The Global Research and Development Landscape and Implications for the Department of Defense

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The Global Research and Development
June June 2128, 2021 , 2021
Landscape and Implications for the
John F. Sargent Jr.
Department of Defense
Specialist in Science and Specialist in Science and
Technology Policy Technology Policy
For more than 70 years, the technological superiority of the United States military has offset the For more than 70 years, the technological superiority of the United States military has offset the

size and geographic advantages of potential adversaries. The Department of Defense (DOD), due size and geographic advantages of potential adversaries. The Department of Defense (DOD), due
Marcy E. Gallo
in large part to the magnitude of its investments in research and development (R&D), has driven in large part to the magnitude of its investments in research and development (R&D), has driven
Analyst in Science and Analyst in Science and
the global R&D and technology landscape. However, DOD and the federal government more the global R&D and technology landscape. However, DOD and the federal government more
Technology Policy Technology Policy
broadly are no longer overriding funders of R&D, and this shift in support for R&D has broadly are no longer overriding funders of R&D, and this shift in support for R&D has

substantial implications for how DOD obtains advanced technology and maintains the battlefield substantial implications for how DOD obtains advanced technology and maintains the battlefield
overmatch that technology has historically provided. overmatch that technology has historically provided.

In 1960, the United States accounted for 69% of global R&D (measured in share of expenditures), with U.S. defense-related In 1960, the United States accounted for 69% of global R&D (measured in share of expenditures), with U.S. defense-related
R&D alone accounting for more than one-third of global R&D (36%). Additionally, the federal government funded R&D alone accounting for more than one-third of global R&D (36%). Additionally, the federal government funded
approximately twice as much R&D as U.S. business. However, from 1960 to 2019, the U.S. share of global R&D fell to 30%, approximately twice as much R&D as U.S. business. However, from 1960 to 2019, the U.S. share of global R&D fell to 30%,
and the federal government’s share of total U.S. R&D fell from 65% to 21%, while business’s share more than doubled from and the federal government’s share of total U.S. R&D fell from 65% to 21%, while business’s share more than doubled from
33% to 71%. As a result of these global, national, and federal trends, federal defense R&D’s share of total global R&D fell to 33% to 71%. As a result of these global, national, and federal trends, federal defense R&D’s share of total global R&D fell to
3.1% in 2019. This decline resulted primarily from more rapid increases in the R&D of other nations (public and private) and 3.1% in 2019. This decline resulted primarily from more rapid increases in the R&D of other nations (public and private) and
partially from increases in U.S. business R&D and federal nondefense R&D.partially from increases in U.S. business R&D and federal nondefense R&D.
Some defense experts and policymakers have recognized the shift in the global R&D landscape and the need for DOD to rely Some defense experts and policymakers have recognized the shift in the global R&D landscape and the need for DOD to rely
increasingly on technologies developed by commercial companies for commercial markets. Among the challenges DOD increasingly on technologies developed by commercial companies for commercial markets. Among the challenges DOD
faces in acquiring new, innovative technologies and maintaining U.S. military technical superiority arefaces in acquiring new, innovative technologies and maintaining U.S. military technical superiority are
 developing/modifying organizations and business models to access this technology;  developing/modifying organizations and business models to access this technology;
 adapting the DOD business culture to seek and embrace technologies developed outside of DOD, the  adapting the DOD business culture to seek and embrace technologies developed outside of DOD, the
United States, and its traditional contractor base; and United States, and its traditional contractor base; and
 finding ways to adapt and leverage commercial technologies for defense applications.  finding ways to adapt and leverage commercial technologies for defense applications.
Congress plays a central role in how DOD creates and acquires leading-edge technologies, including establishing and Congress plays a central role in how DOD creates and acquires leading-edge technologies, including establishing and
refining the organizational structure of DOD R&D activities, providing policy direction, establishing acquisition policies and refining the organizational structure of DOD R&D activities, providing policy direction, establishing acquisition policies and
authorities, and appropriating funds for R&D and innovation-related activities. Congress and the Administration have authorities, and appropriating funds for R&D and innovation-related activities. Congress and the Administration have
undertaken a number of actions to address the perceived decline in technical superiority, including undertaken a number of actions to address the perceived decline in technical superiority, including
 establishing the position of the Under Secretary of Defense for Research and Engineering to coordinate  establishing the position of the Under Secretary of Defense for Research and Engineering to coordinate
DOD’s research enterprise, drive the development of key technologies, and create a more agile and DOD’s research enterprise, drive the development of key technologies, and create a more agile and
innovative department; innovative department;
 increasing DOD collaboration and engagement with industry and academia. For example, DOD has  increasing DOD collaboration and engagement with industry and academia. For example, DOD has
increased its presence in U.S. commercial technology hubs through the Defense Innovation Unit, increased its presence in U.S. commercial technology hubs through the Defense Innovation Unit,
established partnership intermediary agreements with various organizations, and co-located DOD research established partnership intermediary agreements with various organizations, and co-located DOD research
and development personnel at partner institutions across the country; and and development personnel at partner institutions across the country; and
 working to alter the culture of DOD to increase the speed technologies are developed, adapted, and  working to alter the culture of DOD to increase the speed technologies are developed, adapted, and
acquired, including through the use of other transaction authority. acquired, including through the use of other transaction authority.
As DOD implements these reform efforts congressional oversight may include monitoring how effectively DOD is As DOD implements these reform efforts congressional oversight may include monitoring how effectively DOD is
addressing congressional directives and intent to create a more risk tolerant and innovative DOD. addressing congressional directives and intent to create a more risk tolerant and innovative DOD.
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Figure 8. Growth in Gross Expenditures on R&D for Selected Nations, 2000-2019 ................... 10

Tables
Table 1. Nations with the Largest Gross Expenditures on R&D, 2019 ........................................~~...~~ 9

Appendixes
Appendix. Selected Science, Technology, and Innovation Laws Enacted in the 1980s ................ 32

Contacts
Author Information .......................................................................................................~~.................~~ 34

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The Global Context for Research and Development and Implications for the DOD

Introduction
Providing for the national defense is a central concern of Congress, and technological advantage Providing for the national defense is a central concern of Congress, and technological advantage
has long provided U.S. forces with a battlefield overmatch, deterring potential conflicts and has long provided U.S. forces with a battlefield overmatch, deterring potential conflicts and
contributing to decisive U.S. militarycontributing to decisive U.S. military victories. Underpinning U.S. technological advantage are victories. Underpinning U.S. technological advantage are
leading-edge innovations built on a foundation of insights gained from research and development leading-edge innovations built on a foundation of insights gained from research and development
(R&D) activities. Today, many analysts believe that U.S. technological overmatch—and, by (R&D) activities. Today, many analysts believe that U.S. technological overmatch—and, by
extension, national security—is at risk due to a number of factors, including a rapidly evolving extension, national security—is at risk due to a number of factors, including a rapidly evolving
global landscape for innovation; changes in the composition of R&D funding; and the increasing global landscape for innovation; changes in the composition of R&D funding; and the increasing
technological prowess of potential adversaries. Many policymakers believe that new approaches technological prowess of potential adversaries. Many policymakers believe that new approaches
and mechanisms are required to maintain U.S. technological advantage.and mechanisms are required to maintain U.S. technological advantage.
Congress plays a central role in how the Department of Defense (DOD) creates and acquires Congress plays a central role in how the Department of Defense (DOD) creates and acquires
leading-edge technologies, including establishing and refining the organizational structure of leading-edge technologies, including establishing and refining the organizational structure of
DOD research and development activities,1 providing policy direction, and appropriating funds DOD research and development activities,1 providing policy direction, and appropriating funds
for R&D and innovation-related activities. Congress and the Administration have undertaken for R&D and innovation-related activities. Congress and the Administration have undertaken
actions in these areas in an effort to ensure that the United States maintains superiority over its actions in these areas in an effort to ensure that the United States maintains superiority over its
potential adversaries.potential adversaries.
This report provides an overview of the changes that have occurred in the global R&D landscape, This report provides an overview of the changes that have occurred in the global R&D landscape,
the Administration’s policies and perspectives on how to maintain U.S. military technological the Administration’s policies and perspectives on how to maintain U.S. military technological
leadership, actions taken by Congress, and potential issues for consideration. leadership, actions taken by Congress, and potential issues for consideration.
The Global R&D Landscape, Past and Present
Prior to the 1940s, the United States depended on Europe as a major source of scientific capital.2 Prior to the 1940s, the United States depended on Europe as a major source of scientific capital.2
World War II (WWII) initiated a vastly expanded role for the U.S. government in funding, World War II (WWII) initiated a vastly expanded role for the U.S. government in funding,
administering, and conducting research and development. In support of the war effort, new administering, and conducting research and development. In support of the war effort, new
offices were established at the highest levels of the federal government to support the planning offices were established at the highest levels of the federal government to support the planning
and oversight of scientific and technological efforts. President Franklin Roosevelt created the and oversight of scientific and technological efforts. President Franklin Roosevelt created the
U.S. Office of Scientific Research and Development (OSRD) by executive order in June 1941 to U.S. Office of Scientific Research and Development (OSRD) by executive order in June 1941 to
ensure “adequate provision for research on scientific and medical problems relating to the ensure “adequate provision for research on scientific and medical problems relating to the
national defense.”3national defense.”3
The R&D managed by OSRD contributed to the The R&D managed by OSRD contributed to the ~~Allied~~ Al ied victory in WWII in a number of ways. victory in WWII in a number of ways.
Among its best known achievements were the development of atomic weapons under the Among its best known achievements were the development of atomic weapons under the
Manhattan Project and the development of radar. Several of today’s largest and most prestigious Manhattan Project and the development of radar. Several of today’s largest and most prestigious
U.S. national laboratories have their roots in these efforts.4 U.S. national laboratories have their roots in these efforts.4

~~1 The~~ 1 T he phrase “research and development” is used phrase “research and development” is used throughout this report. throughout this report. ~~The~~T he Department of Defense has traditionally Department of Defense has traditionally
includedincluded “testing and evaluation” (T“testing and evaluation” (T &E) funding together with R&D funding&E) funding together with R&D funding in what it refers to collectively as in what it refers to collectively as
RDTRDT &E. Recent changes in U.S.&E. Recent changes in U.S. reporting of federal R&Dreporting of federal R&D funding excludefunding exclude some fundingsome funding for latefor late -stage T-stage T &E activities. &E activities.
~~These~~T hese changes and their underlying rationale are discussed changes and their underlying rationale are discussed in CRSin CRS Report R45150, Report R45150, Federal Research and ~~Development~~Developm ent
(R&D) Funding: FY2019, coordinated by John F. Sargent Jr. , coordinated by John F. Sargent Jr.
2 Office of Scientific Research and2 Office of Scientific Research and Development, Department of Defense, Development, Department of Defense, Science: The Endless Frontier, July 1945, , July 1945,
https://www.nsf.gov/about/history/vbush1945.htm#transmittal. https://www.nsf.gov/about/history/vbush1945.htm#transmittal.
3 Executive Order 8807, “Establishing the Office of Scientific Research and 3 Executive Order 8807, “Establishing the Office of Scientific Research and Development,” issued by President Development,” issued by President
Franklin D. Roosevelt, June 28, 1941, http://www.presidency.ucsb.edu/ws/?pid=16137. Franklin D. Roosevelt, June 28, 1941, http://www.presidency.ucsb.edu/ws/?pid=16137.
4 National laboratories with roots in World War II include4 National laboratories with roots in World War II include Lawrence Berkeley National Laboratory, Los Alamos Lawrence Berkeley National Laboratory, Los Alamos
National Laboratory, Sandia National Laboratories, Oak RidgeNational Laboratory, Sandia National Laboratories, Oak Ridge National Laboratory, Argonne National Laboratory, and National Laboratory, Argonne National Laboratory, and
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In light of the success of the nation’s WWII investments in R&D, President Roosevelt sent a In light of the success of the nation’s WWII investments in R&D, President Roosevelt sent a
letter to OSRD Director Vannevar Bush in November 1944 requesting recommendations on the letter to OSRD Director Vannevar Bush in November 1944 requesting recommendations on the
future of the nation’s scientific enterprise, including what government could do to aid the future of the nation’s scientific enterprise, including what government could do to aid the
research activities of public and private organizations.5 With the death of President Roosevelt in research activities of public and private organizations.5 With the death of President Roosevelt in
April 1945, Bush directed his response to President Harry Truman in the form of a report, April 1945, Bush directed his response to President Harry Truman in the form of a report,
Science: The Endless Frontier. The report asserted the need for, value of, and rationale for an The report asserted the need for, value of, and rationale for an
expanded federal role in supporting R&D and the development of scientific talent to meet societal expanded federal role in supporting R&D and the development of scientific talent to meet societal
needs. The report provided specific recommendations for federal government action.needs. The report provided specific recommendations for federal government action.
In his report, Bush asserted that “science is a proper concern of government” and advocated for a In his report, Bush asserted that “science is a proper concern of government” and advocated for a
strong and steady federal government commitment to scientific research to “insure our health, strong and steady federal government commitment to scientific research to “insure our health,
prosperity, and security as a nation in the modern world.” The report stated that “scientific prosperity, and security as a nation in the modern world.” The report stated that “scientific
progress is essential” and must be “continuous and substantial” to enable progress is essential” and must be “continuous and substantial” to enable
more jobs, higher wages, shorter hours, more abundant crops, more leisure for recreation, more jobs, higher wages, shorter hours, more abundant crops, more leisure for recreation,
forfor ~~study, for learning how to live without the deadening drudgery which has been~~ study, for learning how to live without the deadening drudgery which has been the the
burden of the common man for ages past … for higher standards of living … the prevention burden of the common man for ages past … for higher standards of living … the prevention
and cures of diseases … conservation of our limited national resources, and … means of and cures of diseases … conservation of our limited national resources, and … means of
defense against aggression. 6 defense against aggression. 6
In particular, the report In particular, the report ~~called~~cal ed for “extend[ing federal] financial support to basic medical research for “extend[ing federal] financial support to basic medical research
in the medical schools and in universities,” “more adequate military research in peacetime,” and in the medical schools and in universities,” “more adequate military research in peacetime,” and
for the public welfare, which the report described in terms of full employment through the for the public welfare, which the report described in terms of full employment through the
creation of “new jobs…new and better and cheaper products…[and] plenty of vigorous new creation of “new jobs…new and better and cheaper products…[and] plenty of vigorous new
enterprises.” The report asserted that this required the United States to create its own scientific enterprises.” The report asserted that this required the United States to create its own scientific
capital, turning away from U.S. pre-war reliance on Europe for such knowledge. capital, turning away from U.S. pre-war reliance on Europe for such knowledge.
While its recommendations were not While its recommendations were not
Figure 1. Federal R&D Funding, by Budget
implemented in their entirety, implemented in their entirety, Science:
Function, FY1960-FY2020
The Endless Frontier served as a served as a
(in (in ~~billions~~bil ions of current of current ~~dollars~~dol ars) )
blueprint for a greatly expanded federal blueprint for a greatly expanded federal
role in funding R&D, including the role in funding R&D, including the
establishment of the National Science establishment of the National Science
Foundation and increased funding for Foundation and increased funding for
federal laboratories, private industry, U.S. federal laboratories, private industry, U.S.
universities, and other nonprofit universities, and other nonprofit
organizations. organizations.
Federal R&D funding as a share of total Federal R&D funding as a share of total
U.S. R&D grew from 53.9% in 1953 to U.S. R&D grew from 53.9% in 1953 to
65% by 1960, peaking at 67% in 1964. 65% by 1960, peaking at 67% in 1964.
Between 1953 and 1960, federal R&D Between 1953 and 1960, federal R&D

funding more than tripled in current funding more than tripled in current
Source: CRS analysis of data from CRS analysis of data from National Science National Science
Foundation in Foundation in Federal R&D Funding, by Budget Function: Fiscal
dollars, and by FY1966 it had dollars, and by FY1966 it had
Years 2019–21. NSF 21-315. February 22, 2021. . NSF 21-315. February 22, 2021.
quintupled.7 From 1955 to 1966,8 the vast quintupled.7 From 1955 to 1966,8 the vast

Ames Laboratory. Some of these laboratories and their forerunners existed on a smaller scale prior to the war.Ames Laboratory. Some of these laboratories and their forerunners existed on a smaller scale prior to the war.
5 Office of Scientific Research and 5 Office of Scientific Research and Development, Department of Defense, Development, Department of Defense, Science: The Endless Frontier, July 1945. , July 1945.
6 Ibid. 6 Ibid.
7 CRS7 CRS analysis of data publishedanalysis of data published by the National Science Foundation in by the National Science Foundation in National Patterns of R&D Resources: 2018–19
Data Update, April 9, 2021. April 9, 2021.
8 Federal R&D 8 Federal R&D funding data by budgetfunding data by budget function is not available prior to 1955. function is not available prior to 1955.
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majority (81%) of the growth in federal R&D funding was for national defense (42% of the majority (81%) of the growth in federal R&D funding was for national defense (42% of the
growth) and space flight (39% of the growth).9 (growth) and space flight (39% of the growth).9 (~~See~~See Figure 1 ~~for illustration~~for il ustration of federal R&D of federal R&D
funding by budget function, current dollars, FY1960-FY2020.) funding by budget function, current dollars, FY1960-FY2020.)
U.S. Post-World War II Dominance in Global R&D
Following WWII, with most of the Following WWII, with most of the
Figure 2. Global R&D Expenditures, 1960
developed world developed world ~~still~~ stil recovering from the recovering from the
devastation of the war and with rapid devastation of the war and with rapid
growth in U.S. government and private growth in U.S. government and private
investment in R&D, the United States came investment in R&D, the United States came
to dominate global R&D spending. As to dominate global R&D spending. As
~~illustrated i~~n il ustrated in Figure 2, in in 1960, the United 1960, the United
States accounted for 69% of global R&D States accounted for 69% of global R&D
(measured in share of expenditures), with (measured in share of expenditures), with
U.S. defense-related R&D alone accounting U.S. defense-related R&D alone accounting
for more than one-third of the global total. for more than one-third of the global total.
During this period, DOD investments in During this period, DOD investments in
R&D shaped technology development R&D shaped technology development
paths in many fields. Nevertheless, despite paths in many fields. Nevertheless, despite

rapid real growth in federal defense R&D rapid real growth in federal defense R&D
Source: CRS analysis ofCRS analysis of data fromdata from U.S. Department of U.S. Department of
funding over the next six decades, the U.S. funding over the next six decades, the U.S.
Commerce, Commerce, Office of Technology Policy,Office of Technology Policy, The Global
share of global R&D declined share of global R&D declined ~~substantially~~substantial y..
Context for U.S. Technology Policy,, ~~Summer~~ Summer 1997. 1997.

Despite U.S. R&D Growth, U.S. Share of Global R&D Has Fallen
Figure 3. Global R&D Expenditures, 2019
As As ~~illustrated~~il ustrated i in Figure 3, by 2019 the by 2019 the
U.S. share of global R&D had dropped U.S. share of global R&D had dropped
from 69% to 30%.10 The decline resulted from 69% to 30%.10 The decline resulted
from rapid growth in public and private from rapid growth in public and private
R&D spending by other nations, even as R&D spending by other nations, even as
U.S. R&D expenditures grew seven fold U.S. R&D expenditures grew seven fold

Source: CRS analysis of U.S. data from National Science CRS analysis of U.S. data from National Science
Foundation, Foundation, National Patterns of R&D Resources: 2018–19
Data Update,, ~~April~~ April 9, 2021. Rest of the World9, 2021. Rest of the World share from share from
CRS analysis of OECD data. CRS analysis of OECD data.

~~9 CRS~~ 9 CRS analysis of data publishedanalysis of data published by the National Science Foundation, by the National Science Foundation, Federal R&D Funding, by Budget Function:
Fiscal Years 2019–21. NSF 21-315. February 22, 2021. . NSF 21-315. February 22, 2021.
10 2019 is the latest year for which mostly complete data are available from the Organisation for Economic Cooperation 10 2019 is the latest year for which mostly complete data are available from the Organisation for Economic Cooperation
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in constant dollars by 2019, and more than 47 fold in current dollars.11 in constant dollars by 2019, and more than 47 fold in current dollars.11
Decline in Federal Share of U.S. R&D, Increase in Business Share
In the early 1960s, the federal government In the early 1960s, the federal government
Figure 4. Federal Government and
funded approximately twice as much R&D as funded approximately twice as much R&D as
Business Expenditures on R&D, 1960-2019
U.S. business and thus played a substantial U.S. business and thus played a substantial
role in driving the direction of U.S. and role in driving the direction of U.S. and
global technology development. However, global technology development. However,
from 1960 to 2019, the federal government’s from 1960 to 2019, the federal government’s
share of total U.S. R&D share of total U.S. R&D ~~fell~~ fel from 65% to from 65% to
21%, while business’s share more than 21%, while business’s share more than
doubled from 33% to 71%.12 (doubled from 33% to 71%.12 (~~See~~See Figure 4.)
The decline in the federal government’s share The decline in the federal government’s share
of total U.S. R&D funding did not result from of total U.S. R&D funding did not result from

a decline in federal R&D funding, which a decline in federal R&D funding, which
Source: CRS analysis of data from CRS analysis of data from National Science National Science
more than doubled in constant dollars, but more than doubled in constant dollars, but
Foundation in Foundation in National Patterns of R&D Resources: 2015-
from much faster growth in business R&D from much faster growth in business R&D
16 Data Update,, NSF 18-309. NSF 18-309.
funding (which grew to more than 15 times funding (which grew to more than 15 times
Note: Chart includes data through 2019. Chart includes data through 2019.
its 1960 level) and other nonfederal sources its 1960 level) and other nonfederal sources
of R&D funding. of R&D funding. ~~See~~See Figure 5. Today, U.S. business funds nearly three times as much R&D as Today, U.S. business funds nearly three times as much R&D as
the federal government. the federal government.
This transformation has had, and continues to have, implications for federal R&D strategy and This transformation has had, and continues to have, implications for federal R&D strategy and
management.management.
Figure 5. Growth in Federal and U.S. Business R&D Expenditures, 1960-2019

Source: CRS analysis of data fromCRS analysis of data from National Science Foundation, National Science Foundation, National Patterns of R&D Resources: 2018–19
Data Update,, ~~April~~ April 9, 2021.9, 2021.
Note: Charts include data through 2019. Charts include data through 2019.

and Development (OECD) on national research and development expenditures.and Development (OECD) on national research and development expenditures.
11 National Science Foundation in 11 National Science Foundation in National Patterns of R&D Resources: 2018–19 Data Update, April 9, 2021. , April 9, 2021.
12 CRS12 CRS analysis of data publishedanalysis of data published by the National Science Foundation inby the National Science Foundation in National Patterns of R&D Resources: 2018–
19 Data Update, April 9, 2021. , April 9, 2021.
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Decline in Defense Share of Federal R&D
In addition to the decline in the U.S. share of global R&D, and the decline in the federal share of In addition to the decline in the U.S. share of global R&D, and the decline in the federal share of
U.S. R&D during this period, federal funding for defense R&D as a share of total federal R&D U.S. R&D during this period, federal funding for defense R&D as a share of total federal R&D
declined from 81% to 49% between 1960 and 2019.13 (declined from 81% to 49% between 1960 and 2019.13 (~~See~~See Figure 5.) Once again, federal R&D Once again, federal R&D
grew, but nondefense R&D (e.g., general science, space flight, energy, natural resources, grew, but nondefense R&D (e.g., general science, space flight, energy, natural resources,
transportation) grew faster.14 As a result of these global, national, and federal trends, federal transportation) grew faster.14 As a result of these global, national, and federal trends, federal
defense R&D’s share of total global R&D defense R&D’s share of total global R&D ~~fell~~ fel from 36% in 1960 to 3.1% in 2019. from 36% in 1960 to 3.1% in 2019.
Figure 6. Defense R&D as a Share of Federal R&D, FY1955-FY2019

Source: CRS analysis of data from CRS analysis of data from National Science Foundation in National Science Foundation in Federal R&D Funding, by Budget Function: Fiscal
Years 2019–21, NSF 21-315, February 22, 2021; Department of Defense,, NSF 21-315, February 22, 2021; Department of Defense, Research, Development, Test, and
Evaluation Programs (R-1) for FY2020. for FY2020.
For more than 70 years, U.S. military technological superiority has provided U.S. and For more than 70 years, U.S. military technological superiority has provided U.S. and ~~allied~~
al ied troops with superior weapons and systems, offsetting the size and geographical advantages of troops with superior weapons and systems, offsetting the size and geographical advantages of
potential adversaries. The decline in federal defense R&D funding as a share of global R&D has potential adversaries. The decline in federal defense R&D funding as a share of global R&D has
substantial implications for how the Department of Defense obtains advanced technology and substantial implications for how the Department of Defense obtains advanced technology and
maintains the battlefield overmatch that technology has maintains the battlefield overmatch that technology has ~~historically~~historical y provided. provided.
Competitive Drivers of Commercial R&D: Implications for DOD
Whereas decisions made by the President and Congress determine the level of federal defense Whereas decisions made by the President and Congress determine the level of federal defense
R&D funding, business R&D is driven largely by commercial opportunities. Lucrative, large, and R&D funding, business R&D is driven largely by commercial opportunities. Lucrative, large, and
expanding markets, both current and potential, drive commercial development in fields such as expanding markets, both current and potential, drive commercial development in fields such as
artificial artificial ~~intelligence~~intel igence, computer processors, robotics, software, and advanced materials—fields of , computer processors, robotics, software, and advanced materials—fields of
substantial importance to 21st century military applications. substantial importance to 21st century military applications.
Commercial markets drive competition among firms, provide substantial revenues, and induce Commercial markets drive competition among firms, provide substantial revenues, and induce
investors to fund new market entrants. Competitors reinvest a portion of revenues from earlier investors to fund new market entrants. Competitors reinvest a portion of revenues from earlier

13 Part of the decline in defense13 Part of the decline in defense R&D’s share of federal R&D is attributable to a change in the definition of R&D R&D’s share of federal R&D is attributable to a change in the definition of R&D
adopted by OMBadopted by OMB for FY2017 and later years which excludesfor FY2017 and later years which excludes non ~~non~~-experimental development. -experimental development.
14 CRS 14 CRS analysis of data publishedanalysis of data published by the National Science Foundation in by the National Science Foundation in Federal R&D Funding, by Budget Function:
Fiscal Years 2019–21, NSF 21-315, February 22, 2021. According to the National Science Foundation, , NSF 21-315, February 22, 2021. According to the National Science Foundation, ~~the~~t he national national
defense budgetdefense budget function includes Department of Defense military activities and Department of Energy atomic energy function includes Department of Defense military activities and Department of Energy atomic energy
defense programs; some years also includedefense programs; some years also include defense-related R&D in the Department of Homeland Security anddefense-related R&D in the Department of Homeland Security and the the
Department of Justice. Department of Justice.
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innovations to achieve further technological advances and to improve their market positions, innovations to achieve further technological advances and to improve their market positions,
sometimes managing multiple generations of a technology (e.g., one generation in current sometimes managing multiple generations of a technology (e.g., one generation in current
production, one in testing and evaluation, and one in advanced research). In today’s commercial production, one in testing and evaluation, and one in advanced research). In today’s commercial
environment, the pace and cost of innovation may exceed what the federal government can environment, the pace and cost of innovation may exceed what the federal government can
sustain on its own, sustain on its own, ~~especially~~especial y given the expansive scope and number of technologies DOD uses in given the expansive scope and number of technologies DOD uses in
its weapons, systems, and infrastructure. its weapons, systems, and infrastructure.
Some defense policymakers have recognized DOD’s increasing reliance on technologies Some defense policymakers have recognized DOD’s increasing reliance on technologies
developed by commercial companies for commercial markets. Among the developed by commercial companies for commercial markets. Among the ~~challenges~~chal enges DOD faces DOD faces
are developing/modifying its current organizations and business models to access this technology; are developing/modifying its current organizations and business models to access this technology;
adapting the DOD business culture to seek and embrace technologies developed outside of DOD adapting the DOD business culture to seek and embrace technologies developed outside of DOD
and its traditional contractor base; and finding ways to adapt and leverage commercial and its traditional contractor base; and finding ways to adapt and leverage commercial
technologies for defense applications. See box items, technologies for defense applications. See box items, “Artificial ~~Intelligence~~Intel igence: DOD and Google:
Are There Social and Ethical Barriers to Engaging with U.S. Technology Companies?” and and
“Computer Chips: Too Costly for Commercial Chipmakers to Meet DOD Needs?” below for “Computer Chips: Too Costly for Commercial Chipmakers to Meet DOD Needs?” below for
~~illustrative~~ il ustrative examples of the examples of the ~~challenges~~chal enges DOD faces engaging with commercial companies. DOD faces engaging with commercial companies.
Concerns About U.S. Competitiveness:
Past and Present
Concerns about declining U.S. economic competitiveness and technological leadership—and Concerns about declining U.S. economic competitiveness and technological leadership—and
their potential implications for economic growth, industrial productivity, employment, standard of their potential implications for economic growth, industrial productivity, employment, standard of
living, and national security—are not new. living, and national security—are not new.
Following WWII, America’s new-found global technological leadership and industrial Following WWII, America’s new-found global technological leadership and industrial
capabilitiescapabilities contributed to strong U.S. economic growth, low unemployment rates, and contributed to strong U.S. economic growth, low unemployment rates, and
improvements in the standard of living for Americans. improvements in the standard of living for Americans.
However, in the late 1970s and early 1980s, the United States faced growing trade deficits; However, in the late 1970s and early 1980s, the United States faced growing trade deficits;
slowing rates of productivity growth; increased competition in industries such as automobiles, slowing rates of productivity growth; increased competition in industries such as automobiles,
steel, consumer electronics, and semiconductors; lower corporate profits; plant closings; and job steel, consumer electronics, and semiconductors; lower corporate profits; plant closings; and job
losses.losses.
Congress responded, in part, to these Congress responded, in part, to these ~~challenges~~chal enges by enacting legislation by enacting legislation intended to improve U.S. intended to improve U.S.
development and commercialization, including the Stevenson-Wydler Technology Innovation Act development and commercialization, including the Stevenson-Wydler Technology Innovation Act
of 1980 (P.L. 96-480), Bayh-Dole Act (P.L. 96-517), of 1980 (P.L. 96-480), Bayh-Dole Act (P.L. 96-517), ~~Small~~ Smal Business Innovation Development Act Business Innovation Development Act
of 1982 (P.L. 97-219), Cooperative Research and Development Act of 1984 (P.L. 98-462), and of 1982 (P.L. 97-219), Cooperative Research and Development Act of 1984 (P.L. 98-462), and
Federal Technology Transfer Act of 1986 (P.L. 99-502). (SeFederal Technology Transfer Act of 1986 (P.L. 99-502). (See Appendix for more detailed for more detailed
information on these acts.) information on these acts.)
Toward the end of the 1980s, the Toward the end of the 1980s, the ~~challenge~~chal enge to U.S. competitiveness became more specific. to U.S. competitiveness became more specific.
Japan’s economic success, export penetration of U.S. markets, industrial strength, innovative Japan’s economic success, export penetration of U.S. markets, industrial strength, innovative
manufacturing approaches, and technological capabilities gave rise to increasing concerns about manufacturing approaches, and technological capabilities gave rise to increasing concerns about
the competitiveness of U.S. industry. Some policymakers and analysts asserted that Japan’s the competitiveness of U.S. industry. Some policymakers and analysts asserted that Japan’s
success was based on government-coordinated industrial policies and trade advocacy (this success was based on government-coordinated industrial policies and trade advocacy (this
cooperation was sometimes referred to as “Japan, Inc.”, a term suggesting Japan’s government cooperation was sometimes referred to as “Japan, Inc.”, a term suggesting Japan’s government
and private sector acted as a single entity), unfair policies and practices, closed or difficult to and private sector acted as a single entity), unfair policies and practices, closed or difficult to
access markets, appropriation of U.S. technologies through reverse engineering, and lack of access markets, appropriation of U.S. technologies through reverse engineering, and lack of
reciprocal access to science and technology programs. Others asserted that Japan’s economic reciprocal access to science and technology programs. Others asserted that Japan’s economic
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system, including the industrial organizations known as keiretsu,15 offered a superior competitive system, including the industrial organizations known as keiretsu,15 offered a superior competitive
structure that the U.S. government and American industry should emulate. Some saw the structure that the U.S. government and American industry should emulate. Some saw the
perceived loss of U.S. competitiveness as attributable to other factors as perceived loss of U.S. competitiveness as attributable to other factors as ~~well~~wel , such as industrial , such as industrial
complacency driven by a large domestic market that resulted in a failure to continue to innovate complacency driven by a large domestic market that resulted in a failure to continue to innovate
and a lack of support for and a lack of support for ~~small~~ smal and medium-size manufacturers. and medium-size manufacturers.
Congress responded to concerns about Japan’s rising technological and industrial strength and its Congress responded to concerns about Japan’s rising technological and industrial strength and its
potential implications for the United States, in part, by enacting legislation such as the Omnibus potential implications for the United States, in part, by enacting legislation such as the Omnibus
Trade and Competitiveness Act of 1988 (P.L. 100-418) and the National Competitiveness Trade and Competitiveness Act of 1988 (P.L. 100-418) and the National Competitiveness
Technology Transfer Act of 1989 (P.L. 101-189). (Technology Transfer Act of 1989 (P.L. 101-189). (~~See~~See Appendix for more detailed information for more detailed information
on these and similar acts.) on these and similar acts.)
In the mid-1980s, the U.S. semiconductor industry became a focus of concern about America’s In the mid-1980s, the U.S. semiconductor industry became a focus of concern about America’s
loss of technological leadership. During the 1980s, the industry experienced a steep decline in its loss of technological leadership. During the 1980s, the industry experienced a steep decline in its
share of U.S. and global markets due to competition from Japanese producers. In 1986, Japan share of U.S. and global markets due to competition from Japanese producers. In 1986, Japan
surpassed the United States in commercial semiconductor chip production;16 the U.S. share of the surpassed the United States in commercial semiconductor chip production;16 the U.S. share of the
world market for merchant producers world market for merchant producers ~~fell~~ fel from 100% in 1975 to less than 5%;17 and by 1986, from 100% in 1975 to less than 5%;17 and by 1986,
Japanese firms accounted for 65% of the DRAM (dynamic random-access memory) chips sold in Japanese firms accounted for 65% of the DRAM (dynamic random-access memory) chips sold in
the United States, and more than 80% of the global market.18 the United States, and more than 80% of the global market.18
The Department of Defense, a long-time supporter and user of semiconductor technology, was The Department of Defense, a long-time supporter and user of semiconductor technology, was
particularly concerned about the implications of a loss of U.S. leadership in semiconductors. In particularly concerned about the implications of a loss of U.S. leadership in semiconductors. In
1987, a report by the Defense Science Board (DSB), a panel of government and industry experts, 1987, a report by the Defense Science Board (DSB), a panel of government and industry experts,
concluded that “U.S. leadership in semiconductor manufacturing is rapidly eroding,” and that not concluded that “U.S. leadership in semiconductor manufacturing is rapidly eroding,” and that not
only was “the manufacturing capacity of the U.S. semiconductor industry … being lost to foreign only was “the manufacturing capacity of the U.S. semiconductor industry … being lost to foreign
competitors, competitors, ~~principally~~principal y Japan…, but of even greater long-term concern, that technological Japan…, but of even greater long-term concern, that technological
leadership is also being lost.”19 The DSB proposed the establishment of a public-private leadership is also being lost.”19 The DSB proposed the establishment of a public-private
semiconductor manufacturing technology R&D partnership supported semiconductor manufacturing technology R&D partnership supported ~~equally~~equal y by DOD and the by DOD and the
semiconductor industry. The partnership was to focus on next generation semiconductor semiconductor industry. The partnership was to focus on next generation semiconductor
technology (the 64 megabit DRAM), and include support for a manufacturing facility. technology (the 64 megabit DRAM), and include support for a manufacturing facility.
In December 1987, Congress authorized DOD financial support of up to $100 In December 1987, Congress authorized DOD financial support of up to $100 ~~million~~ mil ion for the for the
SEMATECHSEMATECH consortium,20 while limiting federal, state, and local government support to no more consortium,20 while limiting federal, state, and local government support to no more
than 50% of total funding. Concerned about supporting a government-industry semiconductor than 50% of total funding. Concerned about supporting a government-industry semiconductor
facility that would manufacture DRAMs for the commercial market, Congress directed that facility that would manufacture DRAMs for the commercial market, Congress directed that
SEMATECHSEMATECH funding be used for the conduct of research on advanced semiconductor funding be used for the conduct of research on advanced semiconductor

15 Keiretsu are very large, informal, vertically linked or horizontally linked amalgamations of businesses15 Keiretsu are very large, informal, vertically linked or horizontally linked amalgamations of businesses with with
interlocking businessinterlocking business relations, includingrelations, including cross-shareholdings and shared members of their boardscross-shareholdings and shared members of their boards of directors. of directors. ~~These~~T hese
organizations can includeorganizations can include manufacturers, suppliers, and distributors, and generally have a bank at its core. manufacturers, suppliers, and distributors, and generally have a bank at its core. ~~The~~T he Japanese Japanese
pre-WWII zaibatsu system ispre-WWII zaibatsu system is the predecessor to keiretsu. Korean chaebol have characteristics similar to keiretsu.the predecessor to keiretsu. Korean chaebol have characteristics similar to keiretsu.
16 Department of Commerce, 16 Department of Commerce, 1987 U.S. Industrial Outlook, 1987, pp. 28-29, as cited in Glenn J. McLoughlin and 1987, pp. 28-29, as cited in Glenn J. McLoughlin and
Nancy R. Miller, Nancy R. Miller, The U.S. ~~Semiconductor~~Sem iconductor Industry and the ~~Sematech~~Sem atech Proposal, 87-254 SPR, Congressional Research , 87-254 SPR, Congressional Research
Service, April 23, 1987. Service, April 23, 1987.
17 Ibid., pp. 32-34–32-35; Department of Defense, Defense Science Board, 17 Ibid., pp. 32-34–32-35; Department of Defense, Defense Science Board, Report of the Defense Science Board Task
Force on ~~Semiconductor~~Sem iconductor Dependency, 1987, p. 5, as cited in Glenn1987, p. 5, as cited in Glenn J. McLoughlin and Nancy R. Miller, J. McLoughlin and Nancy R. Miller, The U.S.
~~Semiconductor~~Sem iconductor Industry and the ~~Sematech~~Sem atech Proposal, 87-254 SPR, Congressional Research Service,, 87-254 SPR, Congressional Research Service, April 23, 1987. April 23, 1987.
18 Arthur L. Robinson, “A 16 Megabit Memory Chip from Japan,” 18 Arthur L. Robinson, “A 16 Megabit Memory Chip from Japan,” Science, vol. 235, no. 4794 (May 13, 1987), pp. , vol. 235, no. 4794 (May 13, 1987), pp.
1324-1325. 1324-1325.
19 Department of Defense, Defense Science Board, 19 Department of Defense, Defense Science Board, ~~Task~~T ask Force on Semiconductor Dependency, Force on Semiconductor Dependency, Report of the Defense
Science Board Task Force on ~~Semiconductor~~Sem iconductor Dependency, January 1987. , January 1987.
20 20 ~~The name SEMATECH was derived~~ T he name SEMAT ECH was derived from semiconductor manufacturing technology. from semiconductor manufacturing technology.
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manufacturing techniques, and for the development of manufacturing techniques for a variety of manufacturing techniques, and for the development of manufacturing techniques for a variety of
semiconductor products.21 semiconductor products.21
In late 1987, SEMATECH In late 1987, SEMATECH was established under a memorandum signed by representatives of was established under a memorandum signed by representatives of
DOD and 11 U.S. semiconductor companies. Congress provided $100 DOD and 11 U.S. semiconductor companies. Congress provided $100 ~~million~~mil ion for SEMATECH for SEMATECH in in
FY1988 and a total of approximately $870 FY1988 and a total of approximately $870 ~~million~~ mil ion through FY1996 when funding ended. These through FY1996 when funding ended. These
funds were matched by the industry partners. While some analysts assert that SEMATECH played funds were matched by the industry partners. While some analysts assert that SEMATECH played
an important role in preserving the U.S. semiconductor’s competitive position during this period, an important role in preserving the U.S. semiconductor’s competitive position during this period,
others disagree. others disagree.
Concerns about Japanese dominance in technology-intensive industries have diminished in the Concerns about Japanese dominance in technology-intensive industries have diminished in the
interceding decades. While Japanese firms are formidable competitors in a number of industries interceding decades. While Japanese firms are formidable competitors in a number of industries
(e.g., machine tools, robotics, automobiles, consumer products, steel, semiconductors), they have (e.g., machine tools, robotics, automobiles, consumer products, steel, semiconductors), they have
not become the economic juggernaut that some feared would seize global leadership across a vast not become the economic juggernaut that some feared would seize global leadership across a vast
swath of technologies and undermine U.S. economic prosperity.swath of technologies and undermine U.S. economic prosperity.
In more recent years, some have expressed concerns about the competitive In more recent years, some have expressed concerns about the competitive ~~challenges~~chal enges posed by posed by
certain countries in a narrower swath of industries. For example: certain countries in a narrower swath of industries. For example:
 South Korea experienced a swift rise from an agriculture-based economy in the  South Korea experienced a swift rise from an agriculture-based economy in the
1960s to an industrial economy built, in part, on advanced technological 1960s to an industrial economy built, in part, on advanced technological
capabilities. Today, South Korea has thriving consumer electronics and capabilities. Today, South Korea has thriving consumer electronics and
automobile industries. Some credit South Korea’s success to export-oriented automobile industries. Some credit South Korea’s success to export-oriented
policies, improvements in its business environment (e.g., ease of starting a policies, improvements in its business environment (e.g., ease of starting a
business, enforcing contracts, getting electricity), and policies to incentivize business, enforcing contracts, getting electricity), and policies to incentivize
innovation (e.g., South Korea leads the world in R&D intensity, defined as R&D innovation (e.g., South Korea leads the world in R&D intensity, defined as R&D
spending as a percentage of gross domestic product).22spending as a percentage of gross domestic product).22
 India had rapid growth in the 1990s and 2000s in fields such as software;  India had rapid growth in the 1990s and 2000s in fields such as software;
information technology services; and information technology-enabled industries information technology services; and information technology-enabled industries
(ITES), including outsourcing of business processes (e.g., human resources, (ITES), including outsourcing of business processes (e.g., human resources,
finance, accounting, customer service). India’s population (1.339 finance, accounting, customer service). India’s population (1.339 ~~billion~~bil ion in 2021, in 2021,
second only to China’s population of 1.398 second only to China’s population of 1.398 ~~billion~~bil ion)23 might also provide it with a )23 might also provide it with a
competitive advantage in creating and testing products tailored to consumers in competitive advantage in creating and testing products tailored to consumers in
developing countries and to build market share in that demographic through developing countries and to build market share in that demographic through
domestic sales. domestic sales.
As with Japan, South Korea and India have been successful in advancing their industries and As with Japan, South Korea and India have been successful in advancing their industries and
improving their standards of living, but neither has become an across-the-board economic improving their standards of living, but neither has become an across-the-board economic
juggernaut that threatens U.S. technological and economic leadership. juggernaut that threatens U.S. technological and economic leadership.
None of these countries posed or pose both a broad, multi-industry technology-based None of these countries posed or pose both a broad, multi-industry technology-based
competitiveness competitiveness ~~challenge~~chal enge to the United States as to the United States as ~~well~~ wel as a near-peer national security as a near-peer national security ~~challenge.~~
chal enge. These countries also did not or do not have an integrated civilian-militaryThese countries also did not or do not have an integrated civilian-military strategy for achieving strategy for achieving
global technological dominance. Today, China has each of these elements. The leading role of the global technological dominance. Today, China has each of these elements. The leading role of the
private sector in driving advances in the technologies (e.g., artificial private sector in driving advances in the technologies (e.g., artificial ~~intelligence~~intel igence, autonomous , autonomous
systems, robotics, quantum computing, advanced gene editing) that are expected to be critical to systems, robotics, quantum computing, advanced gene editing) that are expected to be critical to

21 P.L. 100-180 (National Defense Authorization Act for Fiscal Years 1988 and 1989). 21 P.L. 100-180 (National Defense Authorization Act for Fiscal Years 1988 and 1989).
22 Federal Reserve Bank of St. Louis, On the Economy Blog, Ana Maria Santacreu and Heting Zhu, “How Did22 Federal Reserve Bank of St. Louis, On the Economy Blog, Ana Maria Santacreu and Heting Zhu, “How Did South South
Korea’s Economy Develop So Quickly?”, March 20, 2018, https://www.stlouisfed.org/on-the-economy/2018/march/Korea’s Economy Develop So Quickly?”, March 20, 2018, https://www.stlouisfed.org/on-the-economy/2018/march/
how-south-korea-economy-develop-quickly. how-south-korea-economy-develop-quickly.
23 Central Intelligence Agency, 23 Central Intelligence Agency, The World Factbook online, https://www.cia.gov/the-world-factbook. Population data online, https://www.cia.gov/the-world-factbook. Population data
estimated as of Julyestimated as of July 2021. 2021.
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both commercial competitiveness and military strength has given rise to concerns that are both commercial competitiveness and military strength has given rise to concerns that are
discussed in the next section. discussed in the next section.
Rise of China in R&D
A primary A primary ~~challenge~~chal enge to American military technological preeminence is the emergence of China to American military technological preeminence is the emergence of China
as a potential military adversary and as a science and technology powerhouse. The President’s as a potential military adversary and as a science and technology powerhouse. The President’s
National Security Strategy and the and the National Defense Strategy echo this theme. And in June 2018, echo this theme. And in June 2018,
several senior DOD officials raised this concern in congressional testimony: several senior DOD officials raised this concern in congressional testimony:
The The ~~Department of Defense is facing an unprecedented threat to its technological and~~
~~industrial base. Continued globalization and our open society, both in academia~~ Department of Defense is facing an unprecedented threat to its technological and industrial base. Continued globalization and our open society, both in acade mia and and
business, has offered China and others access to the same technology and information that business, has offered China and others access to the same technology and information that
is critical to the success of our future warfighting capabilities. China is making significant is critical to the success of our future warfighting capabilities. China is making significant
and targeted investments in the same technologies of interest to the Department.… China and targeted investments in the same technologies of interest to the Department.… China
has made it a national goal to acquire foreign technologies to not only advance its economy, has made it a national goal to acquire foreign technologies to not only advance its economy,
but also tobut also to use these technologies to advance itsuse these technologies to advance its military capabilities, and it is doing so military capabilities, and it is doing so
through both licit and illicit means.24 through both licit and illicit means.24
China’s emergence as a global science and technology leader is evidenced in part by its rising China’s emergence as a global science and technology leader is evidenced in part by its rising
position among nations in the funding of R&D. China’s share of global R&D rose from 4.9% in position among nations in the funding of R&D. China’s share of global R&D rose from 4.9% in
2000 to 23.9% in 2019. During this same period, the United States, Japan, and Germany saw their 2000 to 23.9% in 2019. During this same period, the United States, Japan, and Germany saw their
collective share of global R&D collective share of global R&D ~~fall~~ fal from 62.6% to 44.5%.from 62.6% to 44.5%.
Moreover, while the United States remained the world’s single largest funder of R&D in 2019, Moreover, while the United States remained the world’s single largest funder of R&D in 2019,
spending 25% more than China (sespending 25% more than China (see Table 1), China’s R&D funding has been growing at a much , China’s R&D funding has been growing at a much
more rapid pace. As a result, China’s R&D expenditures passed Germany’s in 2004 and Japan’s more rapid pace. As a result, China’s R&D expenditures passed Germany’s in 2004 and Japan’s
in 2009 (in 2009 (~~see~~see Figure 7).
Table 1. Nations with the Largest Gross Expenditures on R&D, 2019
(in (in ~~billions~~bil ions of current purchasing power parity (PPP) U.S. of current purchasing power parity (PPP) U.S. ~~dollars~~dol ars) )
Nation
Amount
Share of Global Total
United States United States
$657.5 $657.5
29.9% 29.9%
China China
525.7 525.7
23.9% 23.9%
Japan Japan
173.3 173.3
7.9% 7.9%
Germany Germany
147.5 147.5
6.7% 6.7%
South Korea South Korea
102.5 102.5
4.7% 4.7%
France France
72.8 72.8
3.3% 3.3%
United Kingdom United Kingdom
56.9 56.9
2.6% 2.6%
Russia Russia

44.5 44.5
2.0% 2.0%
Taiwan Taiwan
44.0 44.0
2.0% 2.0%
Italy Italy
38.8 38.8
1.8% 1.8%
Source: CRS analysis of OECD 2019 Gross Expenditures on R&D (GERD) data accessed May 5, 2021. CRS analysis of OECD 2019 Gross Expenditures on R&D (GERD) data accessed May 5, 2021.

24 Joint witness statement of Michael D. Griffin, Undersecretary of Defense for Research and Engineering; Kari A. 24 Joint witness statement of Michael D. Griffin, Undersecretary of Defense for Research and Engineering; Kari A.
Bingen, Deputy Undersecretary of Defense for Intelligence; Eric Chewning,Bingen, Deputy Undersecretary of Defense for Intelligence; Eric Chewning, Deputy Assistant Secretary of Defense for Deputy Assistant Secretary of Defense for
Manufacturing and Industrial Base Policy; and Anthony M. Schinella, Office of the Director of National Intelligence Manufacturing and Industrial Base Policy; and Anthony M. Schinella, Office of the Director of National Intelligence
before the House Committee on Armed Servicesbefore the House Committee on Armed Services hearing on hearing on Military Technology Transfer: Threats, ~~Impacts~~Im pacts, and
Solutions for the ~~Department~~Departm ent of Defense, 115th Cong., June 21, 2018. , 115th Cong., June 21, 2018.
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Notes: Purchasing power parity is an economicPurchasing power parity is an economic analysis tool used to adjust international currencies to a analysis tool used to adjust international currencies to a
common currency (in this case, U.S. dol ars) based on each currency’scommon currency (in this case, U.S. dol ars) based on each currency’s domestic purchasing power. For the domestic purchasing power. For the
purpose of this analysis, global R&D includes purpose of this analysis, global R&D includes ~~all~~ al OECD countries, plus Argentina, China, Romania, Russia, OECD countries, plus Argentina, China, Romania, Russia,
Singapore, South Africa, and Taiwan. Singapore, South Africa, and Taiwan.
Figure 7. Gross Expenditures on R&D for Selected Nations, 2000-2019
(in (in ~~millions~~mil ions of PPP of PPP ~~dollars~~dol ars) )

Source: CRS analysis of OECD GERD data measured CRS analysis of OECD GERD data measured in purchasing power parity dol ars. in purchasing power parity dol ars.
Notes: PPP = purchasing power parity PPP = purchasing power parity
Figure 8 shows the percentage growth in R&D expenditures for selected nations between 2000 shows the percentage growth in R&D expenditures for selected nations between 2000
and 2019, as reported to the OECD. It further and 2019, as reported to the OECD. It further ~~illustrates~~il ustrates the rapid growth of China’s R&D the rapid growth of China’s R&D
investments relative to those of other nations. During this period, China’s R&D grew by 1,496% investments relative to those of other nations. During this period, China’s R&D grew by 1,496%
while U.S. R&D grew by 144%. In absolute terms, China’s R&D grew by $492.8 while U.S. R&D grew by 144%. In absolute terms, China’s R&D grew by $492.8 ~~billion~~bil ion, while , while
U.S. R&D growth was $387.9 U.S. R&D growth was $387.9 ~~billion~~bil ion and R&D growth of the 27 countries of the European Union and R&D growth of the 27 countries of the European Union
combined was $278.7 combined was $278.7 ~~billion~~bil ion.25 .25
Figure 8. Growth in Gross Expenditures on R&D for Selected Nations, 2000-2019

Source: CRS analysis of OECD GERD data measuredCRS analysis of OECD GERD data measured in purchasing power parity dol ars.in purchasing power parity dol ars.
Though the growth shown i Though the growth shown in Figure 8 is for total R&D funding, only a portion of which is is for total R&D funding, only a portion of which is
defense-related, these trends have raised concerns among many defense analysts and senior DOD defense-related, these trends have raised concerns among many defense analysts and senior DOD
leaders. For example, Obama Administrationleaders. For example, Obama Administration Under Secretary of Defense Frank Under Secretary of Defense Frank ~~Kendall~~ Kendal testified testified
in January 2015 that in January 2015 that

~~25 CRS~~ 25 CRS analysis of OECDanalysis of OECD 2019 Gross Expenditures on R&D (GERD)2019 Gross Expenditures on R&D (GERD) data. data.
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~~[O]ver the past few decades, the U.S. and our allies have enjoyed a~~ [O]ver the past few decades, the U.S. and our allies have enjoyed a military capability military capability
advantage over any potential adversary.... The First Gulf War put this suite of technologies advantage over any potential adversary.... The First Gulf War put this suite of technologies
and the associated operational concepts on display for the world to observe and study. The and the associated operational concepts on display for the world to observe and study. The
First Gulf War also marked the beginning of a period of American military dominance that First Gulf War also marked the beginning of a period of American military dominance that
has lasted about a quarter of a century and served us well in several conflicts. We used the has lasted about a quarter of a century and served us well in several conflicts. We used the
samesame ~~capabilities, with some notable enhancements, in Serbia, Afghanistan, Libya~~ capabilities, with some notable enhancements, in Serbia, Afghanistan, Libya and and
Iraq. It has been a good run, but the game isn’t one sided, and all military advantages based Iraq. It has been a good run, but the game isn’t one sided, and all military advantages based
onon ~~technology are temporary.... The rise of foreign capability, coupled with the overall~~
technology are temporary.... The rise of foreign capability, coupled with the overal decline in U.S. research and development investments, is jeopardizing our technological decline in U.S. research and development investments, is jeopardizing our technological
superiority.26 superiority.26
Despite continued U.S. science and technology (S&T) leadership, it is widely asserted that the Despite continued U.S. science and technology (S&T) leadership, it is widely asserted that the
gap between the United States and China has been decreasing in recent years. In 2015, Michael gap between the United States and China has been decreasing in recent years. In 2015, Michael
Dumont, then-Principal Deputy Assistant Secretary of Defense for Special Operations/Low Dumont, then-Principal Deputy Assistant Secretary of Defense for Special Operations/Low
Intensity Conflict, reportedly stated Intensity Conflict, reportedly stated
Many of our adversaries have acquired, developed and even stolen technologies that have Many of our adversaries have acquired, developed and even stolen technologies that have
putput ~~them on somewhat equal footing with the West in a range of areas.... [T]he~~ them on somewhat equal footing with the West in a range of areas .... [T]he U.S. U.S.
government no longer has the leading edge developing its own leading edge capabilities, government no longer has the leading edge developing its own leading edge capabilities,
particularly in information technology.27 particularly in information technology.27
China’s Approaches to Capturing Global Technology Leadership
Funding domestic R&D is only one Funding domestic R&D is only one ~~pillar~~ pil ar in China’s strategy to obtain global technology in China’s strategy to obtain global technology
leadership. A 2018 report published by DOD’s Defense Innovation Unit (DIU) asserts that China leadership. A 2018 report published by DOD’s Defense Innovation Unit (DIU) asserts that China
is engaged in a deliberate, sophisticated, long-term, and integrated approach to achieving this end, is engaged in a deliberate, sophisticated, long-term, and integrated approach to achieving this end,
by both legal and by both legal and ~~illegal~~ il egal means.28 means.28
According to the report, China seeks to reduce reliance on foreign technology, to develop According to the report, China seeks to reduce reliance on foreign technology, to develop
indigenous innovation capabilities, and to close the military gap with the United States. The indigenous innovation capabilities, and to close the military gap with the United States. The
report states that China’s focus includes a number of dual-use technologies, including artificial report states that China’s focus includes a number of dual-use technologies, including artificial
~~intelligence~~ intel igence (AI), autonomous systems, robotics, nanotechnology, augmented reality/virtual (AI), autonomous systems, robotics, nanotechnology, augmented reality/virtual
reality (AR/VR), financial technology, and gene editing. Further, the report states that China’s reality (AR/VR), financial technology, and gene editing. Further, the report states that China’s
strategy for achieving technological leadership includes the following tools: strategy for achieving technological leadership includes the following tools:
 theft of  theft of ~~intellectual~~intel ectual property through industrial espionage and cybertheft; property through industrial espionage and cybertheft;
 foreign direct investment;  foreign direct investment;
 China-based venture capital (some government-sponsored) targeting early stage  China-based venture capital (some government-sponsored) targeting early stage
technology companies; technology companies;
 investment by Chinese companies in U.S. venture-backed deals;  investment by Chinese companies in U.S. venture-backed deals;
 private equity investments;  private equity investments;
 investments through special purpose vehicles that are designed to obscure the  investments through special purpose vehicles that are designed to obscure the
source of capital; source of capital;

26 Written Statement of then-Under Secretary of Defense Frank Kendall, U.S.26 Written Statement of then-Under Secretary of Defense Frank Kendall, U.S. Congress,Congress, House Committee on Armed House Committee on Armed
Services,Services, A Case for Reform : Im proving~~: Improving~~ DOD’s Ability to Respond to the Pace of Technological Change, 114th Cong., , 114th Cong.,
1st sess.,1st sess., January 28, 2015. January 28, 2015.
27 Stew 27 Stew Magnuson, “DOD Official: Government Has Lost its Magnuson, “DOD Official: Government Has Lost its ~~Technological~~T echnological Edge Over Opponents,” Edge Over Opponents,” National Defense
Magazine, January 27, 2015, http://www.nationaldefensemagazine.org/Pages/default.aspx. , January 27, 2015, http://www.nationaldefensemagazine.org/Pages/default.aspx.
28 Department of Defense, Defense Innovation Unit Experimental, 28 Department of Defense, Defense Innovation Unit Experimental, China’s Technology Transfer Strategy: How
Chinese ~~Investments in Emerging Technologies Enable a Strategic Competitor~~Investm ents in Em erging Technologies Enable a S trategic Com petitor to Access the Crown Jewels of U.S.
Innovation, January 2018. January 2018.
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 acquisition of companies;  acquisition of companies;
 access to open source information;  access to open source information;
 Chinese-based technology transfer organizations;  Chinese-based technology transfer organizations;
 U.S.-based associations sponsored by the Chinese government to recruit talent;  U.S.-based associations sponsored by the Chinese government to recruit talent;
 sending Chinese students to study science, technology, engineering, and  sending Chinese students to study science, technology, engineering, and
mathematics (STEM) in the United States and other Western countries (25% of mathematics (STEM) in the United States and other Western countries (25% of
U.S. STEM graduate students are Chinese nationals); and U.S. STEM graduate students are Chinese nationals); and
 acquisition of technical and business expertise from U.S. firms.  acquisition of technical and business expertise from U.S. firms.
To achieve its goal of technological leadership, China has put forth a number of national plans To achieve its goal of technological leadership, China has put forth a number of national plans
and initiativesand initiatives to guide its public and private activities, including to guide its public and private activities, including 13th Five Year Plan for
Economic and Social Development of the People’s Republic of China (2016-2020),29,29 Made in
China 2025,3030 Mega Project Priorities,3131 andand Project 863.32 32
Trump Administration Policies and Perspectives
The The National Security Strategy of the United States (NSS),33 released by President Donald Trump (NSS),33 released by President Donald Trump
in December 2017, and the in December 2017, and the National Defense Strategy of the United States of America:
Sharpening the American Military’s Competitive Edge (NDS),34 released by Defense Secretary (NDS),34 released by Defense Secretary
Jim Mattis in January 2018, offer insights into the Administration’s perspectives on the changing Jim Mattis in January 2018, offer insights into the Administration’s perspectives on the changing
global R&D landscape and provide a strategic framework for its policies and approaches to global R&D landscape and provide a strategic framework for its policies and approaches to
ensuring U.S. technological dominance on the battlefield. ensuring U.S. technological dominance on the battlefield.
National Security Strategy
The NSS addresses both commercial and national defense issues in the The NSS addresses both commercial and national defense issues in the ~~overall~~ overal context of national context of national
security. Among the elements addressed in the NSS are globalizationsecurity. Among the elements addressed in the NSS are globalization and its implications, and its implications,
increased reliance on commercial innovation to meet national needs, the need for speed to increased reliance on commercial innovation to meet national needs, the need for speed to

29 People’s Republic29 People’s Republic of China, of China, 13th Five Year Plan for Economic and Social Development of the People’s Republic of
China (2016-2020), http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf. , http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf.
30 People’s Republic 30 People’s Republic of China, State Council, of China, State Council, Made in China 2025, available from IoT, available from IoT One, a Shanghai-based One, a Shanghai-based
organization supporting Internet of organization supporting Internet of ~~Things~~T hings innovation, at http://www.cittadellascienza.it/cina/wp-content/uploads/2017/ innovation, at http://www.cittadellascienza.it/cina/wp-content/uploads/2017/
02/IoT02/IoT -ONE-Made-in-China-2025.pdf. -ONE-Made-in-China-2025.pdf.
~~31 The~~31 T he Mega Projects concept was introduced in China’s Mega Projects concept was introduced in China’s The National Medium - and Long-Term Program for Science
and Technology ~~Development~~Developm ent (2006-2020): An Outline (produced by China’s State Council), http://www.cistc.gov.cn/(produced by China’s State Council), http://www.cistc.gov.cn/
oa/file/download.asp?id=6298. Accordingoa/file/download.asp?id=6298. According to the European Union report to the European Union report Advance EU Access to Financial Incentives for
Innovation in China: Guide for EU Stakeholders on Chinese National STI Funding ~~Programmes~~Program m es, there are 16 science , there are 16 science
and technology Mega Projects, 10 of which involve civilian applications and 6 of which are focused on civil-military and technology Mega Projects, 10 of which involve civilian applications and 6 of which are focused on civil-military
integration or pure military applications.integration or pure military applications.
32 People’s Republic 32 People’s Republic of China, Ministry of Scienceof China, Ministry of Science ~~and Technology~~ and T echnology, Project 863 (also referred to as the 863 Program), , Project 863 (also referred to as the 863 Program),
http://www.most.gov.cn/eng/programmes1. http://www.most.gov.cn/eng/programmes1.
~~33 The~~33 T he White House, White House, National Security Strategy of the United States, December 2017, https://www.whitehouse.gov/wp-, December 2017, https://www.whitehouse.gov/wp-
content/uploads/ ... /NSS-Final-12-18-2017-0905.pdf. content/uploads/ ... /NSS-Final-12-18-2017-0905.pdf.
34 Department of Defense, 34 Department of Defense, Summary of the 2018 National Defense Strategy of the United States: Sharpening the
American Military’s Competitive Edge, January 2018, https://dod.defense.gov/Portals/1/ ... /2018-National-Defense-, January 2018, https://dod.defense.gov/Portals/1/ ... /2018-National-Defense-
Strategy-Summary.pdf. Strategy-Summary.pdf. ~~The~~T he 2018 National Defense Strategy is classified; is classified; the document linked above is the unclassified the document linked above is the unclassified
summary of the report. For more information on the summary of the report. For more information on the National Defense Strategy, see CRS, see CRS Report R45349, Report R45349, The 2018
National Defense Strategy: Fact Sheet, by Kathleen J. McInnis, and CRS, by Kathleen J. McInnis, and CRS Insight IN10855, Insight IN10855, The 2018 National Defense
Strategy, by Kathleen J. McInnis. , by Kathleen J. McInnis.
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maintain America’s commercial and defense competitiveness, and the need to protect the maintain America’s commercial and defense competitiveness, and the need to protect the
elements of our national innovation system from foreign competitors and adversaries.elements of our national innovation system from foreign competitors and adversaries.
Globalization of R&D and Its Implications
The NSS recognizes the globalization The NSS recognizes the globalization of scientific and technological innovation and asserts the of scientific and technological innovation and asserts the
importance to DOD and other federal agencies of acquiring a better understanding of global importance to DOD and other federal agencies of acquiring a better understanding of global
science and technology trends and their potential effects on U.S. strategies, policies, and science and technology trends and their potential effects on U.S. strategies, policies, and
programs. According to the NSS, “to retain U.S. advantages over our competitors, U.S. programs. According to the NSS, “to retain U.S. advantages over our competitors, U.S.
Government agencies must improve their understanding of worldwide S&T trends and how they Government agencies must improve their understanding of worldwide S&T trends and how they
are likelyare likely to influence—or undermine—American strategies and programs.”35 to influence—or undermine—American strategies and programs.”35
Increased Reliance on Commercial Innovators, Nontraditional Defense
Suppliers
The NSS acknowledges the leading role industry plays in the development of new technologies, The NSS acknowledges the leading role industry plays in the development of new technologies,
~~especially~~especial y those vital to the national defense, and asserts a need for the federal government to those vital to the national defense, and asserts a need for the federal government to
more effectively tap these capabilities: more effectively tap these capabilities:
The The U.S. GovernmentU.S. Government ~~will use private sector technical expertise and R&D~~ will use private sector technical expertise and R&D capabilities capabilities
more effectively.more effectively. ~~Private industry owns many of the technologies that the~~ Private industry owns many of the technologies that the government government
relies upon for critical national security missions. The Department of Defense and other relies upon for critical national security missions. The Department of Defense and other
agenciesagencies ~~will establish strategic partnerships with U.S. companies to help align~~ will establish strategic partnerships with U.S. companies to help align private private
sector R&D resources to priority national security applications. sector R&D resources to priority national security applications.
We We ~~must eliminate bureaucratic impediments to innovation and embrace less expensive~~
~~and time-intensive commercial off-the-shelf solutions. Departments and agencies~~ must eliminate bureaucratic impediments to innovation and embrace less expensive and time-intensive commercial off-the-shelf solutions. Departments and agencies must must
work with industry to experiment, prototype, and rapidly field new capabilities that can be work with industry to experiment, prototype, and rapidly field new capabilities that can be
easily upgraded as new technologies come online. 36 easily upgraded as new technologies come online. 36
In testimony before the Senate Armed Services Committee, Defense Secretary Mattis stated that In testimony before the Senate Armed Services Committee, Defense Secretary Mattis stated that
DOD would “leverage commercial research and development to provide leading edge capabilities DOD would “leverage commercial research and development to provide leading edge capabilities
to the Department while encouraging emerging nontraditional technology companies to focus on to the Department while encouraging emerging nontraditional technology companies to focus on
DOD-specific problems.” Secretary Mattis also reaffirmed DOD’s commitment to continuing its DOD-specific problems.” Secretary Mattis also reaffirmed DOD’s commitment to continuing its
investments in basic research and in the Defense Advanced Research Projects Agency’s investments in basic research and in the Defense Advanced Research Projects Agency’s
(DARPA’s) efforts to develop technologies for revolutionary, high-payoff military capabilities.37 (DARPA’s) efforts to develop technologies for revolutionary, high-payoff military capabilities.37
The Need for Speed
Recognizing that potential military adversaries may have access to the same suite of Recognizing that potential military adversaries may have access to the same suite of
~~commercially available~~ commercial y available technologies as DOD does, the NSS places a premium on speed in the technologies as DOD does, the NSS places a premium on speed in the
development, adaptation, and acquisition of technologies, as development, adaptation, and acquisition of technologies, as ~~well~~ wel as in bringing them to the as in bringing them to the
warfighter in the form of new tools and weapons. According to the NSS, “the United States must warfighter in the form of new tools and weapons. According to the NSS, “the United States must
regain the element of surprise and field new technologies at the pace of modern industry. regain the element of surprise and field new technologies at the pace of modern industry.

~~35 The~~ 35 T he White House, White House, National Security Strategy, December 2017, p. 20, https://www.whitehouse.gov/wp-content/, December 2017, p. 20, https://www.whitehouse.gov/wp-content/
uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf. uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf.
36 Ibid., pp. 21 and 29. 36 Ibid., pp. 21 and 29.
37 37 ~~Testimony~~T estimony of Secretary of Defense Jim Mattis before the of Secretary of Defense Jim Mattis before the ~~Senate~~Senat e Committee on Armed Services, hearing on the Committee on Armed Services, hearing on the
“Department of Defense Budget Posture,” April 26, 2018, https://www.armed-services.senate.gov/download/mattis_04-“Department of Defense Budget Posture,” April 26, 2018, https://www.armed-services.senate.gov/download/mattis_04-
26-18. 26-18.
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Government agencies must shift from an archaic R&D process to an approach that rewards rapid Government agencies must shift from an archaic R&D process to an approach that rewards rapid
fielding and risk taking.” 38 fielding and risk taking.” 38
In testimony before the House Armed Services Committee, Secretary Mattis stated that DOD is In testimony before the House Armed Services Committee, Secretary Mattis stated that DOD is
transitioning to a culture of performance and affordability “that operates at the speed of transitioning to a culture of performance and affordability “that operates at the speed of
relevance,” and that the department is prioritizing speed of delivery, along with continuous relevance,” and that the department is prioritizing speed of delivery, along with continuous
adaptation and frequent modular upgrades.39 adaptation and frequent modular upgrades.39
In testimony before the House Armed Services Committee, Under Secretary of Defense for In testimony before the House Armed Services Committee, Under Secretary of Defense for
Research and Engineering Mike Griffin discussed the implications of commercial firms leading Research and Engineering Mike Griffin discussed the implications of commercial firms leading
technology development in disciplines that technology development in disciplines that ~~will~~ wil play an increasingly important role in U.S. play an increasingly important role in U.S.
national security. He said this situation could lead to a reduction in the U.S. military’s national security. He said this situation could lead to a reduction in the U.S. military’s
technological advantage over potential adversaries and the need for DOD to develop and technological advantage over potential adversaries and the need for DOD to develop and
implement new approaches to capitalize on and leverage commercial research. Because of this he implement new approaches to capitalize on and leverage commercial research. Because of this he
emphasized the importance of speed in innovation and in the delivery of military capabilities to emphasized the importance of speed in innovation and in the delivery of military capabilities to
national security: national security:
The The ~~incremental democratization of technology has fostered global and easy access~~ incremental democratization of technology has fostered global and easy access to to
cutting edge capabilities, which has in turn contributed to the ability of our adversaries tocutting edge capabilities, which has in turn contributed to the ability of our adversaries to
achieve technology parity. As a result, our military’s advanced technical capabilities and achieve technology parity. As a result, our military’s advanced technical capabilities and
unmatched technological superiority is being challenged by the investments of competing unmatched technological superiority is being challenged by the investments of competing
powers.powers. Given the leveledGiven the leveled ~~playing~~ playing field, speedfield, speed in developingin developing ~~new technologies~~ new technologies and and
delivering capabilities to the warfighter is more critical now than ever. delivering capabilities to the warfighter is more critical now than ever.
We We ~~must be willing and able to tap into commercial research, recognize its military~~
~~potential, and leverage it to develop new capabilities, while also accounting~~ must be willing and able to tap into commercial research, recognize its military potential, and leverage it to develop new capabilities, while also accounting for the for the
operational and organizational constructs to employ them faster than our competitors.40 operational and organizational constructs to employ them faster than our competitors.40
Protection of the National Security Innovation Base
The NSS also asserts the importance of defending what it The NSS also asserts the importance of defending what it ~~calls~~cal s the National Security Innovation the National Security Innovation
Base (NSIB) against adversaries who use both licit (e.g., technology licensing, acquisition of Base (NSIB) against adversaries who use both licit (e.g., technology licensing, acquisition of
companies) and companies) and ~~illicit~~ il icit (e.g., theft of (e.g., theft of ~~intellectual~~intel ectual property) mechanisms “to gain access to fields, property) mechanisms “to gain access to fields,
experts, and trusted foundries that experts, and trusted foundries that ~~fill~~ fil their capability gaps and erode America’s long-term their capability gaps and erode America’s long-term
competitive advantages.”41 The NSS defines the NSIB as “the American network of knowledge, competitive advantages.”41 The NSS defines the NSIB as “the American network of knowledge,
capabilities, and people—including academia, National Laboratories, and the private sector—that capabilities, and people—including academia, National Laboratories, and the private sector—that
turns ideas into innovations, transforms discoveries into successful commercial products and turns ideas into innovations, transforms discoveries into successful commercial products and
companies.”42 According to the NSS, “the landscape of innovation does not divide neatly into companies.”42 According to the NSS, “the landscape of innovation does not divide neatly into
sectors. Technologies that are part of most weapon systems often originate in diverse businesses sectors. Technologies that are part of most weapon systems often originate in diverse businesses
as as ~~well~~ wel as in universities and colleges. Losing our innovation and technological edge would have as in universities and colleges. Losing our innovation and technological edge would have
far-reaching negative implications for American prosperity and power.”43 far-reaching negative implications for American prosperity and power.”43

~~38 The~~ 38 T he White House, White House, National Security Strategy, p. 21. , p. 21.
39 39 ~~Testimony~~T estimony of Secretary of Defense Jim Mattis before the House Committee on Armed Services, of Secretary of Defense Jim Mattis before the House Committee on Armed Services, February 6, 2018, February 6, 2018,
hearing on “hearing on “~~The~~T he National Defense Strategy and the Nuclear Posture Review,” National Defense Strategy and the Nuclear Posture Review,” http://docs.house.gov/meetings/AS/http://docs.house.gov/meetings/AS/
AS00/20180206/106833/HHRG-115-AS00-Wstate-MattisJ-20180206.pdf. AS00/20180206/106833/HHRG-115-AS00-Wstate-MattisJ-20180206.pdf.
~~40 Testimony~~40 T estimony of Under Secretary of Defense for Research and of Under Secretary of Defense for Research and ~~Engineering~~Engin eering Mike Griffin before the House Committee Mike Griffin before the House Committee
on Armed Services,on Armed Services, hearing on “Promoting DOD’s Culturehearing on “Promoting DOD’s Culture of Innovation,” April 18, 2018, https://www.armed-of Innovation,” April 18, 2018, https://www.armed-
services.senate.gov/download/griffin_04-18-18. services.senate.gov/download/griffin_04-18-18.
41 41 ~~The~~T he White House, White House, National Security Strategy, p. 21. , p. 21.
42 Ibid. 42 Ibid.
43 Ibid. 43 Ibid.
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National Defense Strategy
The National Defense Strategy (NDS) builds on the NSS framework, recognizing the changing The National Defense Strategy (NDS) builds on the NSS framework, recognizing the changing
global landscape, the increased pace of innovation, increased reliance on commercial global landscape, the increased pace of innovation, increased reliance on commercial
technologies to meet defense needs, U.S. adversaries’ potential access to these technologies, the technologies to meet defense needs, U.S. adversaries’ potential access to these technologies, the
potential erosion of U.S. technological advantage, and the need for cultural change within DOD: potential erosion of U.S. technological advantage, and the need for cultural change within DOD:
The The ~~security environment is also affected by rapid technological advancements and~~ security environment is also affected by rapid technological advancements and the the
changing character of war. The drive to develop new technologies is relentless, expanding changing character of war. The drive to develop new technologies is relentless, expanding
to more actorsto more actors ~~with~~ with lower barrierslower barriers ~~of entry, and moving at accelerating speed. New~~
~~technologies include advanced computing, “big data” analytics,~~ of entry, and moving at accelera ting speed. New technologies include advanced computing, “big data” analytics, artificial intelligence, artificial intelligence,
autonomy, robotics, directed energy, hypersonics, and biotechnology—the very autonomy, robotics, directed energy, hypersonics, and biotechnology—the very
technologiestechnologies ~~that ensure we will be able to fight and win the wars of the future.~~ that ensure we will be able to fight and win the wars of the future. New New
commercial technology will change society and, ultimately, the character of war. The fact commercial technology will change society and, ultimately, the character of war. The fact
that many technological developments will come from the commercial sector means that that many technological developments will come from the commercial sector means that
state competitors and nonstate actors will also have access to them, a fact that risks eroding state competitors and nonstate actors will also have access to them, a fact that risks eroding
the conventional overmatch to which our Nation has grown accustomed. Maintaining the the conventional overmatch to which our Nation has grown accustomed. Maintaining the
Department’s technological advantage will require changes to industry culture, investment Department’s technological advantage will require changes to industry culture, investment
sources, and protection across the National Security Innovation Base.”44 sources, and protection across the National Security Innovation Base.”44
Among its objectives, the NDS reinforces the Administration’s priorities for rapid innovation, Among its objectives, the NDS reinforces the Administration’s priorities for rapid innovation,
affordability, changes to the DOD culture, and the importance of the NSIB: affordability, changes to the DOD culture, and the importance of the NSIB:
Continuously delivering performance with affordability and speed as we Continuously delivering performance with affordability and speed as we change change
Departmental mindset, culture, and management systems; and Departmental mindset, culture, and management systems; and
Establishing Establishing ~~an unmatched twenty-first century National Security Innovation Base that~~
an unmatched twenty-first century National Security Innovation Base that effectively supports Department operations and sustains security and solvency.” effectively supports Department operations and sustains security and solvency.”
The NDS also emphasizes the need for DOD structural and cultural changes to support The NDS also emphasizes the need for DOD structural and cultural changes to support
innovation, and the mandate the department has given to DOD managers to pursue such changes: innovation, and the mandate the department has given to DOD managers to pursue such changes:
The Department’s management structure and processes are not written in stone, they are a The Department’s management structure and processes are not written in stone, they are a
means to an end–empowering the warfighter with the knowledge, equipment and support means to an end–empowering the warfighter with the knowledge, equipment and support
systems to fight and win. Department leaders will adapt their organizational structures to systems to fight and win. Department leaders will adapt their organizational structures to
best support the Joint Force. If current structures hinder substantial increases in lethality or best support the Joint Force. If current structures hinder substantial increases in lethality or
performance,performance, ~~it is expected that Service Secretaries and Agency heads will consolidate,~~
it is expected that Service Secretaries and Agency heads will consolidate, eliminate, or restructure as needed. The Department’s leadership is committed to changes eliminate, or restructure as needed. The Department’s leadership is committed to changes
in authorities, granting of waivers, and securing external support for streamlining processes in authorities, granting of waivers, and securing external support for streamlining processes
andand ~~organizations…. A rapid, iterative approach to capability development will reduce~~
~~costs, technological obsolescence, and acquisition risk. The Department~~ organizations…. A rapid, iterative approach to capability development will reduce costs, technological obsolescence, and acquisition risk. The Department will realign will realign
incentive and reporting structures to increase speed of delivery, enable design trade-offs in incentive and reporting structures to increase speed of delivery, enable design trade-offs in
the requirementsthe requirements process,process, expand the role of warfighters and intelligence analysis expand the role of warfighters and intelligence analysis
throughout the acquisitions process, and utilizethroughout the acquisitions process, and utilize nontraditional suppliers. Prototyping and nontraditional suppliers. Prototyping and
experimentationexperimentation ~~should be used prior to defining requirements and commercial~~ should be used prior to defining requirements and commercial off-the-off-the-
shelf systems.45 shelf systems.45
Under Secretary Griffin reiterated the need for DOD to pursue new approaches to innovation in Under Secretary Griffin reiterated the need for DOD to pursue new approaches to innovation in
testimony before the House Armed Services Committee. “We are and must remain open-minded testimony before the House Armed Services Committee. “We are and must remain open-minded
to new ways of executing missions,” said Griffin, later adding to new ways of executing missions,” said Griffin, later adding

44 Department of Defense, Summary of the 2018 National Defense Strategy of the United States of America: 44 Department of Defense, Summary of the 2018 National Defense Strategy of the United States of America:
Sharpening the American Military’s Competitive Edge,” January 2018, p. 3, https://www.defense.gov/Portals/1/Sharpening the American Military’s Competitive Edge,” January 2018, p. 3, https://www.defense.gov/Portals/1/
Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. Documents/pubs/2018-National-Defense-Strategy-Summary.pdf.
45 Ibid., pp. 10-11. 45 Ibid., pp. 10-11.
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Identifying [commercial] centers of excellence to spearhead investment portfolios is a way Identifying [commercial] centers of excellence to spearhead investment portfolios is a way
to maximizeto maximize our agility in innovation and to pursue diverse investment strategies. Several our agility in innovation and to pursue diverse investment strategies. Several
of the Department’s initiatives (i.e., the Army Research Lab Open Campus, the Defense of the Department’s initiatives (i.e., the Army Research Lab Open Campus, the Defense
Innovation Unit-Experimental (DIUx), and the pilot program with In-Q-Tel) are expanding Innovation Unit-Experimental (DIUx), and the pilot program with In-Q-Tel) are expanding
avenues to grow Department and industry partnerships. Beyond technical innovation, the avenues to grow Department and industry partnerships. Beyond technical innovation, the
Department continues to pursue new practices and organizational structures to support a Department continues to pursue new practices and organizational structures to support a
culture of innovation.46 culture of innovation.46
Two of the initiatives identified Two of the initiatives identified by Under Secretary Griffin—the Army Research Lab Open by Under Secretary Griffin—the Army Research Lab Open
Campus and DIU—are discussed in greater detail later in this report. Campus and DIU—are discussed in greater detail later in this report.
Selected Congressional and Executive Branch
Actions
Over the past several years, policymakers and others have expressed concern that the long-held Over the past several years, policymakers and others have expressed concern that the long-held
technological edge of the U.S. military is eroding. This erosion is attributed, in part, to the technological edge of the U.S. military is eroding. This erosion is attributed, in part, to the
increased development of advanced technologies outside the defense sector and to DOD increased development of advanced technologies outside the defense sector and to DOD
organizational and cultural barriers to effectively incorporating and exploiting commercial organizational and cultural barriers to effectively incorporating and exploiting commercial
innovations. Some have also expressed concerns about the extent and effectiveness of DOD’s innovations. Some have also expressed concerns about the extent and effectiveness of DOD’s
engagement with leading-edge companies that have not engagement with leading-edge companies that have not ~~historically~~historical y been a part of the DOD been a part of the DOD
innovation ecosystem. Congress has taken a number of actions to address these concerns, some of innovation ecosystem. Congress has taken a number of actions to address these concerns, some of
which are described below; the actions described should be consider which are described below; the actions described should be consider ~~illustrative~~il ustrative and not and not
exhaustive.exhaustive.
Reorganizing to Foster Innovation
Reestablishing the Position of Under Secretary of Defense for Research and
Engineering
In 2016, through the National Defense Authorization Act for Fiscal Year 2017 (FY2017 NDAA, In 2016, through the National Defense Authorization Act for Fiscal Year 2017 (FY2017 NDAA,
P.L. 114-328), Congress eliminated the position of the Under Secretary of Defense for P.L. 114-328), Congress eliminated the position of the Under Secretary of Defense for
Acquisition, Technology, and Logistics (USD (AT&L)) and established the positions of Under Acquisition, Technology, and Logistics (USD (AT&L)) and established the positions of Under
Secretary of Defense for Research and Engineering (USD (R&E)) and Under Secretary of Secretary of Defense for Research and Engineering (USD (R&E)) and Under Secretary of
Defense for Acquisition and Sustainment (USD (A&S)). Defense for Acquisition and Sustainment (USD (A&S)).
The establishment of the USD (R&E) as the third highest ranking DOD official—behind the The establishment of the USD (R&E) as the third highest ranking DOD official—behind the
Secretary and Deputy Secretary—was intended to promote faster innovation and to reduce risk-Secretary and Deputy Secretary—was intended to promote faster innovation and to reduce risk-
intolerance in the pursuit of new technologies.47 In general, the position of USD (R&E) was intolerance in the pursuit of new technologies.47 In general, the position of USD (R&E) was
created as a response to the perception that the “acquisitions culture” dominated the office of the created as a response to the perception that the “acquisitions culture” dominated the office of the
USD (AT&L), discouraging innovation and experimentation by the research and engineering staff USD (AT&L), discouraging innovation and experimentation by the research and engineering staff
and was not in alignment with the “fail fast” mentality of the broader innovation community. and was not in alignment with the “fail fast” mentality of the broader innovation community.

~~46 Testimony~~ 46 T estimony of Under Secretary of Defense for Research and Engineering Mike Griffin before the House Committee of Under Secretary of Defense for Research and Engineering Mike Griffin before the House Committee
on Armed Services,on Armed Services, hearing on “Promoting DOD’s Culturehearing on “Promoting DOD’s Culture of Innovation,” April 18, 2018, https://www.armed-of Innovation,” April 18, 2018, https://www.armed-
services.senate.gov/download/griffin_04-18-18. services.senate.gov/download/griffin_04-18-18.
47 P.L. 114-328 established the position of USD (R&E) and gave it precedence behind the Secretary and Deputy 47 P.L. 114-328 established the position of USD (R&E) and gave it precedence behind the Secretary and Deputy
Secretary of Defense. Subsequently,Secretary of Defense. Subsequently, P.L. 115-91 established the position of Chief Management Officer and gave it P.L. 115-91 established the position of Chief Management Officer and gave it
precedence behindprecedence behind the Secretary and Deputy Secretary of Defense and above the USD (R&E),the Secretary and Deputy Secretary of Defense and above the USD (R&E), making USDmaking USD (R&E) (R&E)
fourth in DOD precedence; however, P.L. 116-283 repealed the position of Chief Managemen Officier making the fourth in DOD precedence; however, P.L. 116-283 repealed the position of Chief Managemen Officier making the
USD(R&E)USD(R&E) third in DOD precendence again. third in DOD precendence again.
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Over the course of DOD’s history, leadership for research, engineering, and technology Over the course of DOD’s history, leadership for research, engineering, and technology
development has existed at various levels within the Office of the Secretary of Defense (OSD), development has existed at various levels within the Office of the Secretary of Defense (OSD),
including an Assistant Secretary of Defense for Research and Engineering and a Director of including an Assistant Secretary of Defense for Research and Engineering and a Director of
Defense for Research and Engineering. Prior to the reestablishment of the position of the USD Defense for Research and Engineering. Prior to the reestablishment of the position of the USD
(R&E) in the FY2017 NDAA, the position of USD (R&E) was in place from 1977 to 1986. (R&E) in the FY2017 NDAA, the position of USD (R&E) was in place from 1977 to 1986.
In reestablishing the position of USD (R&E), the Senate Committee on Armed Services stated In reestablishing the position of USD (R&E), the Senate Committee on Armed Services stated
(S.Rept. 114-255) (S.Rept. 114-255)
The The ~~committee expects that just as previous USD(R&E) incumbents led the so-called~~ committee expects that just as previous USD(R&E) incumbents led the so -caled
“Second Offset” strategy, which successfully enabled the United States to leap ahead of “Second Offset” strategy, which successfully enabled the United States to leap ahead of
thethe ~~Soviet Union in terms of military technology, the new USD(R&E) would be tasked~~
~~with driving the key technologies that must encompass what defense leaders are~~ Soviet Union in terms of military technology, the new USD(R&E) would be tasked with driving the key technologies that must encompass what defense leaders are now now
calling a “Third Offset” strategy: cyber and space capabilities, unmanned systems, directed calling a “Third Offset” strategy: cyber and space capabilities, unmanned systems, directed
energy, undersea warfare, hypersonics, and robotics, among others. energy, undersea warfare, hypersonics, and robotics, among others.
A key factor driving the establishment of the USD (R&E) and giving it precedence above the A key factor driving the establishment of the USD (R&E) and giving it precedence above the
USD (A&S) was concern that DOD technology development had become too risk averse under USD (A&S) was concern that DOD technology development had become too risk averse under
the acquisition-dominant culture of AT&L. In the conference report (H.Rept. 114-840) for the the acquisition-dominant culture of AT&L. In the conference report (H.Rept. 114-840) for the
FY2017 NDAA, the conferees stated their expectation that the USD (R&E) “would take risks, FY2017 NDAA, the conferees stated their expectation that the USD (R&E) “would take risks,
press the technology envelope, test and experiment, and have the latitude to fail, as appropriate.” press the technology envelope, test and experiment, and have the latitude to fail, as appropriate.”
P.L. 114-328 outlines the powers and duties of the USD (R&E) to include P.L. 114-328 outlines the powers and duties of the USD (R&E) to include
 serving as the chief technology officer of DOD with the mission of advancing  serving as the chief technology officer of DOD with the mission of advancing
technology and innovation for the military services and DOD; technology and innovation for the military services and DOD;
 establishing policies on, and supervising and coordinating, DOD’s research and  establishing policies on, and supervising and coordinating, DOD’s research and
engineering, technology development, technology transition, prototyping, engineering, technology development, technology transition, prototyping,
experimentation, and developmental testing activities and programs, including experimentation, and developmental testing activities and programs, including
the the ~~allocation~~al ocation of resources for defense research and engineering; and of resources for defense research and engineering; and
 serving as the principal advisor to the Secretary of Defense on  serving as the principal advisor to the Secretary of Defense on ~~all~~ al research, research,
engineering, and technology development activities and programs in DOD. engineering, and technology development activities and programs in DOD.
On July 15, 2020, DOD released Department of Defense Directive (DODD) 5137.02 specifying On July 15, 2020, DOD released Department of Defense Directive (DODD) 5137.02 specifying
45 key functions and responsibilities of the USD (R&E) and defining45 key functions and responsibilities of the USD (R&E) and defining the authorities of the USD the authorities of the USD
(R&E) and his or her relationships with other senior DOD officials. The responsibilities detailed (R&E) and his or her relationships with other senior DOD officials. The responsibilities detailed
in DODD 5137.02 include managing the DOD science and technology (S&T) portfolio to address in DODD 5137.02 include managing the DOD science and technology (S&T) portfolio to address
near-term and far-term capability gaps against emerging threats and ensuring that DOD technical near-term and far-term capability gaps against emerging threats and ensuring that DOD technical
infrastructure, scientific and engineering capabilities, and associated resources align with DOD infrastructure, scientific and engineering capabilities, and associated resources align with DOD
priorities. It remains to be seen if the new organizational structure priorities. It remains to be seen if the new organizational structure ~~will~~ wil be successful in achieving be successful in achieving
congressional intent and helping to create a more risk tolerant and innovative DOD. congressional intent and helping to create a more risk tolerant and innovative DOD.
In addition to creating the USD (R&E) and elevating its role in the DOD innovation process, as In addition to creating the USD (R&E) and elevating its role in the DOD innovation process, as
part of its reform efforts, Congress shifted certain acquisition authority and day-to-day part of its reform efforts, Congress shifted certain acquisition authority and day-to-day
management of RDT&E activities and programs back to the military services.48 The extent to management of RDT&E activities and programs back to the military services.48 The extent to
which this shift in authorities and responsibility which this shift in authorities and responsibility ~~will~~ wil have an influence on the role and efficacy of have an influence on the role and efficacy of
the USD (R&E) remains to be seen. In response to a question about the USD (R&E) remains to be seen. In response to a question about ~~what~~w hat authorities and authorities and
responsibilities the USD (R&E) should have, former USD (R&E) Michael D. Griffin statedresponsibilities the USD (R&E) should have, former USD (R&E) Michael D. Griffin stated

48 For more information on acquisition reform see CRS48 For more information on acquisition reform see CRS Report R45068, Report R45068, Acquisition Reform in the FY2016-FY2018
National Defense Authorization Acts (NDAAs), by Heidi, by Heidi M. Peters. M. Peters.
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I personally believe it was a very good idea to delegate programs back to the services to I personally believe it was a very good idea to delegate programs back to the services to
run on a day-to-day basis. [However, as a result,] the authorities that the USD (R&E) has run on a day-to-day basis. [However, as a result,] the authorities that the USD (R&E) has
dodo ~~not include the ability~~ not include the ability to directto direct ~~funding. They do not include the ability~~ funding. They do not include the ability to direct to direct
programs or program direction. So, therefore, the office [of the USD (R&E)] is persuasive programs or program direction. So, therefore, the office [of the USD (R&E)] is persuasive
or advisory in nature.49or advisory in nature.49
Congress may monitor how effectively the USD (R&E) is able to accomplish its mission in the Congress may monitor how effectively the USD (R&E) is able to accomplish its mission in the
absence of direct authority over programs and funding. In this regard, Congress may opt to absence of direct authority over programs and funding. In this regard, Congress may opt to
examine the evolution of the relationship between the USD (R&E) and the military services. The examine the evolution of the relationship between the USD (R&E) and the military services. The
effectiveness and nature of the relationship between the USD (R&E) and the military services effectiveness and nature of the relationship between the USD (R&E) and the military services
~~will likely~~ wil likely be important as DOD pursues its modernization priorities. The office of the USD be important as DOD pursues its modernization priorities. The office of the USD
(R&E) has identified 11 technical areas as part of DOD’s modernization efforts. Each technical (R&E) has identified 11 technical areas as part of DOD’s modernization efforts. Each technical
area has a prinicipal director within the office of the USD (R&E) who is responsible for area has a prinicipal director within the office of the USD (R&E) who is responsible for
establishing a “DOD-wide, mission-focused roadmap” for delivering capabilities in their establishing a “DOD-wide, mission-focused roadmap” for delivering capabilities in their
technical area to the warfighter; assessing work and activities occurring in their technical area technical area to the warfighter; assessing work and activities occurring in their technical area
across DOD, other federal agencies, academia, the private sector, and across DOD, other federal agencies, academia, the private sector, and ~~internationally~~international y; leading ; leading
independent technical analyses; and conducting outreach and engagement across the innovation independent technical analyses; and conducting outreach and engagement across the innovation
community. The 11 modernization priority areas arecommunity. The 11 modernization priority areas are:
 Artifical  Artifical ~~intelligence~~intel igence; ;
 Biotechnology;  Biotechnology;
 Autonomy;  Autonomy;
 Cyber;  Cyber;
 Directed energy;  Directed energy;
 Fully networked command, control, and communications technology;  Fully networked command, control, and communications technology;
 Microelectronics;  Microelectronics;
 Quantum science;  Quantum science;
 Hypersonics;  Hypersonics;
 Space; and  Space; and
 5G.50  5G.50
Army Futures Command
On August 15, 2018, the Army announced that the Army Futures Command (AFC) would be On August 15, 2018, the Army announced that the Army Futures Command (AFC) would be
headquartered in Austin, TX.51 The intent of AFC is to consolidate the Army’s modernization headquartered in Austin, TX.51 The intent of AFC is to consolidate the Army’s modernization
efforts and command under one entity. According to the Army, efforts and command under one entity. According to the Army,
Establishment of the command marks the most significant reorganization of the Establishment of the command marks the most significant reorganization of the
institutional Army since 1973, when it created U.S. Army Forces Command (FORSCOM) institutional Army since 1973, when it created U.S. Army Forces Command (FORSCOM)
andand ~~U.S. Army Training and Doctrine Command (TRADOC). Unique in structure~~ U.S. Army Training and Doctrine Command (TRADOC). Unique in structure and and
design, it is being headquartered in Austin, Texas to better partner with academia, industry, design, it is being headquartered in Austin, Texas to better partner with academia, industry,

~~49 U.S.~~ 49 U.S. Congress, Senate Committee on Armed Services,Congress, Senate Committee on Armed Services, Subcommittee on EmergingSubcommittee on Emerging ~~Threats~~ T hreats and Capabilities, and Capabilities,
Accelerating New Technologies to Meet ~~Emerging~~ Em erging Threats, 115th Cong., 2nd sess.,, 115th Cong., 2nd sess., April 18, 2018. April 18, 2018.
50 Undersecretary of Defense for Research and Engineering, Department of Defense, “Modernizationn Priorities,” 50 Undersecretary of Defense for Research and Engineering, Department of Defense, “Modernizationn Priorities,”
https://www.cto.mil/modernization-priorities/. https://www.cto.mil/modernization-priorities/.
51 For more information on the Army Futures Command see, CRS 51 For more information on the Army Futures Command see, CRS Insight IN10889, Insight IN10889, Army Futures Command (AFC), by , by
AndrewAndrew Feickert ~~Feickert~~. .
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and innovators in the private sector, while providing a good and affordable quality of life and innovators in the private sector, while providing a good and affordable quality of life
for Futures Command personnel.52 for Futures Command personnel.52
Part of the AFC, the Army Applications Lab (AAL) is tasked with “align[ing] innovative Part of the AFC, the Army Applications Lab (AAL) is tasked with “align[ing] innovative
solutions and technologies with Army problems, resources and programs to rapidly discover, solutions and technologies with Army problems, resources and programs to rapidly discover,
validate and transition technology applications in support of Army modernization.”53 Accroding validate and transition technology applications in support of Army modernization.”53 Accroding
to MITRE, the AAL’s three main lines of effort are (1) discovery of novel capability concepts; (2) to MITRE, the AAL’s three main lines of effort are (1) discovery of novel capability concepts; (2)
acceleration of disruptive applications of technology that deliver a 2-4 times improvement over acceleration of disruptive applications of technology that deliver a 2-4 times improvement over
current or planned Army capabilities, and (3) translation of breakthrough innovations that create a current or planned Army capabilities, and (3) translation of breakthrough innovations that create a
scalable, first-mover advantage for the Army in strategic technology areas.54 scalable, first-mover advantage for the Army in strategic technology areas.54
Outreach to Companies Outside of the Traditional Defense Base
The Role of the Defense Innovation Unit (DIU)
In 2015, former Secretary of Defense Ash Carter created the Defense Innovation Unit55 (DIU) to In 2015, former Secretary of Defense Ash Carter created the Defense Innovation Unit55 (DIU) to
address the concern that DOD was not adequately engaged with start-up technology companies address the concern that DOD was not adequately engaged with start-up technology companies
and other commercial enterprises generating innovative technologies. In announcing DIU, and other commercial enterprises generating innovative technologies. In announcing DIU,
Secretary Carter indicated that the organization’s mission was to “strengthen existing Secretary Carter indicated that the organization’s mission was to “strengthen existing
relationships and build new ones; help scout for new technologies; and help function as a local relationships and build new ones; help scout for new technologies; and help function as a local
interface” between Silicon interface” between Silicon ~~Valley~~ Val ey and DOD.56and DOD.56
In 2016, DIU was expanded to include offices in the technology hubs of Boston, MA, and Austin, In 2016, DIU was expanded to include offices in the technology hubs of Boston, MA, and Austin,
TX, and restructured to reflect a partnership-style leadership model common in venture capital TX, and restructured to reflect a partnership-style leadership model common in venture capital
firms. In 2018, DIU added an office in Washington, DC. According to DIU, it is “a fast-moving firms. In 2018, DIU added an office in Washington, DC. According to DIU, it is “a fast-moving
government entity that provides nondilutive capital to companies to solve national defense government entity that provides nondilutive capital to companies to solve national defense
problems.” In general, DIU uses other transaction authority to acquire prototypes from problems.” In general, DIU uses other transaction authority to acquire prototypes from
nontraditional defense contractors; other transactions are not subject to federal acquisition nontraditional defense contractors; other transactions are not subject to federal acquisition
regulations and are viewed as providing federal agencies with more flexibilityregulations and are viewed as providing federal agencies with more flexibility than traditional than traditional
acquisition mechanisms, such as grants, contracts, or cooperative agreements.57 For further acquisition mechanisms, such as grants, contracts, or cooperative agreements.57 For further
discussion of this issue, see “Expanding Flexibility:discussion of this issue, see “Expanding Flexibility: Other Transaction Authority” below. Other Transaction Authority” below.
In 2017, former Defense Secretary James Mattis stated that “there is no doubt in my mind that In 2017, former Defense Secretary James Mattis stated that “there is no doubt in my mind that
DIUx DIUx ~~will~~ wil not only continue to exist, it not only continue to exist, it ~~will actually, it will~~ wil actual y, it wil grow in its influence and its impact on grow in its influence and its impact on
the Department of Defense.”58 the Department of Defense.”58

52 Department of the Army, “Army Announces Austin as the Home of New52 Department of the Army, “Army Announces Austin as the Home of New Army FuturesArmy Futures Command,” press release, Command,” press release,
AugustAugust 15, 2018, https://www.army.mil/article/208477/15, 2018, https://www.army.mil/article/208477/
army_announces_austin_as_the_home_of_new_army_futures_command. army_announces_austin_as_the_home_of_new_army_futures_command.
53 Army Futures Command, Army Applications Lab, “Who We Are,” https://armyfuturescommand.com/aal/. 53 Army Futures Command, Army Applications Lab, “Who We Are,” https://armyfuturescommand.com/aal/.
54 54 ~~MITRE~~MIT RE, Acquisiton in the Digital Age (AiDA), “Understanding DOD: , Acquisiton in the Digital Age (AiDA), “Understanding DOD: ~~Tap~~T ap the Innovation Ecosystem,” the Innovation Ecosystem,”
https://aida.mitre.org/demystifying-dod/innovation-ecosystem/. https://aida.mitre.org/demystifying-dod/innovation-ecosystem/.
55 55 ~~The~~T he Defense Innovation Unit was formerly called the Defense Innovation Unit Experimental or DIUx. Defense Innovation Unit was formerly called the Defense Innovation Unit Experimental or DIUx.
56 Remarks of Secretary of Defense Ash Carter, at Stanford University, “Rewiring the Pentagon: Charting a New Path 56 Remarks of Secretary of Defense Ash Carter, at Stanford University, “Rewiring the Pentagon: Charting a New Path
on Innovation and Cybersecurity,” press release, April 23, 2015, https://www.defense.gov/News/Speeches/Speech-on Innovation and Cybersecurity,” press release, April 23, 2015, https://www.defense.gov/News/Speeches/Speech-
View/Article/606666/drell-lecture-rewiring-the-pentagon-charting-a-new-path-on-innovation-and-cyber/. View/Article/606666/drell-lecture-rewiring-the-pentagon-charting-a-new-path-on-innovation-and-cyber/.
57 U.S. 57 U.S. Government Accountability Office, Government Accountability Office, Military Acquisitions: DOD Taking Steps to Address Challenges Faced by
Certain ~~Companies~~Com panies, GAO-17-644, July 20, 2017, p. 27. , GAO-17-644, July 20, 2017, p. 27.
58 Department of Defense, “Media Availability with Secretary Mattis at DIUx,” transcript, August 10, 2017, 58 Department of Defense, “Media Availability with Secretary Mattis at DIUx,” transcript, August 10, 2017,
https://www.defense.gov/News/https://www.defense.gov/News/~~Transcripts/Transcript~~T ranscripts/T ranscript -View/Article/1275373/media-availability-with-secretary-mattis--View/Article/1275373/media-availability-with-secretary-mattis-
at-diux/. at-diux/.
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Some Members of Congress have been more measured in their support for DIU and its ability to Some Members of Congress have been more measured in their support for DIU and its ability to
engage new and nontraditional commercial sources of innovation.59 The conference report to the engage new and nontraditional commercial sources of innovation.59 The conference report to the
FY2017 NDAA (H.Rept. 114-840) statedFY2017 NDAA (H.Rept. 114-840) stated
The conferees remain cautiously optimistic that the changes to the organizational structure The conferees remain cautiously optimistic that the changes to the organizational structure
and functions of DIUx could become important tools for the Department of Defense (DOD) and functions of DIUx could become important tools for the Department of Defense (DOD)
toto engage withengage with ~~new and~~ new and non-traditionalnon-traditional commercial sourcescommercial sources ~~of innovation, as~~ of innovation, as well as well as
rapidly identify and integrate new technologies into defense systems. The conferees believe rapidly identify and integrate new technologies into defense systems. The conferees believe
that outreach to commercial companies, small businesses and other nonthat outreach to commercial companies, small businesses and other non -traditional defense -traditional defense
contractors, in Silicon Valley and across the nation, will be a key element in all efforts at contractors, in Silicon Valley and across the nation, will be a key element in all efforts at
modernizing defense systems and pursuing offsetting technology strategies. However, the modernizing defense systems and pursuing offsetting technology strategies. However, the
conferees are concerned that investments made by DIUx to-date were not focused on rapid conferees are concerned that investments made by DIUx to-date were not focused on rapid
delivery of much neededdelivery of much needed game-changinggame-changing technologies…technologies… Additionally,Additionally, the conferees the conferees
remain concerned that in the Department’s rush to try something new, defense leaders have remain concerned that in the Department’s rush to try something new, defense leaders have
notnot ~~taken the time to determine how effective recent organizational and~~ taken the time to determine how effective recent organizational and management management
changes are before seeking a rapid expansion of resources. Nor do the conferees believe changes are before seeking a rapid expansion of resources. Nor do the conferees believe
that the Department has postured DIUx to be successful in the innovation ecosystem with that the Department has postured DIUx to be successful in the innovation ecosystem with
partners across the Department, finding ways to multiply the effectiveness and networking partners across the Department, finding ways to multiply the effectiveness and networking
potentialpotential ~~of DIUx by leveraging the personnel, expertise, authorities, and resources~~ of DIUx by leveraging the personnel, expertise, authorities, and resources of of
existing successful research, development, innovation, and tech transfer mechanisms.60 existing successful research, development, innovation, and tech transfer mechanisms.60
~~Additionally,~~ Additional y, in the Department of Defense and Labor, Health and Human Services, and in the Department of Defense and Labor, Health and Human Services, and
Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 (P.L. 115-245), Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 (P.L. 115-245),
Congress provided DIU with $44 Congress provided DIU with $44 ~~million~~ mil ion in funding, a level more than $27 in funding, a level more than $27 ~~million~~ mil ion below the below the
President’s budget request of $71.1 President’s budget request of $71.1 ~~million~~mil ion. The reason provided for the reduced level was . The reason provided for the reduced level was
unjustified mission and personnel growth.61 Furthermore, the John S. McCain National Defense unjustified mission and personnel growth.61 Furthermore, the John S. McCain National Defense
Authorization Act for Fiscal Year 2019 (P.L. 115-232) required the USD (R&E) to submit a report Authorization Act for Fiscal Year 2019 (P.L. 115-232) required the USD (R&E) to submit a report
to Congress detailing how DIU would be integrated into the broader DOD research and to Congress detailing how DIU would be integrated into the broader DOD research and
engineering community, how the impact and effectiveness of the agency engineering community, how the impact and effectiveness of the agency ~~will~~ wil be measured, and be measured, and
how DOD is institutionalizinghow DOD is institutionalizing best practices to best practices to ~~alleviate~~al eviate systematic problems with technology systematic problems with technology
access. access.
However, Congess continues to provide DIU with additional authorities. For example, P.L. 115- However, Congess continues to provide DIU with additional authorities. For example, P.L. 115-
232 extended the direct hiring authority under 10 U.S.C. §1599h to facilitate recruitment of 232 extended the direct hiring authority under 10 U.S.C. §1599h to facilitate recruitment of
eminent experts in science or engineering to DIU. eminent experts in science or engineering to DIU. ~~Additionally,~~ Additional y, in the National Defense in the National Defense
Authorization Act for Fiscal Year 2020 (P.L. 116-92), Congress authorized DOD to establish a Authorization Act for Fiscal Year 2020 (P.L. 116-92), Congress authorized DOD to establish a
joint reserve attachment for DIU with the purpose of supporting engagement and collaboration joint reserve attachment for DIU with the purpose of supporting engagement and collaboration
with the private sector and accelerating the use and adoption of with the private sector and accelerating the use and adoption of ~~commercially~~commercial y-developed -developed
technologies for national security purposes. According to DIU’s annual report, in the five years technologies for national security purposes. According to DIU’s annual report, in the five years
since the agency was created it has received 2,381 proposals; awarded 208 prototype other since the agency was created it has received 2,381 proposals; awarded 208 prototype other
transaction contracts; completed 36 projects; and leveraged $11.7 transaction contracts; completed 36 projects; and leveraged $11.7 ~~billion~~bil ion in private sector in private sector
investment. investment. ~~Additionally,~~ Additional y, 87% of DIU awardees are nontradtional vendors, 35% are first-time 87% of DIU awardees are nontradtional vendors, 35% are first-time
DOD vendors, and 77% are DOD vendors, and 77% are ~~small~~ smal businesses.62 Despite DIU’s progess, a number of questions businesses.62 Despite DIU’s progess, a number of questions
remain: ~~remain:~~

59 Philip Marcelo, “Mattis, Hill Republicans59 Philip Marcelo, “Mattis, Hill Republicans Clash over Potential Diux Future,” Clash over Potential Diux Future,” Defense News,, ~~August~~ August 11, 2017. 11, 2017.
60 U.S.60 U.S. Congress, HouseCongress, House Committee on Armed Services, Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2017 , ,
conference report to accompany S. 2943, 114th Cong., 2nd sess., November 30, 2016, H.Rept. 114-840, p. 992. conference report to accompany S. 2943, 114th Cong., 2nd sess., November 30, 2016, H.Rept. 114-840, p. 992.
61 U.S. 61 U.S. Congress, HouseCongress, House Committee on Appropriations, Committee on Appropriations, Department of Defense for the Fiscal Year Ending September
30, 2019, and for Other Purposes, conference report to accompany H.R. 6157, 115th Cong., 2nd sess., September 13, , conference report to accompany H.R. 6157, 115th Cong., 2nd sess., September 13,
2018, H. Rept, 115-952, pp. 473, 227. 2018, H. Rept, 115-952, pp. 473, 227.
62 Defense Innovation Unit, 62 Defense Innovation Unit, Annual Report 2020, pp. 6-10, https://assets.ctfassets.net/3nanhbfkr0pc/, pp. 6-10, https://assets.ctfassets.net/3nanhbfkr0pc/
3VXak4123q9HHoG2rvpQFO/385542158e5b6ca62e7fa63c03bcfe0d/DIU_-_2020_Annual_Report_FINAL.pdf. 3VXak4123q9HHoG2rvpQFO/385542158e5b6ca62e7fa63c03bcfe0d/DIU_-_2020_Annual_Report_FINAL.pdf.
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 Is the DIU model effective at rapidly identifying and integrating new  Is the DIU model effective at rapidly identifying and integrating new
technologies into defense systems? technologies into defense systems?
 Is DIU serving as an effective ‘change agent’ within the department—helping to  Is DIU serving as an effective ‘change agent’ within the department—helping to
foster a broad based cultural shift or is it just another isolated workaround? foster a broad based cultural shift or is it just another isolated workaround?
 What is the appropriate size and level of funding for DIU?  What is the appropriate size and level of funding for DIU?
The Role of Small Businesses
~~Small~~ Smal businesses are often described as being critical to the economy—creating jobs, improving businesses are often described as being critical to the economy—creating jobs, improving
productivity, and advancing innovation and competitiveness. The NDS recognized the productivity, and advancing innovation and competitiveness. The NDS recognized the
contributions of contributions of ~~small~~ smal business, among others, to DOD:business, among others, to DOD:
~~The Department will also continue to explore streamlined, non-traditional pathways~~ The Department will also continue to explore streamlined, non-traditional pathways to to
bring critical skills into service, expanding access to outside expertise, and devising new bring critical skills into service, expanding access to outside expertise, and devising new
public-private partnerships to work with small companies, start-ups, and universities.63 public-private partnerships to work with small companies, start-ups, and universities.63
The following section provides a few The following section provides a few ~~illustrative~~il ustrative examples of how DOD is trying to increase its examples of how DOD is trying to increase its
engagement with engagement with ~~small~~ smal businesses. businesses.
In 2019, the Air Force introduced “pitch days” into its In 2019, the Air Force introduced “pitch days” into its ~~Small~~ Smal Business Innovation Research Business Innovation Research
(SBIR) program.64 According to the Air Force, (SBIR) program.64 According to the Air Force,
the the introduction ofintroduction of ~~the pitch day~~ the pitch day concept markedconcept marked a dramatica dramatic ~~shift~~ shift in thein the Air Force’s Air Force’s
acquisition strategy, creating a faster, smarter method to get cutting-edge technologies and acquisition strategy, creating a faster, smarter method to get cutting-edge technologies and
capabilities into the hands of warfighters. capabilities into the hands of warfighters.
The events are designed to award SBIR contracts to winning The events are designed to award SBIR contracts to winning ~~small~~ smal companies and startups and to companies and startups and to
~~allocate~~al ocate funds via a government credit card on the same day as the “pitch.” In 2019, the Air Force funds via a government credit card on the same day as the “pitch.” In 2019, the Air Force
awarded $131 awarded $131 ~~million~~mil ion through its pitch day events.65 through its pitch day events.65
The Air Force has also launched a number of accelerators and incubators that offer start-ups and The Air Force has also launched a number of accelerators and incubators that offer start-ups and
~~small~~ smal businesses seed funding, mentoring and other support, and often a collaborative physical businesses seed funding, mentoring and other support, and often a collaborative physical
environment to develop their innovative ideas, brand identification, and business plans. For environment to develop their innovative ideas, brand identification, and business plans. For
example, the Catalyst Space Accelerator is described as a 12-week, semi-residential program example, the Catalyst Space Accelerator is described as a 12-week, semi-residential program
located in Colorado Springs, designed to increase the Air Force’s awareness and rapid acquisition located in Colorado Springs, designed to increase the Air Force’s awareness and rapid acquisition
of commercial dual-use space technology by providing relevant business development training to of commercial dual-use space technology by providing relevant business development training to
selected companies and connecting them with DoD and commercial users, decisionmakers, and selected companies and connecting them with DoD and commercial users, decisionmakers, and
potential new customers.66 potential new customers.66
On March 31, 2021, DOD announced a memorandum of agreement between the Office of On March 31, 2021, DOD announced a memorandum of agreement between the Office of ~~Small~~
Smal Business Programs and the National Security Innovation Network (described later) to expand the Business Programs and the National Security Innovation Network (described later) to expand the
national security innovation base. The objectives of the agreement include event and program national security innovation base. The objectives of the agreement include event and program
collaboration to engage collaboration to engage ~~small~~ smal businesses in the National Technology and Industrial Base;67 and businesses in the National Technology and Industrial Base;67 and

63 Department of Defense, “Summary of the 2018 National Defense Strategy of the United States of America: 63 Department of Defense, “Summary of the 2018 National Defense Strategy of the United States of America:
Sharpening the American Military’s Competitive Edge,” January 2018, p. 8, https://www.defense.gov/Portals/1/Sharpening the American Military’s Competitive Edge,” January 2018, p. 8, https://www.defense.gov/Portals/1/
Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. Documents/pubs/2018-National-Defense-Strategy-Summary.pdf.
64 For more information on the Small Business64 For more information on the Small Business Innovation and Small BusinessInnovation and Small Business ~~Technology Transfer programs~~ T echnology T ransfer pro grams see CRS see CRS
Report R43695, Report R43695, ~~Small~~Sm all Business Research ~~Programs~~Program s: SBIR and STTR, by Marcy E. Gallo. , by Marcy E. Gallo.
65 U.S. 65 U.S. Air Force, “Air Force Pitch Day,” https://www.afsbirsttr.af.mil/Events/Pitch-Days/. Air Force, “Air Force Pitch Day,” https://www.afsbirsttr.af.mil/Events/Pitch-Days/.
66 Air Force Research Laboratory, “Air Force Accelerators and Incubators: Our Programs,” 66 Air Force Research Laboratory, “Air Force Accelerators and Incubators: Our Programs,”
https://www.afaccelerators.com/. https://www.afaccelerators.com/.
67 As defined67 As defined by 10 U.S.C.by 10 U.S.C. §2500, the National §2500, the National ~~Technology~~T echnology and Industrial Base and Industrial Base means the persons and organizations means the persons and organizations
that are engagedthat are engaged in research, development, production, integration, services, or information technology activities in research, development, production, integration, services, or information technology activities
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enhancing DOD partnerships with private capital, increasing access to commercial technologies, enhancing DOD partnerships with private capital, increasing access to commercial technologies,
and improving market research and source selection capabilities.68 and improving market research and source selection capabilities.68
Increasing Collaboration with Academia and Industry
In addition to DIU and the In addition to DIU and the ~~small~~ smal business-related examples described above, DOD has been business-related examples described above, DOD has been
pursuing other means of increasing collaboration and interaction with academia and industry. The pursuing other means of increasing collaboration and interaction with academia and industry. The
following sections provide a few following sections provide a few ~~illustrative~~il ustrative examples. examples. ~~Additionally,~~ Additional y, the box items, the box items, “Artificial
~~Intelligence~~Intel igence: DOD and Google:
Are There Social and Ethical Barriers to Engaging with U.S. Technology Companies?” and and
“Computer Chips: Too Costly for Commercial Chipmakers to Meet DOD Needs?,” “Computer Chips: Too Costly for Commercial Chipmakers to Meet DOD Needs?,” ~~illustrate~~il ustrate the the
types of potential types of potential ~~challenges~~chal enges DOD may face in expanding its engagement with leading U.S. DOD may face in expanding its engagement with leading U.S.
technology companies. technology companies.
Defense Innovation Board
The Defense Innovation Board (DIB) was established in 2016 by the Department of Defense as The Defense Innovation Board (DIB) was established in 2016 by the Department of Defense as
an independent federal advisory committee. DIB members are appointed by the Secretary of an independent federal advisory committee. DIB members are appointed by the Secretary of
Defense. Among its members are senior representatives from leading U.S. technology companies, Defense. Among its members are senior representatives from leading U.S. technology companies,
venture capital firms, research institutes, and universities (including schools of business and venture capital firms, research institutes, and universities (including schools of business and
technology). The DIB provides advice to the Secretary of Defense and other senior leaders across technology). The DIB provides advice to the Secretary of Defense and other senior leaders across
DOD with “independent advice and recommendations on innovative means to address future DOD with “independent advice and recommendations on innovative means to address future
~~challenges~~ chal enges through the prism of three focus areas: people and culture, technology and capabilities, through the prism of three focus areas: people and culture, technology and capabilities,
and practices and operations.” Efforts to date have focused on artificial and practices and operations.” Efforts to date have focused on artificial ~~intelligence~~intel igence and machine and machine
learning; software workforce capacity building; hiring and retention of innovation, science, learning; software workforce capacity building; hiring and retention of innovation, science,
technology, engineering, and mathematics (I+STEM) talent; acquisition reform; communication technology, engineering, and mathematics (I+STEM) talent; acquisition reform; communication
networks; information technology infrastructure; and working with the technology industry.69 networks; information technology infrastructure; and working with the technology industry.69
Congress may conduct oversight of DOD implementation of DIB recommendations. Congress may conduct oversight of DOD implementation of DIB recommendations. ~~Additionally~~Additional y, ,
Congress may opt to leverage the expertise of DIB members regarding potential policy changes Congress may opt to leverage the expertise of DIB members regarding potential policy changes
and other reform efforts that Congress might consider to ensure the innovative capacity of DOD and other reform efforts that Congress might consider to ensure the innovative capacity of DOD
is sustained over the long-term. is sustained over the long-term.
Army: Open Campus Initiative and Army Venture Capital Initiative
The Army Research Laboratory describes its Open Campus Initiative as “an effort to create The Army Research Laboratory describes its Open Campus Initiative as “an effort to create
strong, enduring S&T partnerships” through the co-location of Army R&D personnel in S&T strong, enduring S&T partnerships” through the co-location of Army R&D personnel in S&T
hubs.70 Congress has been broadly supportive of these efforts and has encouraged DOD to expand hubs.70 Congress has been broadly supportive of these efforts and has encouraged DOD to expand
its presence both its presence both ~~locally and globally~~local y and global y. For example, in P.L. 115-232, Congress cited the open . For example, in P.L. 115-232, Congress cited the open
campus program as a model for other DOD laboratories to increase and improve their campus program as a model for other DOD laboratories to increase and improve their

conducted within the United States, the United Kingdom of conducted within the United States, the United Kingdom of ~~Great~~Gr eat Britain and Northern Ireland, Australia, and Canada. Britain and Northern Ireland, Australia, and Canada.
For more information see, CRSFor more information see, CRS InFocus CRSInFocus CRS In Focus IF11311, In Focus IF11311, Defense ~~Primer~~Prim er: The National Technology and
Industrial Base, by Heidi, by Heidi M. Peters. M. Peters.
68 U.S. 68 U.S. Department of Defense, “Partnership Expands Opportunities for New andDepartment of Defense, “Partnership Expands Opportunities for New and ~~Small Businesses~~ Small Businesses to Work with the to Work with the
Department of Defense, Expand National Security Innovation Base,” press release, March 31, 2021, Department of Defense, Expand National Security Innovation Base,” press release, March 31, 2021,
https://www.defense.gov/Newsroom/Releases/Release/Article/2557252/partnership-expands-opportunities-for-new-https://www.defense.gov/Newsroom/Releases/Release/Article/2557252/partnership-expands-opportunities-for-new-
and-small-businesses-to-work-with-the/. and-small-businesses-to-work-with-the/.
69 Defense Innovation Board, https://innovation.defense.gov/. 69 Defense Innovation Board, https://innovation.defense.gov/.
70 U.S.70 U.S. Army, “Open Campus,” at https://www.arl.army.mil/opencampus/. Army, “Open Campus,” at https://www.arl.army.mil/opencampus/.
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collaboration with the larger research and engineering enterprise. collaboration with the larger research and engineering enterprise. ~~Specifically~~Specifical y, the House , the House
Appropriations Committee conference report on the legislation (H.Rept. 115-676) stated Appropriations Committee conference report on the legislation (H.Rept. 115-676) stated
The committee recommends that the Department better enable laboratories and centers to The committee recommends that the Department better enable laboratories and centers to
embrace an open and innovative posture, while simultaneously becoming more active in embrace an open and innovative posture, while simultaneously becoming more active in
thethe ~~Department’s requirements process. The committee is aware of the Army~~ Department’s requirements process. The committee is aware of the Army Research Research
Lab’s Open Campus project as an example of open innovation that encourages Lab’s Open Campus project as an example of open innovation that encourages
groundbreaking advances in basic and applied research areas through increased groundbreaking advances in basic and applied research areas through increased
collaboration with the broader research enterprise. The committee believes that this serves collaboration with the broader research enterprise. The committee believes that this serves
asas a model for laboratoriesa model for laboratories ~~to become more ingrained in the scientific and~~ to become more ingrained in the scientific and research research
communities,communities, ~~both~~ both locally and globally,locally and globally, ~~and~~ and become a greaterbecome a greater ~~sensor~~ sensor for disruptive for disruptive
technologiestechnologies ~~that present opportunities or highlight vulnerabilities for the~~ that present opportunities or highlight vulnerabilities for the Department. Department.
Additionally, the committee recommends that the laboratories increase their presence in Additionally, the committee recommends that the laboratories increase their presence in
innovation hubs across the United States.71 innovation hubs across the United States.71
Congress has also been supportive of DOD-backed venture capital funds as a way to increase ties Congress has also been supportive of DOD-backed venture capital funds as a way to increase ties
with start-ups and innovative companies, often citing the Central with start-ups and innovative companies, often citing the Central ~~Intelligence~~Intel igence Agency’s nonprofit Agency’s nonprofit
In-Q-Tel as a successful model. In 2002, through the defense appropriations act (P.L. 107-117), In-Q-Tel as a successful model. In 2002, through the defense appropriations act (P.L. 107-117),
Congress set aside $25 Congress set aside $25 ~~million~~mil ion for the Secretary of the Army to establish a venture capital for the Secretary of the Army to establish a venture capital
investment corporation. The resulting nonprofit corporation, the Army Venture Capital Initiative investment corporation. The resulting nonprofit corporation, the Army Venture Capital Initiative
(AVCI), has been in existence since 2003; however, there is little information on the impact and (AVCI), has been in existence since 2003; however, there is little information on the impact and
success of the investments made by AVCI to date. Congress may opt to examine AVCI and other success of the investments made by AVCI to date. Congress may opt to examine AVCI and other
venture capital funds and investments made by DOD to ensure these resources are effective, venture capital funds and investments made by DOD to ensure these resources are effective,
being properly managed, and addressing congressional intent of serving as a bridge between being properly managed, and addressing congressional intent of serving as a bridge between
DOD and innovative companies. DOD and innovative companies.
National Security Innovation Network
The National Security Innovation Network (NSIN), formerly the MD5 National Security The National Security Innovation Network (NSIN), formerly the MD5 National Security
Technology Accelerator, seeks to increase interactions and to develop partnerships between Technology Accelerator, seeks to increase interactions and to develop partnerships between
uniformed and civilianuniformed and civilian DOD employees and innovators and entrepreneurs outside of DOD, DOD employees and innovators and entrepreneurs outside of DOD,
including students and faculty at colleges and universities. NSIN was placed under the purview of including students and faculty at colleges and universities. NSIN was placed under the purview of
DIU in 2019. According to NSIN, it carries out its mission via three portfolios of effort: National DIU in 2019. According to NSIN, it carries out its mission via three portfolios of effort: National
Service, Collaboration, and Acceleration. Service, Collaboration, and Acceleration.
Our National Our National ~~Service Portfolio creates new models and pathways to service~~ Service Portfolio creates new models and pathways to service for those for those
wishing to serve without having to put on a uniform, ensuring that generational and cultural wishing to serve without having to put on a uniform, ensuring that generational and cultural
differencesdifferences ~~are not barriers. Our Collaboration Portfolio facilitates collision events that~~
~~connect service members with academic and venture partners to develop and prototype~~
~~new service member-driven solutions. Our Acceleration Portfolio offers programs that~~
~~promote the development and growth of dual-use ventures that respond to service~~
~~members’ needs.72~~

~~71 U.S. Congress, House~~ are not barriers. Our Collaboration Portfolio facilitates collision events that connect service members with academic and venture partners to develop and prototype new service member-driven solutions. Our Acceleration Portfolio offers programs that promote the development and growth of dual-use ventures that respond to service members’ needs.72 71 U.S. Congress, House Committee on Appropriations, Committee on Appropriations, National Defense Authorization Act for Fiscal Year 2019, ,
report to accompany H.R. 5515, 115th Cong., May 15, 2018, H.Rept. 115-676 (Washington: GPO, 2018), p. 72. report to accompany H.R. 5515, 115th Cong., May 15, 2018, H.Rept. 115-676 (Washington: GPO, 2018), p. 72.
72 National Security Innovation Network, “Our Work: A New Model for National Security Innovation,” 72 National Security Innovation Network, “Our Work: A New Model for National Security Innovation,”
https://www.nsin.us/. https://www.nsin.us/.
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Artificial Intelligence: DOD and Google:
Are There Social and Ethical Barriers to Engaging with U.S. Technology
Companies?
Artificial Artificial ~~intelligence (AI)—generally~~ intel igence (AI)—general y characterized as computerized systems characterized as computerized systems that work and react in ways commonly that work and react in ways commonly
thought to require thought to require ~~intelligence,~~ intel igence, such as solving complex problemssuch as solving complex problems in real-worldin real-world situations—issituations—is a prime examplea prime example of a of a
technology area where innovation is being driven largelytechnology area where innovation is being driven largely by the private sector rather than the federal government.by the private sector rather than the federal government.
The private sectorThe private sector is investing heavily in AI because of its potential for transforming existing industries and creating is investing heavily in AI because of its potential for transforming existing industries and creating
new ones. In the near term,new ones. In the near term, AI offers the potential for substantial productivity gains by improving decision-making, AI offers the potential for substantial productivity gains by improving decision-making,
automating processes,automating processes, and substituting for human labor. For example,and substituting for human labor. For example, AI is fundamental to the deployment of AI is fundamental to the deployment of
autonomous vehicles; self-optimizingautonomous vehicles; self-optimizing manufacturing processes;manufacturing processes; ~~allowing~~ al owing for voice-based human-machine interfaces; for voice-based human-machine interfaces;
and identifying, anticipating and responding to customer needs and preferences.and identifying, anticipating and responding to customer needs and preferences. In the longer term,In the longer term, AI and more AI and more
powerful computing capabilities are expected to achieve, then surpass, the speed and complexity of the humanpowerful computing capabilities are expected to achieve, then surpass, the speed and complexity of the human
brain, and to act on such “thoughts” nearly instantaneously. The implicationsbrain, and to act on such “thoughts” nearly instantaneously. The implications of such technology, acting at the of such technology, acting at the
direction of human beings and/or acting autonomously, are enormous.direction of human beings and/or acting autonomously, are enormous.
Similarly,Similarly, AI offers the potential for near-term and long-term applications in national security. Potential adversaries AI offers the potential for near-term and long-term applications in national security. Potential adversaries
such as Russia and China are investing heavily in AI’ssuch as Russia and China are investing heavily in AI’s ~~commercial~~ commercial and militaryand military applications. In this context, many applications. In this context, many
consider capitalizing on AI essential to maintaining the superiority of the United States military.consider capitalizing on AI essential to maintaining the superiority of the United States military. With advances in AI With advances in AI
being driven primarilybeing driven primarily by the private sector,by the private sector, many believemany believe DOD must find new mechanismsDOD must find new mechanisms for engaging with for engaging with
companies that have not been part of the traditional defense industrial base. Thus, DOD is seeking to partner with companies that have not been part of the traditional defense industrial base. Thus, DOD is seeking to partner with
leading U.S.leading U.S. technology companies in the development of AI applications for a wide range of militarytechnology companies in the development of AI applications for a wide range of military functions (e.g., functions (e.g.,
~~intelligence~~ intel igence col ection and analysis, logistics,col ection and analysis, logistics, cyberspace operations).cyberspace operations).
However,However, recent developmentsrecent developments in the partnership between DODin the partnership between DOD and Google highlight a potential concern that and Google highlight a potential concern that
extends beyond the bureaucratic extends beyond the bureaucratic ~~challenges DOD~~ chal enges DOD faces in engaging with nontraditional defense contractors. Earlier faces in engaging with nontraditional defense contractors. Earlier
this year, Googlethis year, Google announced that it would not renew its contract with DODannounced that it would not renew its contract with DOD for the work it was doing on Projectfor the work it was doing on Project
Maven—a program focused on adapting commercialMaven—a program focused on adapting commercial AI algorithmsAI algorithms to detect, classify, and track objects from drone to detect, classify, and track objects from drone
~~surveillance~~ surveil ance to enhance militaryto enhance military decision-making.decision-making. Google’sGoogle’s decision to terminate its relationship with DOD was decision to terminate its relationship with DOD was
sparked by a lettersparked by a letter from morefrom more than 4,000 Google employeesthan 4,000 Google employees who objected to the company’s involvementwho objected to the company’s involvement in the in the
program.program. The letter stated, “recognizing Google’sThe letter stated, “recognizing Google’s ~~moral~~ moral and ethical responsibility,and ethical responsibility, and the threat to Google’s and the threat to Google’s
reputation, we request that you: (1) cancel this project immediately;reputation, we request that you: (1) cancel this project immediately; (2) draft, publicize, and enforce a clear policy (2) draft, publicize, and enforce a clear policy
stating that neither Google nor its contractors wil everstating that neither Google nor its contractors wil ever build warfare technology.”73 build warfare technology.”73
GoogleGoogle subsequently releasedsubsequently released a set of AI principles, stating that the principlesa set of AI principles, stating that the principles are “concrete standards that wil are “concrete standards that wil
actively govern our research and product development and wil impact our business decisions.”74actively govern our research and product development and wil impact our business decisions.”74 Concern over Concern over
violating the company’s AI principles was cited as one of the reasons Google recently decided to pul out of the violating the company’s AI principles was cited as one of the reasons Google recently decided to pul out of the
competition for the Pentagon’s Joint Enterprise Defense Infrastructure (JEDI) cloud computing and storage contract competition for the Pentagon’s Joint Enterprise Defense Infrastructure (JEDI) cloud computing and storage contract
valued at morevalued at more than $10 bil ion.75 than $10 bil ion.75
SomeSome experts believeexperts believe other U.S. technology companies wilother U.S. technology companies wil step in to fil potential gaps created by Google’s step in to fil potential gaps created by Google’s
decision to end its partnership with DOD on Project Maven. However,decision to end its partnership with DOD on Project Maven. However, the Google experiencethe Google experience suggests DOD may suggests DOD may
face additional face additional ~~challenges~~chal enges in its efforts to engage with leading edge technology companies if their employees in its efforts to engage with leading edge technology companies if their employees have have
social and ethical concerns regarding the use of their expertise in the developmentsocial and ethical concerns regarding the use of their expertise in the development of militaryof military technologies. technologies.
For moreFor more information on AI and national security see CRS Report R45178, information on AI and national security see CRS Report R45178, Artificial ~~Intelligence~~ Intel igence and National Security, ,
by Daniel S. Hoadley and Nathan J. Lucas. by Daniel S. Hoadley and Nathan J. Lucas.

73 Daisuke Wakabayashi and Scott Shane, “Google Will Not Renew Pentagon Contract 73 Daisuke Wakabayashi and Scott Shane, “Google Will Not Renew Pentagon Contract ~~That~~T hat Upset Employees,” Upset Employees,” New
York ~~Times~~Tim es, June 1, 2018. , June 1, 2018.
74 Sundar 74 Sundar Pichai, CEO, “AI at Google:Pichai, CEO, “AI at Google: Our Principles,” https://www.blog.google/technology/ai/ai-principles/. Our Principles,” https://www.blog.google/technology/ai/ai-principles/.
75 Naomi Nix, “Google Drops Out of Pentagon’s $10 Billion Cloud75 Naomi Nix, “Google Drops Out of Pentagon’s $10 Billion Cloud Competition,” Bloomberg, October 8, 2018.Competition,” Bloomberg, October 8, 2018.
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Computer Chips: Too Costly for Commercial Chipmakers to Meet DOD Needs?
The Department of Defense The Department of Defense requires requires ~~small-run~~ smal -run and custom computer chips for a wide range of applications with and custom computer chips for a wide range of applications with
unique security requirementsunique security requirements due to departmental concerns about the potential for the chips to be compromised, due to departmental concerns about the potential for the chips to be compromised,
including missiles,including missiles, jet aircraft, and jet aircraft, and ~~satellites.~~ satel ites. But the production of these chips comesBut the production of these chips comes with unique security with unique security
requirementsrequirements due to DODdue to DOD concerns about the potential of the chips to be compromised. concerns about the potential of the chips to be compromised.
Not only do DODNot only do DOD chips need to performchips need to perform reliably under often harsh and extreme conditions, DODreliably under often harsh and extreme conditions, DOD must be must be
certain that they haven’t been compromisedcertain that they haven’t been compromised in any manner by potential adversariesin any manner by potential adversaries or hackers.or hackers. Compromised Compromised
chips might chips might ~~allow~~al ow an adversary to remotely an adversary to remotely activate a designed function (e.g.,activate a designed function (e.g., control navigation, detonate a bomb), control navigation, detonate a bomb),
to activate a function embedded by the enemyto activate a function embedded by the enemy (e.g., covertly acquire and send data, open a “backdoor” to enable (e.g., covertly acquire and send data, open a “backdoor” to enable
control of the system), or to makecontrol of the system), or to make the chip nonfunctional. Such compromisesthe chip nonfunctional. Such compromises may be extremelymay be extremely difficult to detect difficult to detect
during chip testing. In addition, chip production outside of a secureduring chip testing. In addition, chip production outside of a secure facility could provide adversariesfacility could provide adversaries information information
on U.S. militaryon U.S. military capabilities or functionality, and lower the barriercapabilities or functionality, and lower the barrier to theft of critical technologies. to theft of critical technologies.
WhereasWhereas federal agencies—DODfederal agencies—DOD and the National Aeronauticsand the National Aeronautics and Space Administrationand Space Administration (NASA), in particular—(NASA), in particular—
were once large and vital customers of chips, this is no longer the case. Throughout the 1950s, DODwere once large and vital customers of chips, this is no longer the case. Throughout the 1950s, DOD took efforts took efforts
to increaseto increase the uptake of semiconductors.the uptake of semiconductors. Fol owing the development of the integrated circuit (IC) by Texas Fol owing the development of the integrated circuit (IC) by Texas
Instrument’s Jack Kilby in 1958, the federal government played a majorInstrument’s Jack Kilby in 1958, the federal government played a major ~~role~~ role in advancing the chip industry through in advancing the chip industry through
R&D funding and acquisitions.R&D funding and acquisitions. In the early 1960s, federal government purchases (including guidance systemsIn the early 1960s, federal government purchases (including guidance systems for for
the NASA Apol othe NASA Apol o program and the Minuteman-II missile76)program and the Minuteman-II missile76) accounted for an estimatedaccounted for an estimated 100% of U.S. IC 100% of U.S. IC
production.77 This market dependence made private producers highly responsiveproduction.77 This market dependence made private producers highly responsive to government requirements. to government requirements.
However,However, by 1970, the U.S. military’sby 1970, the U.S. military’s share of U.S. IC sales had share of U.S. IC sales had ~~fallen~~fal en to around 20%, and by 1980 to below 10%.78 to around 20%, and by 1980 to below 10%.78
By 2016, DODBy 2016, DOD ~~systems~~ systems and programs accounted for lessand programs accounted for less than 1% of global semiconductor output.79 than 1% of global semiconductor output.79
Also,Also, production runs for DOD-unique chips are often production runs for DOD-unique chips are often ~~small~~ smal compared to chips produced for commercial compared to chips produced for commercial
applications, and leading-edge fabrication (fab) plants are expensive. For example, in May 2015 Samsung announced applications, and leading-edge fabrication (fab) plants are expensive. For example, in May 2015 Samsung announced
plans for a $14 bil ion fab plant and in 2017 the Taiwan Semiconductor Manufacturing Company announced plans plans for a $14 bil ion fab plant and in 2017 the Taiwan Semiconductor Manufacturing Company announced plans
for a $20 bil ion state-of-the-art plant.80 (In contrast, fab plants established in the mid-2000s werefor a $20 bil ion state-of-the-art plant.80 (In contrast, fab plants established in the mid-2000s were estimated to estimated to
cost $2 bil ioncost $2 bil ion to $3 bil ion.) In addition, the useful lifeto $3 bil ion.) In addition, the useful life of a new fab plant is estimated at 5-7 years.81 Such large of a new fab plant is estimated at 5-7 years.81 Such large
investments and short useful lives requireinvestments and short useful lives require large-scale production to be profitable. large-scale production to be profitable.
~~Small~~ Smal production runs, high performance requirements,production runs, high performance requirements, and DOD’sand DOD’s declining share of chip consumption has made declining share of chip consumption has made
it lessit less attractive for chip producers to serveattractive for chip producers to serve the DOD market.the DOD market. The opportunity to serve DODThe opportunity to serve DOD may come at a may come at a
price that private companies are unwil ing to pay: operating price that private companies are unwil ing to pay: operating ~~small~~smal -run production facilities.-run production facilities. Such an operation Such an operation
involves not only additional expenses, but comesinvolves not only additional expenses, but comes with high opportunity costs—using the company’s highly-trained with high opportunity costs—using the company’s highly-trained
scientists,scientists, engineers,engineers, technicians, and managers; capital; and state-of-the-art equipment that might otherwisetechnicians, and managers; capital; and state-of-the-art equipment that might otherwise be be
used for serving higher return commercialused for serving higher return commercial markets. markets.
The House ArmedThe House Armed ~~Services Committee~~ Services Committee noted in H.Rept. 114-537 accompanying the National Defense noted in H.Rept. 114-537 accompanying the National Defense
Authorization Act for FiscalAuthorization Act for Fiscal Year 2017, “due to marketYear 2017, “due to market trends, supply chain globalization, and manufacturing costs, trends, supply chain globalization, and manufacturing costs,
the Department’sthe Department’s future access to U.S.-based microelectronicsfuture access to U.S.-based microelectronics sources is uncertain.” Industry consolidation has sources is uncertain.” Industry consolidation has
led to DOD considering non-U.S. companiesled to DOD considering non-U.S. companies to meet its needs. Then-Deputy Assistant Secretary of Defenseto meet its needs. Then-Deputy Assistant Secretary of Defense for for
Manufacturing and Industrial Base Policy Andre Gudger is quoted in a July 2016 Manufacturing and Industrial Base Policy Andre Gudger is quoted in a July 2016 ~~Wall~~ Wal Street Journal article article saying, saying,
“Our goal is to look “Our goal is to look ~~globally. We~~ global y. We want access to the latest and the greatest.” want access to the latest and the greatest.”
Air Force: Wright Brothers Institute, CyberWorx, and AFWERX
The Air Force has initiated a number of partnerships to expand collaboration and to engage The Air Force has initiated a number of partnerships to expand collaboration and to engage
nontraditional partners. Examples include a partnership between the Air Force Research nontraditional partners. Examples include a partnership between the Air Force Research

76 Anna Slomovic, 76 Anna Slomovic, Anteing Up: The Government’s Role in the Microelectronics Industry, December 1988, p. 6, December 1988, p. 6,
http://www.dtic.mil/dtic/tr/fulltext/u2/a228267.pdf. http://www.dtic.mil/dtic/tr/fulltext/u2/a228267.pdf.
~~77 The~~77 T he Brookings Institution, Brookings Institution, International Diffusion of Technology: The Case of Semiconductors, John E. , John E. ~~Tilton~~T ilton, 1971. , 1971.
78 David C. Mowery, Haas School of Business,78 David C. Mowery, Haas School of Business, University of California at Berkeley, “University of California at Berkeley, “ Federal Policy and the Federal Policy and the
Development of Semiconductors, Computer Hardware, andDevelopment of Semiconductors, Computer Hardware, and Computer Software: A Policy Model for Climate Change Computer Software: A Policy Model for Climate Change
R&D?,” in R&D?,” in Accelerating Energy Innovation: Insights from Multiple Sectors (National Bureau of Economic Research, (National Bureau of Economic Research,
2011), p. 25, http://www.nber.org/chapters/c11753.pdf. 2011), p. 25, http://www.nber.org/chapters/c11753.pdf.
79 Daniel J. Radack, et al., Institute for Defense Analysis, 79 Daniel J. Radack, et al., Institute for Defense Analysis, Semiconductor Industrial Base: Focus Study–Final Report, ,
September 2016, p. i, https://www.ida.org//idamedia/Corporate/Files/Publications/IDA_Documents/September 2016, p. i, https://www.ida.org//idamedia/Corporate/Files/Publications/IDA_Documents/~~ITSD~~IT SD/2017/D-/2017/D-
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Laboratory and the Wright Brothers Institute (WBI) to provide collaborative environments for Laboratory and the Wright Brothers Institute (WBI) to provide collaborative environments for
industry, academia, and government to accelerate development and commercialization in industry, academia, and government to accelerate development and commercialization in
aerospace, advanced materials and manufacturing, human performance, sensors, and aerospace, advanced materials and manufacturing, human performance, sensors, and
environmental technologies; and a partnership between the U.S. Air Force Academy (USAFA) environmental technologies; and a partnership between the U.S. Air Force Academy (USAFA)
and the nonprofit Center for Technology, Research and Commercialization to establish and the nonprofit Center for Technology, Research and Commercialization to establish
CyberWorx to accelerate the delivery of capabilities to the warfighter through human-centered CyberWorx to accelerate the delivery of capabilities to the warfighter through human-centered
design, public partnering, rapid prototyping, and testing by bringing together USAFAdesign, public partnering, rapid prototyping, and testing by bringing together USAFA cadets, cadets,
experienced operational airmen, and industry. experienced operational airmen, and industry.
~~Additionally,~~ Additional y, in 2017, the Secretary of the Air Force created AFWERX—a strategic networking in 2017, the Secretary of the Air Force created AFWERX—a strategic networking
organization. The purpose of AFWERX is to improve Air Force capabilities by creating an organization. The purpose of AFWERX is to improve Air Force capabilities by creating an
ecosystem of innovators from the public and private sectors, streamlining technology transfer, ecosystem of innovators from the public and private sectors, streamlining technology transfer,
and accelerating results. According to the Air Force, and accelerating results. According to the Air Force,
AFWERX will AFWERX will accomplish this mission by: (1) Connecting diverse, innovative members accomplish this mission by: (1) Connecting diverse, innovative members
from industry, academia, and government; (2) Creating capabilities options and prototype from industry, academia, and government; (2) Creating capabilities options and prototype
opportunities for the Air Force; (3) Facilitating streamlined acquisition processes; and (4) opportunities for the Air Force; (3) Facilitating streamlined acquisition processes; and (4)
Fostering a culture of innovation in the Air Force.82 Fostering a culture of innovation in the Air Force.82
AFWERX has established innovation hubs in Las Vegas, NV; Washington, DC; and Austin, TX. AFWERX has established innovation hubs in Las Vegas, NV; Washington, DC; and Austin, TX.
The organization has a number of programs that target “intrapreneurs,” members of the Air Force The organization has a number of programs that target “intrapreneurs,” members of the Air Force
with ideas and an interest in solving problems. Such programs includewith ideas and an interest in solving problems. Such programs include:
 Spark, “a decentralized network of Air Force bases” that provide Airmen with  Spark, “a decentralized network of Air Force bases” that provide Airmen with
access to resources and support to “execute access to resources and support to “execute ~~locally~~local y generated ideas and projects”; generated ideas and projects”;
 The Air Force Ideation Platform, which enables any Air Force organization to run  The Air Force Ideation Platform, which enables any Air Force organization to run
a a ~~challenge~~chal enge open to the entire Air Force; and open to the entire Air Force; and
 The Squadron Innovation Fund, which provides resources and support that  The Squadron Innovation Fund, which provides resources and support that
~~allows~~al ows “squadrons to solve problems and make incremental, cutting-edge “squadrons to solve problems and make incremental, cutting-edge
technological improvements.”83 technological improvements.”83
AFWERX also serves as an entry point for industry and academia through AFWERX also serves as an entry point for industry and academia through ~~challenges~~chal enges, technology , technology
accelerators, and the accelerators, and the ~~Small~~ Smal Business Innovation Research and Business Innovation Research and ~~Small~~ Smal Business Technology Business Technology
Transfer programs. Transfer programs.
Navy: Wright Brothers Institute and NavalX
The Navy has established such partnerships as The Navy has established such partnerships as ~~well~~wel . For example, the Naval Surface Warfare . For example, the Naval Surface Warfare
Center, Crane Division, signed a partnership intermediary agreement with WBI to align Center, Crane Division, signed a partnership intermediary agreement with WBI to align
“complimentary technologies, sourcing commercial markets, connecting technical experts, and “complimentary technologies, sourcing commercial markets, connecting technical experts, and
engaging manufacturers to further commercialization.”engaging manufacturers to further commercialization.”

8294.pdf. 8294.pdf.
80 R. Colin Johnson, “Samsung Breaks Ground 80 R. Colin Johnson, “Samsung Breaks Ground on $14 Billion Fab,”on $14 Billion Fab,” ~~EE Times~~ EE T imes, May 8, 2015, http://www.eetimes.com/, May 8, 2015, http://www.eetimes.com/
document.asp?doc_id=1326565; Samson Ellis, Yuan Gao,document.asp?doc_id=1326565; Samson Ellis, Yuan Gao, Cindy Wang “Cindy Wang “~~TSMC Ready~~ T SMC Ready to Spend $20 Billion on its to Spend $20 Billion on its
Most Advanced Chip PlantMost Advanced Chip Plant ,” Bloomberg, October 6, 2017, https://www.bloomberg.com/,” Bloomberg, October 6, 2017, https://www.bloomberg.com/ news/articles/2017-10-news/articles/2017-10-
06/tsmc-ready-to-spend-20-billion-on-its-most-advanced-chip-plant. 06/tsmc-ready-to-spend-20-billion-on-its-most-advanced-chip-plant.
81 Institute for Defense Analysis, 81 Institute for Defense Analysis, Semiconductor Industrial Base: Focus Study–Final Report, September 2016, pp. 4-1. , September 2016, pp. 4-1.
82 Department of Defense, 82 Department of Defense, Air Force: Research, Development, Test & Evaluation, Air Force Vol-II, Department of the , Department of the
Air Force, February 2020, p. 172. Air Force, February 2020, p. 172.
83 AFWERX, “A Guide 83 AFWERX, “A Guide to AFWERX for Airmen,” https://www.afwerx.af.mil/airmen-guide.html. to AFWERX for Airmen,” https://www.afwerx.af.mil/airmen-guide.html.
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~~Additionally,~~ Additional y, in 2019, NavalX was launched under the Assistant Secretary of the Navy for in 2019, NavalX was launched under the Assistant Secretary of the Navy for
Research, Development, and Acquisition. It distinguishes itself from other military service Research, Development, and Acquisition. It distinguishes itself from other military service
innovation offices by focusing its efforts on transforming the Navy’s workforce rather than innovation offices by focusing its efforts on transforming the Navy’s workforce rather than
creating new technologies.84 NavalX states that it “creates organizational agilitycreating new technologies.84 NavalX states that it “creates organizational agility by empowering by empowering
the workforce to solve problems and helps build partnerships and networks to enable greater the workforce to solve problems and helps build partnerships and networks to enable greater
collaboration on warfighter needs.”85 collaboration on warfighter needs.”85
U.S. Special Operations Command: SOFWERX
The U.S. Special Operations Command (USSOCOM) has established a partnership intermediary The U.S. Special Operations Command (USSOCOM) has established a partnership intermediary
agreement with the nonprofit Doolittle Institute to implement SOFWERX, an intermediary to agreement with the nonprofit Doolittle Institute to implement SOFWERX, an intermediary to
assist with collaboration, innovation, prototyping, rapid proof of concepts, and exploration among assist with collaboration, innovation, prototyping, rapid proof of concepts, and exploration among
industry, government laboratories, and academic partners. industry, government laboratories, and academic partners.
Expanding Flexibility: Other Transaction Authority
Over the years, Congress has expanded DOD’s authority to use other transactions (OTs). OT Over the years, Congress has expanded DOD’s authority to use other transactions (OTs). OT
agreements do not have to comply with federal procurement regulations and are agreements do not have to comply with federal procurement regulations and are ~~generally~~general y viewed viewed
as giving federal agencies additional flexibility,as giving federal agencies additional flexibility, including the abilityincluding the ability to develop agreements that to develop agreements that
are are ~~specifically~~specifical y tailored to the needs of the project and its participants. There is no statutory or tailored to the needs of the project and its participants. There is no statutory or
regulatory definition for OTs. Instead, OTs are a more flexible alternative to contracts, grants, and regulatory definition for OTs. Instead, OTs are a more flexible alternative to contracts, grants, and
cooperative agreements. OTs are cooperative agreements. OTs are ~~legally~~legal y binding agreements that are binding agreements that are ~~generally~~general y exempt from most exempt from most
federal procurement laws and regulations, such as the Federal Acquisition Regulation and the federal procurement laws and regulations, such as the Federal Acquisition Regulation and the
Competition in Contracting Act.86 In contrast, traditional procurement contracts must adhere to Competition in Contracting Act.86 In contrast, traditional procurement contracts must adhere to
the procurement-specific requirements set forth in statute and regulation. OTs, however, are the procurement-specific requirements set forth in statute and regulation. OTs, however, are
bound by standard contract and other select laws and regulations, such as the Anti-Deficiency Act bound by standard contract and other select laws and regulations, such as the Anti-Deficiency Act
and the Trade Secrets Act.87 Only those agencies that have been provided OT authority may and the Trade Secrets Act.87 Only those agencies that have been provided OT authority may
engage in other transactions.88 engage in other transactions.88
Congress provided the Defense Advanced Research Projects Agency (DARPA) with OT authority Congress provided the Defense Advanced Research Projects Agency (DARPA) with OT authority
in 1989.89 DARPA is often cited by Congress and others when discussing how to improve the in 1989.89 DARPA is often cited by Congress and others when discussing how to improve the
~~ability~~ ability of the federal government to spur innovation through its R&D investments. DARPA of the federal government to spur innovation through its R&D investments. DARPA
officials contend that its organizational structure officials contend that its organizational structure ~~allows~~al ows the agency to operate in a fashion that is the agency to operate in a fashion that is
unique within DOD, as unique within DOD, as ~~well~~ wel as the entire federal government. as the entire federal government. ~~Specifically~~Specifical y, DARPA officials , DARPA officials

84 Aaron Boyd, “NavalX Innovation Office Really Wants the Navy to Be More Agile,”84 Aaron Boyd, “NavalX Innovation Office Really Wants the Navy to Be More Agile,” Nextgov, October 10, 2019, , October 10, 2019,
https://www.nextgov.com/emerging-tech/2019/10/navalx-innovation-office-really-wants-navy-be-more-agile/160526/. https://www.nextgov.com/emerging-tech/2019/10/navalx-innovation-office-really-wants-navy-be-more-agile/160526/.
85 NavalX, “About Us,” https://www.secnav.navy.mil/agility/Pages/about.aspx. 85 NavalX, “About Us,” https://www.secnav.navy.mil/agility/Pages/about.aspx.
86 Defense Procurement and Acquisition Policy, Other 86 Defense Procurement and Acquisition Policy, Other ~~Transaction~~T ransaction Guide for Prototype Projects, Version 1.2.0, 2017, Guide for Prototype Projects, Version 1.2.0, 2017,
p. i; Kenneth Patton, “p. i; Kenneth Patton, “ GAO Says Oracle Protest Did Not Make Policy; Criticizes GreenwaltGAO Says Oracle Protest Did Not Make Policy; Criticizes Greenwalt Op-ed,” Breaking Defense, Op-ed,” Breaking Defense,
JulyJuly 9, 2018, https://breakingdefense.com/2018/07/gao-says-oracle-protest-did-not-make-policy-criticizes-greenwalt9, 2018, https://breakingdefense.com/2018/07/gao-says-oracle-protest-did-not-make-policy-criticizes-greenwalt --
op-ed/. op-ed/.
87 Defense Procurement and Acquisition Policy, Other 87 Defense Procurement and Acquisition Policy, Other ~~Transaction~~T ransaction Guide for Guide for ~~Prototype~~Prototyp e Projects, Version 1.2.0, 2017. Projects, Version 1.2.0, 2017.
88 For more information on other transactions see U.S.88 For more information on other transactions see U.S. Government Accountability Office, Government Accountability Office, Federal Acquisitions: Use of
‘Other Transaction’ Agreements Limited and Mostly for Research and Development Activities, GAO-16-209, January , GAO-16-209, January
7, 2016. 7, 2016.
89 For more information about DARPA see CRS 89 For more information about DARPA see CRS Report R45088, Report R45088, Defense Advanced Research Projects Agency:
Overview and Issues for Congress, by Marcy E. Gallo. , by Marcy E. Gallo.
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assert that the agency’s relatively assert that the agency’s relatively ~~small~~ smal size and flat structure enable flexibility and size and flat structure enable flexibility and ~~allow~~al ow the the
agency to avoid internal processes and rules that slow action in other federal agencies.90agency to avoid internal processes and rules that slow action in other federal agencies.90
In the National Defense Authorization Act for Fiscal Year 2016 (P.L. 114-92), Congress made In the National Defense Authorization Act for Fiscal Year 2016 (P.L. 114-92), Congress made
permanent DOD’s ability to use OTs for acquiring prototypes and extended the use of OTs to permanent DOD’s ability to use OTs for acquiring prototypes and extended the use of OTs to
follow-on production activities.91 In making these changes, the joint explanatory statement to P.L. follow-on production activities.91 In making these changes, the joint explanatory statement to P.L.
114-92 stated114-92 stated
We believe that the flexibility of the OTA authorities of section 2371 of title 10, We believe that the flexibility of the OTA authorities of section 2371 of title 10, United United
StatesStates ~~Code, and the related and dependent authorities of section 845 of the~~ Code, and the related and dependent authorities of section 845 of the National National
Defense Authorization Act for Fiscal Year 1994Defense Authorization Act for Fiscal Year 1994 (Public Law 103–160)(Public Law 103–160) as modified and as modified and
codified in this provision, can make them attractive to firms and organizations that do not codified in this provision, can make them attractive to firms and organizations that do not
usually participate in government contracting due to the typical overhead burden and “one usually participate in government contracting due to the typical overhead burden and “one
~~size fits all” rules. We believe that expanded use of OTAs will support Department of~~
~~Defense efforts to access new source[s] of technical innovation, such as Silicon~~ size fits all” rules. We believe that expanded use of OTAs will support Department of Defense efforts to access new source[s] of technical innovation, such as Silicon Valley Valley
startup companies and small commercial firms.92 startup companies and small commercial firms.92
On February 1, 2018, DIU used its OT authority to award a follow-on production contract to On February 1, 2018, DIU used its OT authority to award a follow-on production contract to
REAN Cloud for $950 REAN Cloud for $950 ~~million~~mil ion. The issuance of the follow-on production contract raised some . The issuance of the follow-on production contract raised some
concerns from potential competitors and resulted in Oracle America, Incconcerns from potential competitors and resulted in Oracle America, Inc ., filing a bid protest with ., filing a bid protest with
the U.S. Government Accountability Office (GAO) that was sustained by GAO on May 31, the U.S. Government Accountability Office (GAO) that was sustained by GAO on May 31,
2018.93 According to media reports, senior Pentagon officials “were not aware of the production 2018.93 According to media reports, senior Pentagon officials “were not aware of the production
agreement prior to it being announced.”94 In an effort to gain more insight into the use of OTs, the agreement prior to it being announced.”94 In an effort to gain more insight into the use of OTs, the
National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) includes language that National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) includes language that
requires DOD to collect data on the use of OTs and to submit a report to Congress each year requires DOD to collect data on the use of OTs and to submit a report to Congress each year
summarizing the purpose, description, and status of each OT agreement entered into by DOD, summarizing the purpose, description, and status of each OT agreement entered into by DOD,
including the organizations involved and the size of the contract. In conjunction with the House including the organizations involved and the size of the contract. In conjunction with the House
version of the provision, the House Armed Services Committee statedversion of the provision, the House Armed Services Committee stated
~~The committee remains committed to providing the Department of Defense the needed~~
~~flexibility~~ The committee remains committed to providing the Department of Defense the needed flexibility to acquire advanced capabilities through streamlined and expedited processes. to acquire advanced capabilities through streamlined and expedited processes.
The committee recognizes that other transaction authorityThe committee recognizes that other transaction authority has been an effectivehas been an effective tool for tool for
research and development, particularly for execution of science, technology, and research and development, particularly for execution of science, technology, and
prototyping programs. It provides needed flexibility in terms of adherence to select Federal prototyping programs. It provides needed flexibility in terms of adherence to select Federal
acquisitionacquisition regulations.regulations. ~~While the benefits of this~~ While the benefits of this flexibility are clear, flexibility are clear, ~~the~~ th e committee committee
believes that it is still necessary to exercise effective oversight both to understand the ways believes that it is still necessary to exercise effective oversight both to understand the ways
in which the Department is properly leveraging the use of this authority and to prevent its in which the Department is properly leveraging the use of this authority and to prevent its
abuse or misuse.95 abuse or misuse.95

90 Defense Advanced90 Defense Advanced Research Projects Agency, “Innovation at DARPA,” July 2016, pp. 22-23, at Research Projects Agency, “Innovation at DARPA,” July 2016, pp. 22-23, at
http://www.darpa.mil/attachments/DARPA_Innovation_2016.pdf. http://www.darpa.mil/attachments/DARPA_Innovation_2016.pdf.
91 In 1993, through P.L. 103-160, Congress provided the Director of the Defense Advanced Research Projects Agency 91 In 1993, through P.L. 103-160, Congress provided the Director of the Defense Advanced Research Projects Agency
with the authority to use with the authority to use ~~OTs~~OT s for prototypes; this authority was expanded to include for prototypes; this authority was expanded to include the Secretary of a military the Secretary of a military
department or any other official designated by the Secretary of Defense in 1996 through P.L. 104-201. department or any other official designated by the Secretary of Defense in 1996 through P.L. 104-201.
92 U.S. 92 U.S. Congress, HouseCongress, House Committee on Armed Services, Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2016, ,
committee print, Legislative committee print, Legislative ~~Text~~T ext and Joint Explanatory Statement to accompany S. 1356, P.L. 114-92, 114th Cong., 1st and Joint Explanatory Statement to accompany S. 1356, P.L. 114-92, 114th Cong., 1st
sess.,sess., November 2015, pp. 700-701. November 2015, pp. 700-701.
93 U.S.93 U.S. Government Accountability Office, Government Accountability Office, Oracle America, Inc., B-416061, May 31, 2018, https://www.gao.gov/, B-416061, May 31, 2018, https://www.gao.gov/
products/D19096. products/D19096.
94 Anthony Capaccio, “Pentagon Says It Was Caught Off-Guard 94 Anthony Capaccio, “Pentagon Says It Was Caught Off-Guard by $950 Million Cloudby $950 Million Cloud Deal,” Deal,” Bloomberg News, ,
March 6, 2018, https://www.bloomberg.com/news/articles/2018-03-06/pentagon-says-it-was-caughtMarch 6, 2018, https://www.bloomberg.com/news/articles/2018-03-06/pentagon-says-it-was-caught -off-guard-by-950--off-guard-by-950-
million-cloud-deal. million-cloud-deal.
95 U.S.95 U.S. Congress, HouseCongress, House Committee on Armed Services, Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2019, ,
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According to an analysis by the Center for Strategic and International Studies (CSIS), DOD According to an analysis by the Center for Strategic and International Studies (CSIS), DOD
obligations through OTs increase from $0.7 obligations through OTs increase from $0.7 ~~billion~~bil ion in FY2015 to $7.4 in FY2015 to $7.4 ~~billion~~ bil ion in FY2019. CSIS in FY2019. CSIS
also found that OTs comprised 3% of DOD’s R&D portfolio in FY2015, rising to 18% in also found that OTs comprised 3% of DOD’s R&D portfolio in FY2015, rising to 18% in
FY2019, and that most OTs obligations are for mid-to-late stage R&D, primarily advanced FY2019, and that most OTs obligations are for mid-to-late stage R&D, primarily advanced
componenet development and prototyping (i.e., budget activity 6.4).96 componenet development and prototyping (i.e., budget activity 6.4).96
Congress may opt to provide oversight as DOD increases its use of OTs to ensure that it does so Congress may opt to provide oversight as DOD increases its use of OTs to ensure that it does so
in a way that is consistent with congressional intent, including increasing the number of in a way that is consistent with congressional intent, including increasing the number of
nontraditional defense contractors and accelerating the transition of innovative technologies to the nontraditional defense contractors and accelerating the transition of innovative technologies to the
warfighter while effectively preventing potential waste, fraud, and abuse. warfighter while effectively preventing potential waste, fraud, and abuse.
Potential Issues for Consideration
Research and development is now a global enterprise, with the private sector driving technology Research and development is now a global enterprise, with the private sector driving technology
development. Some assert that DOD has been slow to react and adapt to this new reality, raising development. Some assert that DOD has been slow to react and adapt to this new reality, raising
concerns that the United States military may be unable to maintain its historical technological concerns that the United States military may be unable to maintain its historical technological
advantages. Congress and the Administration have adopted a number of reforms to address the advantages. Congress and the Administration have adopted a number of reforms to address the
perceived concerns, including those described above. Many of these efforts perceived concerns, including those described above. Many of these efforts ~~will likely~~ wil likely require require
sustained focus to ensure DOD transforms into a more innovative, risk-tolerant R&D sustained focus to ensure DOD transforms into a more innovative, risk-tolerant R&D
organization that delivers new technologies to the warfighter in a timely and relevant manner. As organization that delivers new technologies to the warfighter in a timely and relevant manner. As
Congress considers the impact of these reforms and their effectiveness, including the Congress considers the impact of these reforms and their effectiveness, including the
establishment of the position of USD (R&E), DIU, and other innovation agencies or entities establishment of the position of USD (R&E), DIU, and other innovation agencies or entities
within DOD, there are a number of issues. Such issues includewithin DOD, there are a number of issues. Such issues include:
 The adequacy of DOD’s investments in RDT&E.  The adequacy of DOD’s investments in RDT&E.
 The sufficiency of DOD’s strategic planning as it relates to the development and  The sufficiency of DOD’s strategic planning as it relates to the development and
deployment of technologies deemed critical for national security, in particular deployment of technologies deemed critical for national security, in particular
emerging technologies. emerging technologies.
 DOD’s ability to attract and retain scientific and technical talent.  DOD’s ability to attract and retain scientific and technical talent.
 How to measure the rate and extent of cultural change within DOD.  How to measure the rate and extent of cultural change within DOD.
 The effectiveness of DOD’s collaborations and cooperation with other federal  The effectiveness of DOD’s collaborations and cooperation with other federal
agencies and agencies and ~~allied~~ al ied nations in the development and implementation of nations in the development and implementation of
technologies deemed critical for national security, in particular emerging technologies deemed critical for national security, in particular emerging
technologies. technologies.
 The degree to which DOD is incorporating nontraditional contractors and  The degree to which DOD is incorporating nontraditional contractors and ~~small~~
smal businesses into the defense industrial base. businesses into the defense industrial base.
 How Congress can effectively balance its oversight responsibilities and the need  How Congress can effectively balance its oversight responsibilities and the need
for transparency and accountability with the desire to provide DOD with for transparency and accountability with the desire to provide DOD with
sufficient flexibilitysufficient flexibility and the nimbleness to respond quickly to emergent and the nimbleness to respond quickly to emergent
opportunities. opportunities.
In the near-term, Congress may want to focus its oversight efforts on organizational, structural, In the near-term, Congress may want to focus its oversight efforts on organizational, structural,
and strategic planning and implementation activities, and strategic planning and implementation activities, ~~especially~~especial y efforts led by the USD (R&E), efforts led by the USD (R&E),
who is tasked with leadership of DOD’s research and engineering enterprise. For example, under who is tasked with leadership of DOD’s research and engineering enterprise. For example, under
P.L. 115-232, Congress required DOD to develop an annual strategy that would articulate the P.L. 115-232, Congress required DOD to develop an annual strategy that would articulate the

report to accompany H.R. 5515, 115th Cong., May 15, 2018, H.Reptreport to accompany H.R. 5515, 115th Cong., May 15, 2018, H.Rept . 115-676 (Washington: GPO, 2018), p. 162. . 115-676 (Washington: GPO, 2018), p. 162.
96 Rhys McCormick, 96 Rhys McCormick, Department of Defense Other Transaction Authority Trends: A New R&D Funding Paradigm? , ,
Center for Strategic and International Studies, Washington, DC, December 8, 2020, https://www.csis.org/analysis/Center for Strategic and International Studies, Washington, DC, December 8, 2020, https://www.csis.org/analysis/
departmentdepartment -defense-other-transaction-authority-trends-new-rd-funding-paradigm. -defense-other-transaction-authority-trends-new-rd-funding-paradigm.
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science and technology priorities, goals, and investments of DOD; and make recommendations on science and technology priorities, goals, and investments of DOD; and make recommendations on
the future of the defense research and engineering enterprise and its continued success in an era of the future of the defense research and engineering enterprise and its continued success in an era of
strategic competition. Despite this requirement, some experts suggest that DOD lacks a coherent strategic competition. Despite this requirement, some experts suggest that DOD lacks a coherent
strategy and that DOD’s technology priorities are constantly shifting, driven by changes in senior strategy and that DOD’s technology priorities are constantly shifting, driven by changes in senior
leadership. These experts recommend the development of “a transparent framework for leadership. These experts recommend the development of “a transparent framework for
identifying technology priorities that identifying technology priorities that ~~will~~ wil provide clarity and stability,” indicating a need for clear provide clarity and stability,” indicating a need for clear
priorities given budgetary constraints and the role of the private sector in driving innovation.97 In priorities given budgetary constraints and the role of the private sector in driving innovation.97 In
addition, given the intrinsic connection between economic competitiveness and national security, addition, given the intrinsic connection between economic competitiveness and national security,
some experts recommend the development of a government-wide, national technology strategy some experts recommend the development of a government-wide, national technology strategy
and mechanisms to link the roles and responsibilities of the National Security Council, the and mechanisms to link the roles and responsibilities of the National Security Council, the
National Economic Council, and the Office of Science and Technology Policy.98 National Economic Council, and the Office of Science and Technology Policy.98
Access to scientific and engineering talent is considered a key component of advancing Access to scientific and engineering talent is considered a key component of advancing
innovation. Over the years, Congress has supported science, technology, engineering, and innovation. Over the years, Congress has supported science, technology, engineering, and
mathematics (STEM) education programs at DOD (e.g., scholarhips, mathematics (STEM) education programs at DOD (e.g., scholarhips, ~~fellowships~~fel owships, and , and
internships), in addition to providing DOD with flexibileinternships), in addition to providing DOD with flexibile hiring authorities to increase the number hiring authorities to increase the number
of STEM-related personnel at the department. However, according to CSIS, DOD “faces issues of STEM-related personnel at the department. However, according to CSIS, DOD “faces issues
onboarding technical talent, leveraging talent in support of defense missions, and developing and onboarding technical talent, leveraging talent in support of defense missions, and developing and
promoting technical talent within defense organizations.” The promoting technical talent within defense organizations.” The ~~William~~ Wil iam M. (Mac) Thornberry M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021 requires DOD to conduct a study to National Defense Authorization Act for Fiscal Year 2021 requires DOD to conduct a study to
develop policy options and recommendations for the establishment of a program to attract and develop policy options and recommendations for the establishment of a program to attract and
retain STEM talent. retain STEM talent.
In this context and as it relates In this context and as it relates ~~specifically~~specifical y to the USD (R&E), policymakers may want to to the USD (R&E), policymakers may want to
consider the following questions. consider the following questions.
 Has the USD (R&E) created an overarching vision and strategic plan for DOD’s  Has the USD (R&E) created an overarching vision and strategic plan for DOD’s
research, development, testing, and evaluation (RDT&E) activities and research, development, testing, and evaluation (RDT&E) activities and
programs? Has the USD (R&E) sought and incorporated the perspectives of programs? Has the USD (R&E) sought and incorporated the perspectives of
various stakeholders, including industry, academia, and DOD services and various stakeholders, including industry, academia, and DOD services and
agencies in the development of an RDT&E strategic plan? agencies in the development of an RDT&E strategic plan?
 If there is an RDT&E strategic plan, what steps have been taken to implement the  If there is an RDT&E strategic plan, what steps have been taken to implement the
plan? How does the plan prioritize RDT&E activities and investments? plan? How does the plan prioritize RDT&E activities and investments?
 Is the USD (R&E) effectively leveraging and coordinating RDT&E activities and  Is the USD (R&E) effectively leveraging and coordinating RDT&E activities and
investments across DOD and with other federal agencies? investments across DOD and with other federal agencies?
 What, if any, policies or procedures has the USD (R&E) implemented to ensure  What, if any, policies or procedures has the USD (R&E) implemented to ensure
DOD maintains an adequate science, engineering, and technical workforce? DOD maintains an adequate science, engineering, and technical workforce?
 Is DOD using special hiring authorities appropriately and effectively in recruiting  Is DOD using special hiring authorities appropriately and effectively in recruiting
and retaining outstanding scientific and engineering talent? and retaining outstanding scientific and engineering talent?

97 Paul Scharre and Ainikki Riikonen, 97 Paul Scharre and Ainikki Riikonen, Defense Technology Strategy, Center for a New, Center for a New American Security, Washington, American Security, Washington,
DC, November 17, 2020, p. 5, https://s3.us-east-1.amazonaws.com/files.cnas.org/documents/CNAS-Defense-DC, November 17, 2020, p. 5, https://s3.us-east-1.amazonaws.com/files.cnas.org/documents/CNAS-Defense-
~~Technology~~T echnology-Strategy-2.pdf?mtime=20201116164927&focal=none. -Strategy-2.pdf?mtime=20201116164927&focal=none.
98 For example, see National Security Commission on Artificial Intelligence, 98 For example, see National Security Commission on Artificial Intelligence, Final Report, 2021, p. 166, , 2021, p. 166,
https://www.nscai.gov/wp-content/uploads/2021/03/Full-Reporthttps://www.nscai.gov/wp-content/uploads/2021/03/Full-Report -Digital-1.pdf; Martijn Rasser and Megan Lamberth, -Digital-1.pdf; Martijn Rasser and Megan Lamberth,
Taking the Helm : A National Technology Strategy to Meet the China Challenge, Center for a New, Center for a New American Security, American Security,
Washington, DC, January 13, 2021, https://s3.us-east-1.amazonaws.com/files.cnas.org/documents/Taking-the-Washington, DC, January 13, 2021, https://s3.us-east-1.amazonaws.com/files.cnas.org/documents/Taking-the-
Helm_FINAL-compressed.pdf?mtime=20210113105310&focal=none; and Brendan McCord and Zoe A. Y. Weinberg, Helm_FINAL-compressed.pdf?mtime=20210113105310&focal=none; and Brendan McCord and Zoe A. Y. Weinberg,
“How the NSC“How the NSC ~~Can Better Tackle Emerging Technology Threats~~ Can Better T ackle Emerging T echnology T hreats,” Brookings Institution, February 1, 2021, ,” Brookings Institution, February 1, 2021,
https://www.brookings.edu/techstream/how-the-nsc-can-better-tackle-emerging-technology-threats/. https://www.brookings.edu/techstream/how-the-nsc-can-better-tackle-emerging-technology-threats/.

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 What, if any, policies or procedures has the USD (R&E) implemented to help  What, if any, policies or procedures has the USD (R&E) implemented to help
foster a culture of risk-taking and an appropriate tolerance for failure within foster a culture of risk-taking and an appropriate tolerance for failure within
DOD?DOD?
In the mid-term and long-term, Congress may want to focus its oversight efforts on outcomes of In the mid-term and long-term, Congress may want to focus its oversight efforts on outcomes of
congressional and DOD actions. For example: congressional and DOD actions. For example:
 How are promising technologies being transitioned into operational use and what  How are promising technologies being transitioned into operational use and what
are the appropriate metrics for determining success? are the appropriate metrics for determining success?
 What has DOD learned from the greater use of prototypes and other methods?  What has DOD learned from the greater use of prototypes and other methods?
 Has DOD increased its tolerance for failure? How has the failure rate and failure  Has DOD increased its tolerance for failure? How has the failure rate and failure
speed of projects changed? How quickly are resources redeployed to new speed of projects changed? How quickly are resources redeployed to new
potential opportunities? For example, is DOD pursuing multiple lines of inquiry potential opportunities? For example, is DOD pursuing multiple lines of inquiry
simultaneously with some projects failing and resources being quickly simultaneously with some projects failing and resources being quickly
~~reallocated~~real ocated accordingly? accordingly?
 Is the DOD RDT&E strategic plan being effectively implemented?  Is the DOD RDT&E strategic plan being effectively implemented?
 Has DOD increased collaboration and partnership with leading-edge technology  Has DOD increased collaboration and partnership with leading-edge technology
companies that have not companies that have not ~~historically~~historical y been a part of DOD’s innovation ecosystem? been a part of DOD’s innovation ecosystem?
 Is DOD effectively using other transaction authority to increase its innovative  Is DOD effectively using other transaction authority to increase its innovative
capacity and access technologies outside of the agency’s traditional contractor capacity and access technologies outside of the agency’s traditional contractor
base? base?
 How systemic are the changes in the DOD culture of innovation? What signs of  How systemic are the changes in the DOD culture of innovation? What signs of
change and innovation are being observed in core elements of DOD outside of change and innovation are being observed in core elements of DOD outside of
special offices such as the Defense Innovation Unit (DIU), the Strategic special offices such as the Defense Innovation Unit (DIU), the Strategic
CapabilitiesCapabilities Office (SCO), or the rapid capabilities offices within the military Office (SCO), or the rapid capabilities offices within the military
services? services?
As the global R&D landscape continues to evolve, Congress may conduct hearings to stay As the global R&D landscape continues to evolve, Congress may conduct hearings to stay
apprised of the competitive positions of near-peer nations (and firms) in key fields of science and apprised of the competitive positions of near-peer nations (and firms) in key fields of science and
technology; the science, technology, and innovation policies of those countries; and new and technology; the science, technology, and innovation policies of those countries; and new and
emerging models for technology development and innovation. emerging models for technology development and innovation.
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Appendix. Selected Science, Technology, and
Innovation Laws Enacted in the 1980s
Stevenson-Wydler Technology Innovation Act of 1980 (P.L. 96-480)
The Stevenson-Wydler Technology Innovation Act of 1980 articulated a clear and strong linkage The Stevenson-Wydler Technology Innovation Act of 1980 articulated a clear and strong linkage
between U.S. economic performance and technological leadership, stating “technology and between U.S. economic performance and technological leadership, stating “technology and
industrial innovation are central to the economic, environmental, and social industrial innovation are central to the economic, environmental, and social ~~well~~wel -being of citizens -being of citizens
of the United States.... Increased industrial and technological innovation would reduce trade of the United States.... Increased industrial and technological innovation would reduce trade
deficits, stabilize the dollar, increase productivity gains, increase employment, and stabilize deficits, stabilize the dollar, increase productivity gains, increase employment, and stabilize
prices.”99 prices.”99
The act expressed concern about potential U.S. decline, noting that “Industrial and technological The act expressed concern about potential U.S. decline, noting that “Industrial and technological
innovation in the United States may be lagging when compared to historical patterns and other innovation in the United States may be lagging when compared to historical patterns and other
industrialized nations.” Further, the act asserted the need for a comprehensive national policy to industrialized nations.” Further, the act asserted the need for a comprehensive national policy to
enhance technological innovation for commercial and public purposes, including a strong national enhance technological innovation for commercial and public purposes, including a strong national
policy supporting domestic technology transfer and utilization of the science and technology policy supporting domestic technology transfer and utilization of the science and technology
resources of the Federal Government.resources of the Federal Government.
Among its provisions, the act sought to improve technology transfer from federal laboratories to Among its provisions, the act sought to improve technology transfer from federal laboratories to
industry by requiring federal laboratories to take an active role in technical cooperation, industry by requiring federal laboratories to take an active role in technical cooperation,
expanding the dissemination of information about research activities and results, and establishing expanding the dissemination of information about research activities and results, and establishing
Offices of Research and Technology Applications at major federal laboratories to coordinate and Offices of Research and Technology Applications at major federal laboratories to coordinate and
promote technology transfer. The act also established an Office of Industrial Technology at the promote technology transfer. The act also established an Office of Industrial Technology at the
Commerce Department with a broad mandate to conduct and report studies and policy Commerce Department with a broad mandate to conduct and report studies and policy
experiments related to technology, innovation, and industrial and national economic performance. experiments related to technology, innovation, and industrial and national economic performance.
Government Patent Policy Act (P.L. 96-517, referred to as the “Bayh-Dole Act”)
The Government Patent Policy Act (P.L. 96-517, commonly referred to as the “Bayh-Dole Act”) The Government Patent Policy Act (P.L. 96-517, commonly referred to as the “Bayh-Dole Act”)
provided provided ~~small~~ smal businesses, universities, and not-for-profit organizations the right to obtain titles businesses, universities, and not-for-profit organizations the right to obtain titles
to inventions developed with federal funds. President Ronald Reagan issued a memorandum in to inventions developed with federal funds. President Ronald Reagan issued a memorandum in
1983 and Executive Order 12591 in 1987 directing federal agencies to apply this provision to 1983 and Executive Order 12591 in 1987 directing federal agencies to apply this provision to ~~all~~
al businesses, regardless of size, to the extent permitted by law. businesses, regardless of size, to the extent permitted by law.
Small Business Innovation Development Act of 1982 (P.L. 97-219)
The The ~~Small~~ Smal Business Innovation Development Act of 1982 (P.L. 97-219) established the Business Innovation Development Act of 1982 (P.L. 97-219) established the ~~Small~~
Smal Business Innovation Research program by requiring certain agencies to set aside a portion of their Business Innovation Research program by requiring certain agencies to set aside a portion of their
annual extramural R&D funding to competitively award R&D funds for annual extramural R&D funding to competitively award R&D funds for ~~small~~ smal businesses. businesses.
Cooperative Research and Development Act of 1984 (P.L. 98-462)
The Cooperative Research and Development Act of 1984 (P.L. 98-462) sought to encourage firms The Cooperative Research and Development Act of 1984 (P.L. 98-462) sought to encourage firms
to pool their research funds and engage in precompetitive research by eliminating treble damages to pool their research funds and engage in precompetitive research by eliminating treble damages
for antitrust violations. The act contributed to the development of research consortia such as the for antitrust violations. The act contributed to the development of research consortia such as the
Semiconductor Research Corporation (SEMATECH). Semiconductor Research Corporation (SEMATECH).

99 P.L. 96-480, Section 2. 99 P.L. 96-480, Section 2.
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Federal Technology Transfer Act of 1986 (P.L. 99-502)
The Federal Technology Transfer Act of 1986 (P.L. 99-502) authorized government-owned, The Federal Technology Transfer Act of 1986 (P.L. 99-502) authorized government-owned,
government-operated (GOGO) laboratories to enter into cooperative research and development government-operated (GOGO) laboratories to enter into cooperative research and development
agreements (CRADAs) and to negotiate licenses on patents owned by the laboratories. It also agreements (CRADAs) and to negotiate licenses on patents owned by the laboratories. It also
required laboratories to share a portion of patent licensing royalties with the government required laboratories to share a portion of patent licensing royalties with the government
employed inventor(s). The act made technology transfer, consistent with mission responsibilities, employed inventor(s). The act made technology transfer, consistent with mission responsibilities,
a responsibility of each laboratory scientist and engineer. In addition, the act codified the Federal a responsibility of each laboratory scientist and engineer. In addition, the act codified the Federal
Laboratory Consortium (FLC) and charged it with facilitating technology transfer through Laboratory Consortium (FLC) and charged it with facilitating technology transfer through
professional development training, providing advice and assistance to agencies and laboratories, professional development training, providing advice and assistance to agencies and laboratories,
and acting as a clearinghouse for requests for technical assistance received by laboratories. and acting as a clearinghouse for requests for technical assistance received by laboratories.
Malcolm Baldrige National Quality Improvement Act of 1987 (P.L. 100-107)
The Malcolm Baldrige The Malcolm Baldrige National Quality Improvement Act of 1987 (P.L. 100-107) sought to National Quality Improvement Act of 1987 (P.L. 100-107) sought to
improve the quality of American goods and services by instituting an awards program to honor improve the quality of American goods and services by instituting an awards program to honor
companies and other organizations that practice effective quality management, and by companies and other organizations that practice effective quality management, and by
disseminating information about successful quality improvement strategies and programs. During disseminating information about successful quality improvement strategies and programs. During
this period, Japanese products were often seen as superior in quality to similar American this period, Japanese products were often seen as superior in quality to similar American
products. During its recovery from WWII, Japan embraced the work of W. Edwards Deming, a products. During its recovery from WWII, Japan embraced the work of W. Edwards Deming, a
leading pioneer in the field of statistical quality control (SQC) and total quality management leading pioneer in the field of statistical quality control (SQC) and total quality management
(TQM), including industrial adoption of statistical process controls. (TQM), including industrial adoption of statistical process controls.
Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418)
The Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418), among other things: The Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418), among other things:
 sought to facilitate more open, equitable, and reciprocal market access; reduce or  sought to facilitate more open, equitable, and reciprocal market access; reduce or
eliminate eliminate barriers and other trade-distorting policies and practices; enable a more barriers and other trade-distorting policies and practices; enable a more
effective system of international trading disciplines and procedures; increase effective system of international trading disciplines and procedures; increase
~~intellectual~~ intel ectual property protections; and improve enforcement of U.S. antidumping property protections; and improve enforcement of U.S. antidumping
and countervailing duties; and countervailing duties;
 authorized trade adjustment assistance to firms and workers;  authorized trade adjustment assistance to firms and workers;
 extended federal patent royalty payments to nongovernment employees;  extended federal patent royalty payments to nongovernment employees;
 declared as U.S. policy that  declared as U.S. policy that ~~federally~~federal y supported international science and supported international science and
technology agreements should be negotiated to ensure that technology agreements should be negotiated to ensure that ~~intellectual~~intel ectual property property
rights are properly protected and that access to R&D opportunities and facilities, rights are properly protected and that access to R&D opportunities and facilities,
and the flow of scientific and technological information, are, to the maximum and the flow of scientific and technological information, are, to the maximum
extent practicable, equitable and reciprocal; extent practicable, equitable and reciprocal;
 changed the name of the National Bureau of Standards to the National Institute of  changed the name of the National Bureau of Standards to the National Institute of
Standards and Technology (NIST), expanded its technology transfer role, and Standards and Technology (NIST), expanded its technology transfer role, and
mandated an annual report on emerging technologies; mandated an annual report on emerging technologies;
 established the NIST Advanced Technology Program (ATP) to assist U.S.  established the NIST Advanced Technology Program (ATP) to assist U.S.
businesses in creating and applying generic technology and research results businesses in creating and applying generic technology and research results
needed to commercialize significant new scientific discoveries and technologies needed to commercialize significant new scientific discoveries and technologies
rapidly and to refine manufacturing technologies; rapidly and to refine manufacturing technologies;
 established the NIST Manufacturing Extension Partnership (MEP) program to  established the NIST Manufacturing Extension Partnership (MEP) program to
assist in the establishment of regional centers to enhance productivity and assist in the establishment of regional centers to enhance productivity and
technological performance of U.S. technological performance of U.S. ~~small~~ smal and medium-size manufacturers. and medium-size manufacturers.
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National Institute of Standards and Technology Authorization Act for 1989
(P.L. 100-519)
The National Institute of Standards and Technology Authorization Act for 1989 (P.L. (100-519), The National Institute of Standards and Technology Authorization Act for 1989 (P.L. (100-519),
among other things, established a Department of Commerce Technology Administration, led by among other things, established a Department of Commerce Technology Administration, led by
an Under Secretary for Technology, composed of NIST, the Office of Technology Policy, and the an Under Secretary for Technology, composed of NIST, the Office of Technology Policy, and the
National Technical Information Service; National Technical Information Service;
National Competitiveness Technology Transfer Act of 1989 (P.L. 101-189)
The National Competitiveness Technology Transfer Act of 1989 (P.L. 101-189) extended to The National Competitiveness Technology Transfer Act of 1989 (P.L. 101-189) extended to
government-owned, contractor-operated (GOCO) laboratories many of the same CRADA government-owned, contractor-operated (GOCO) laboratories many of the same CRADA
authorities provided to GOGOs by P.L. 99-502); protected information created under a CRADA authorities provided to GOGOs by P.L. 99-502); protected information created under a CRADA
from disclosure to third parties, and provided a technology transfer mission to the Department of from disclosure to third parties, and provided a technology transfer mission to the Department of
Energy’s nuclear weapons laboratories. Energy’s nuclear weapons laboratories.

Author Information

John F. Sargent Jr. John F. Sargent Jr.
Marcy E. Gallo Marcy E. Gallo
Specialist in Science and Technology Policy Specialist in Science and Technology Policy
Analyst in Science and Technology Policy Analyst in Science and Technology Policy

Acknowledgments
This CRS Report was originally co-authored by former CRS Specialist in Defense Acquisition Moshe This CRS Report was originally co-authored by former CRS Specialist in Defense Acquisition Moshe
Schwartz. Schwartz.

Disclaimer
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