Historically, the Department of Defense (DoD) has relied on a business model whereby DoD set requirements, contracted with competing firms for research and development (R&D), and ultimately DoD awarded production contracts based on the lowest cost solution offered. This paradigm was a result of government-funded R&D spending outnumbering industry R&D spending; an approach that relied upon because the government-funded R&D was the driver of innovation in the U.S. economy. In the 1960s the percentage of total R&D spending funded by government was about double the percentage funded by industry, however over time, private R&D funding has steadily grown such that those figures have now flipped. The trend for greater industry R&D will be further exacerbated by federal budget cuts and the possible return of sequestration, which has already led to a recent downturn in DoD R&D contract spending.
This trend, assuming it continues, will force DoD to rethink its processes for generating requirements, budgeting, and acquisition, as well as oversight structures within the Department and Congress that are aligned to its historical business model. For instance, DoD and Congress have embraced the modular open systems approach (MOSA) to access commercial technologies through technological refresh through the lifecycle. While legislation has been passed pertaining to the technical details to support this effort, most notably pertaining to intellectual property and technical data rights, there are inherent conflicts between MOSA and DoD’s desires for greater investment in R&D for some types of systems. Moving forward, ongoing panels established by the Fiscal Year 2016 National Defense Authorization Act on intellectual property statutes (Government-Industry Advisory Panel) and streamlining and codifying acquisition regulations (Section 809 Panel) should provide a good starting point for DoD.