National Defense Authorization Act Seeks To Better Leverage Commercial Technology

Last week, President Biden signed the National Defense Authorization Act (NDAA), which specifies the annual budget for the Department of Defense (DoD) and mandates how the money is spent. The bill passed both the Senate and the House handedly despite having its fair share of scrutiny for issues related to selective service, sexual assault, and embargos. However, Congress was generally positive about the NDAA’s increased focus on research and development, including almost $117 billion in new science and technology. More importantly, the NDAA included several much needed measures to support and reform the DoD acquisition processes. These measures focus on better leveraging technology from the commercial sector, especially in the fields of cybersecurity and Artificial Intelligence (AI).

There is a general concern that the U.S. military has fallen behind other countries, namely China, in these fields. Earlier this year, Nic Chaillan, the Air Force chief software officer, stated in his resignation: “We’re very behind in cyber, to a point that it was very scary when it comes to critical infrastructure and the lack of security.” He further stated, “While we wasted time in bureaucracy, our adversaries moved further ahead.”  Moreover, a recent report from the National Security Commission on AI stated that the United States is incapable of defending itself against threats related to AI technologies. The report continues that the U.S. government is far from even being “AI-ready.”

The central reason for these issues is that the U.S. defense acquisition structure is not set up for fast-paced technologies. While the current processes are well suited for the procurement of tanks, fighter-planes, and aircraft carriers, they struggle when handling technology not unique to the military, especially related to information technology and electronics. In these fields, the DoD’s long-development timelines do not keep pace with the commercial sector, resulting in technology being obsolete by the time that it is fielded.

A recent report from the RAND corporation states that other countries, including China and Russia, have historically faced similar issues with their defense acquisition processes. However, the report also states that in 2015, China set a national priority to better leverage its booming commercial sector for military technology.  This “Military-civil fusion” has been successful and has advanced China’s military technology in the cyber and AI realms.

The recently approved NDAA includes provisions that support the U.S. military using commercial innovation, similar to what China accomplished. First, the NDAA mandates several studies on how to better leverage the commercial sector through changes in the DoD acquisition process. The Senate Armed Services Committee identified that the DoD tends to procure custom solutions when better commercial alternatives are available. As such, Section 807 requires that the DOD investigate the “impediments and incentives” related to the defense acquisition of commercial products and services. 

Additionally, Section 824 of the NDAA requires a review of the use of Other Transaction (OT) authority. This authority has historically been used for nonstandard procurement contracts, grants, or cooperative agreements that are not subject to the Federal Acquisition Regulation. In recent years, OT authority has been heavily used for prototype development especially leveraging commercial technology. With some ambiguity in the current OT policies, this review will add transparency and allow for a clear pathway for leveraging commercial technology.

The NDAA also formalizes the Commercial Solutions Openings (CSO) program, which was launched as a pilot program in 2017 to acquire “innovative technologies” through prize competitions and peer review of proposals. The CSO program sought to remove the high barriers of entry and low incentives associated with current processes, allowing non-traditional contractors to provide innovative solutions to the government.  Both the Air Force and the Defense Innovation Unit have successfully used CSOs with commercial firms for procuring IT equipment and services. The program was set to expire at the end of this Fiscal Year; however, Section 803 of the NDAA permanently retains this program.

Furthermore, the NDAA establishes a pilot program to develop and implement novel acquisition mechanisms related to emerging technologies. Section 833 requires the DoD to establish this pilot program within 180 days and award up to four contracts related to critical modernization efforts. The NDAA enumerates specific areas of focus including “offensive missile capabilities, space-based assets, personnel and quality of life improvement, and energy generation and storage.” If successful, these mechanisms will be formalized in a future NDAA.

Although the United States military may be lagging China in leveraging commercial technology, these adjustments are a marked improvement to the status quo. Further, these provisions lay the groundwork for larger acquisition reforms that will likely occur in coming years.