Decades of Lost Potential in Defense Research and Development

In this episode, we unpack a deep and systemic challenge at the heart of U.S. defense innovation: how a flagship program intended to catalyse breakthrough technologies has, over decades, evolved into an engine of bureaucratic inertia and entrenched incumbency. Using the Small Business Innovation Research (SBIR) program as a case study, we explore how misaligned incentives, flawed policy design, and organisational risk aversion have constrained entry for truly innovative firms, starved defence research of fresh ideas, and squandered taxpayer resources. More than a critique of one program, this episode surfaces strategic questions about how defence innovation systems reward incumbency, how they bridge early-stage research to real operational impact, and what meaningful reform would require in an era of rapid technological challenge and great-power competition.

Transcript

SPEAKER_00 0:04

Well, hello and welcome back to The Leading Edge, a series which offers in-depth insights into the key challenges, innovations, and evolving dynamics of the contract and commerce landscape. I'm your host, Nikki Mackay, Chief Development Officer of the Commerce and Contract Management Institute. Now, when you think about defence innovation, it is natural to imagine cutting-edge technologies, brilliant engineers, disruptive ideas, and a pipeline that turns early research into decisive advantage on the battlefield. But what if the very policies and programs designed to unlock that innovation have over decades become obstacles rather than enablers? So today's guest, Amanda Bressler, president of PW Communications, asked this question in her article on decades of lost potential in defence, research, and development. So Amanda is here to guide us through this evolving landscape. Amanda, welcome, a warm welcome to the Leading Edge.

SPEAKER_01 1:15

Thank you so much, and I appreciate this opportunity. Look forward to a conversation with you.

SPEAKER_00 1:20

So brilliant. Let's dive in, Amanda. I'd like to start by stepping back to first principles. Because when you compare the original intent behind the SBIR program, how it was actually function, how has it actually functioned over time? And where I think where do you see the biggest divergence? If you could address that and perhaps then touch on the core drivers behind that gap.

SPEAKER_01 1:51

Absolutely. You know, the divergence between the intent of the SIBR program and the outcomes we've seen over the last four plus decades is frankly a masterclass in how policy is meaningless without appropriate incentives. For instance, SIBR is supposed to serve as an easier on-ramp for innovative small businesses to break into the federal market and to accelerate the delivery of their capabilities to the warfighter. Yet SIBR program offices are primarily held accountable for awarding their budgeted program dollars to eligible firms and making sure those firms deliver compliant milestones, not on whether they're funding new businesses or whether technologies ever reach the warfighter. They say what gets measured gets done. So it's no surprise that the system disproportionately rewards companies with the most institutional knowledge and falls short when it comes to technology transition. Policy goals and institutional incentives are not the same thing. And if they're not designed to align with one another, institutions will reliably optimize for whatever reduces internal friction, not whatever serves the original mission.

SPEAKER_00 3:02

Yeah, and indeed that creates an incredibly challenging environment. If we look at bureaucracy, participation, and innovation now, Amanda, in your article you actually described how so-called siber mills succeed not necessarily by being more innovative, but actually by being better at navigating bureaucracy. So, how does that dynamic shape who gets to participate in the defense innovation ecosystem? And what does it suggest about how the system currently defines and rewards innovation? What are your thoughts?

SPEAKER_01 3:44

Yeah, so a quick definition for listeners who may not be familiar with the SIBR program. So the term SIBR mills colloquially describes a set of companies that have been awarded a disproportionate share of SIBR funding over the last many decades. And to answer your question, this dynamic has made it very challenging for truly innovative companies to break into the defense market. Many forego programs like SIBR entirely once they realize just how complicated and anti-competitive the process is, which only makes it easier for Mills to expand their market share. Ultimately, what we're calling innovation in this context has become decoupled from actual technological advancement. It's innovation in bureaucratic fluency, not capabilities. That tells us something critical. If the barriers to entry reward the wrong skills, you don't just get the wrong participants, you actively repel the people and the organizations you most need.

SPEAKER_00 4:43

Yeah, yeah, absolutely. And that plays in nicely into looking at what is known as the Valley of Death problem, because a recurring theme in defense RD is this valley of death between proof of concept and operational adoption. Using Sibra as a case study, what do you see as the key structural barriers that prevent really promising technologies from making that leap? And where, if anywhere, could incentives be better aligned to help really bridge that gap?

SPEAKER_01 5:18

Yeah, so you know, first and foremost, this is this can be a bit controversial. Yeah. Our research reveals something that might seem counterintuitive. When it comes to SIBR, the current structure of the program actually manufactures the Valley of Death. So MILS, which I've described, they generate tens of millions in phase one, phase two awards, yet transition at below average rates. And the program keeps rewarding them anyway because transition isn't measured or required. So there's no penalty for living off phase one, phase two awards, and no reward for program managers who push companies towards programs of records. So the structural barrier isn't lack of resources or support. It's that the incentive structure makes the valley comfortable. Mills end up optimizing their business models to stay in it. To actually bridge the gap, you'd need to make transition rates a gating factor for future awards. Cap lifetime phase one, phase two funding so companies can't build permanent businesses on SIBRs alone, and consider technological integration as a key measure of success for the program. Now, separately, truly small firms that do manage to break into the program expect that if they perform well, it will lead to follow-on government business. There are a litany of structural barriers that keep that from happening. SIBR process doesn't educate companies on how to sell to the broader government market and it doesn't connect them with prospective government customers. So if they try to endeavor it on their own, what they find is that SAM.gov is impossible to navigate. And compounding these issues, SIBR program offices don't systematically share information about their portfolio companies to prospective end users. So there's no mechanism that makes it easy for someone in, say, the Navy to learn about what's being funded by the Air Force or Army SIBR, let alone what's happening within the Navy. Capabilities can't transition if prospective transition partners don't know they exist. So to make it possible for the truly innovative SIBR companies to reach the warfighter, the government must overhaul its marketing and communications practices with industry. And information about SIBR-funded companies must be readily available to the stakeholders across the federal government that would benefit from them. So over the years, we've also recommended establishing a set-aside program that requires government end users and prime contractors to allocate a share of contract dollars annually to a subset of SIBR companies that pass a rigorous assessment of technical merit at the end of their phase two. To further break down the stovepipes, we've recommended providing greater incentives for integrating capabilities that initially were funded by a different branch. Now, it's important to note that goals around increasing transition rate are meaningless altogether if innovative startups can't access the program to begin with. And entrenched companies are able to capture billions in funding unchecked. So allow me to reiterate that until the program is restructured in general to value technical merit over this what we call bureaucratic fluency, efforts to bridge this valley of death are frankly misplaced.

SPEAKER_00 8:25

Yeah, absolutely. There is so much to be gained by making that change and restructuring, as you've pointed out. So, um, Amanda, I want to now finally let's turn to uh the bigger picture and the strategic implications. So, zooming out beyond SIBA itself, what what do you think this story tells us about the United States' broader ability to harness emerging technologies in an era of great power competition? You know, are these challenges specific to this program, or do they point to a deeper strategic and organizational patterns in how defense innovation is managed? Tell me your thoughts. Yeah.

SPEAKER_01 9:10

Absolutely. This is symptomatic of something much deeper. The Simmer case is well documented, which is part of the reason that we've returned to it time and time again as an example of this symptomatic problem. But we've absolutely seen the same dynamics appear across defense innovation initiatives. Ultimately, all of these programs disproportionately benefit entrenched players. And the national security implications are significant. So we, as a US federal government, are failing to attract and retain the commercial technologies we need to remain competitive. And meanwhile, they can turn to countries like China with relative ease and access capital and customers. So I like to look at the silver lining here. And that's the fact that America, when all is said and done, we are still the most innovative country in the world. It's great news. The strategic problem isn't a lack of innovative companies here. It's a problem of access, and access is something that can be fixed with better design. We often like to say that it's objectively easier to reorient these programs towards their stated objectives than it is to accomplish many of the technological feats that we've we've accomplished as a country. You know, we've put a man on the moon. So restructuring these incentives is well within reach, and it's something that my team and I are passionate about helping to steward.

SPEAKER_00 10:36

Yeah, I mean, I think that's a powerful um close to this conversation, Amanda. Let's change this problem of access and let's empower innovation because America, United States of America, is the most innovative country in the world. And um and there's so much opportunity to be gained by making this change. So I'm afraid that's all we've got time for, Amanda. I really enjoyed this conversation. Thank you so much for joining me today. Thank you, and uh have a wonderful day to all of your listeners. Thank you so much, Amanda. You know, today's conversation isn't a critique of One Programme's administration. It's clear it's a strategic lens on how policy design, institutional incentives, and organizational risk cultures shape the technologies that ultimately make it into the hands of operators. If we care about defense innovation delivering real capability, not just reports, awards, and outputs on paper, we have to look past conventional metrics and institutional habits. Ultimately, the question isn't merely how much we spend, it's whether the system we build channels that spend towards the most promising ideas, those most capable innovators and outcomes that meaningfully strengthen deterrence and defence. So thank you, Amanda, for joining me today, and thank you for listening. If you like what you heard, please stay tuned for the next episode where we will continue to explore the ideas, innovations, and leadership shifts shaping the future of commerce and contracting. But until then, keep challenging, keep adapting, and keep leading.