Industry and Innovation in the QDR

2010 QDR, p.82:

Although some unique items are produced solely for the Department, these items themselves often rely on a complex and integrated supply chain of product providers that, if strained at the second, third, and even fourth tiers, would jeopardize the ability of even the seemingly pure military industrial providers to continue to support our forces.

Many of the defense industries' jobs that require the most irreplaceable skills reside within nonprime suppliers. Many of these small, highly specialized companies depend on the major suppliers and their unique requirements for their very survival. The cascading effects on them of decisions that the Department makes at the overall programmatic level must be better understood-to ensure that critical lower-tier providers have the capacity to respond to these decisions, to ensure the continued supply of critical subcomponents to our defense industrial base, to ensure that critical skills are not lost, and to protect our national security from the risk of
using compromised supply chains ….

Likewise, although innovations unique to national security often occur within the "pure-play" defense industrial base, the vast majority of innovative and revolutionary components, systems, and approaches that enable and sustain our technological advantage reside in the commercial marketplace, in small defense companies, or in America's universities.

I found this passage interesting, because it echos an argument that the Rumsfeld Pentagon made about the role of small business in defense procurement. Specifically, Rumsfeld argued that in an era of accelerating innovation, small companies that weren't traditionally part of the defense industry would play a larger role in developing new technologies and systems.

Rumsfeld also argued that small, innovative companies had trouble working with the Department of Defense. Eugene Gholz and Pete Dombrowski made this argument at greater length (and with a different focus) in Buying Military Transformation, which suggested that the familiarity of the major defense-industrial companies with DoD practice and personnel made it very difficult for alternative providers to break in to the market. Davida Isaacs and myself expanded on this by arguing that DoD interpretation of patent and trade secret law makes it very risky for small companies to engage in any kind of military-oriented innovation.

And so it's interesting that we still find an injunction to support the innovative practices of small companies in the 2010 QDR. The quoted statements, I think, would be right at home in Rumsfeld's DoD. The lack of explicit, concrete steps to support small, non-traditional defense providers, however, indicates to me that the rhetorical support may be lacking in any kind of policy force.