maintain overmatch against adversaries, experts say. But despite a myriad of programs and efforts to entice firms to work with the Pentagon, data shows that there has been a continued downward trajectory.

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Stacie Pettyjohn, director of the Center for a New American Security’s defense program, said major prime contractors have optimized themselves for the Pentagon’s burdensome procurement process, but nontraditional and small businesses have not.

“They have to sort of adapt to this really onerous process that exists,” she said. The process can be very slow and inflexible, and the threshold for obtaining a program of record is extremely high. Programs of record are where the real money is, she noted.

While the Pentagon has stood up innovation hubs such as the Defense Innovation Unit and AFWERX, most of their money is for early research and development efforts, she said.

“They don’t actually have money to procure any of these programs at scale,” Pettyjohn said. “They provide seed funding, which is in DoD dollars relatively modest. That helps to start and to get some of these companies going, and then maybe to prototype, but then it ultimately has to be picked up probably by one of the services.”

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