Defense Secretary Chuck Hagel announced a new, long-term measure to spur innovation within the Defense Department last week, marking the Pentagon’s latest and most wide-ranging attempt to address what officials call America’s diminished technological superiority in the military arena.
The new program, known as the Defense Innovation Initiative, aims to set up a research and development arm to explore cutting-edge technologies and systems that the military should invest in, such as 3-D printing, robotics, and big data, Hagel said in a speech at the Reagan National Defense Forum in California.
In addition, the Pentagon will look into new approaches to war fighting, military education and leadership programs, he said.
Hagel did not provide specifics on how much money the Pentagon plans to invest in the program, saying only that as the initiative matures, he “expect its impact on [the Defense Department]’s budget to scale up in tandem.”
While the department’s other measures — such as its Better Buying Power initiative to improve acquisition — have specific consequences for contractors, the picture isn’t as clear with Hagel’s program.
Acknowledging that the Pentagon is no longer the birthplace of innovation, Hagel said the new program will “actively seek proposals from the private sector,” including from companies and academic institutions “outside its traditional orbit.”
Without more details, contractors may be slow to embrace the initiative, according to defense analysts.
“The department is still deliberating on how much money will be shifted or applied to these technology areas, and we do not think defense companies will chase these technologies until there is a better understanding of the payoff,” Roman Schweizer, a defense policy analyst at Guggenheim Securities, wrote in an analyst note.
In the short term, smaller companies are more likely to benefit from the program, Schweizer said.
“It’s very possible that the Pentagon will shift hundreds or tens of millions in [research and development] spending that will move the needle for smaller firms working on specific technologies,” he wrote.
The push for innovative technology could also spur more big defense companies to acquire small ones, he said.
Such consolidation is already evident in the government contracting market.
Lockheed Martin has made seven acquisitions so far this year, including its purchase of satellite company Astrotech Space Operations, energy start-up Sun Catalytix and health technology company Systems Made Simple. Consulting giant Booz Allen Hamilton bought two health-care companies last month.
The Pentagon has said that it will release more details about the innovation plan in coming weeks.
In the near term, the innovation program will invite “some of the brightest minds from inside and outside government” to assess what technologies the Pentagon should develop over the next three to five years, Hagel said.
The Pentagon also plans to set up a panel led by Deputy Defense Secretary Robert Work intended to present ideas to preserve the military’s competitive edge.
Frank Kendall, the Pentagon’s top acquisition official and the person behind Better Buying Power, has repeatedly called for the need to invest in new technology. The latest iteration of his program, released in September, has a research-heavy emphasis that includes provisions for small businesses and incentives to reward companies that spend money on research and development.
The two programs are designed to work with each other, according to the Pentagon.
While Hagel’s program sets a big-picture agenda for the Pentagon over the next decade, Kendall’s effort “helps to implement that strategy,” a department spokeswoman said in an e-mail.
Hagel touched on the difference between the two in his speech.
The aim of Kendall’s effort is to work with Congress and “overhaul the legal framework” for military acquisitions “by reducing unnecessary paperwork so that we can focus on key, strategic priorities,” he said.