Defense Science and Technology:

Adopting Best Practices Can Improve Innovation Investments and Management

GAO-17-499: Published: Jun 29, 2017. Publicly Released: Jun 29, 2017.

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sullivanm@gao.gov

 

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Defense Science and Technology: Adopting Best Practices Can Improve Innovation Investments and Management

DOD plans to invest $12.5 billion on innovative technology in fiscal year 2017. We compared DOD's approach with how leading technology companies like Amazon and Dow manage their science and technology investments.

We found that DOD's ability to innovate is limited by its funding policies, as projects are planned up to 2 years in advance, which can slow innovation and limit lab directors’ autonomy. Additionally, DOD’s culture prioritizes developing technologies only for programs that already have the needed funding.

We recommended that DOD define a science and technology management framework that uses leading commercial practices.

Department of Defense Technology Management Process

Graphic showing progression from technology investment, through development, then deployment.

Graphic showing progression from technology investment, through development, then deployment.

Additional Materials:

Contact:

Mike Sullivan
(202) 512-4841
sullivanm@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The eight leading companies whose practices GAO assessed take a disciplined approach to organizing and executing their technology development activities by grouping them into two portfolios: incremental and disruptive, as shown in the figure. Incremental development improves product lines whereas disruptive development is for riskier innovative and potentially market-shifting technologies.

Commercial Model Ensures Investments in Incremental and Disruptive Innovation

Commercial Model Ensures Investments in Incremental and Disruptive Innovation

By separating these two portfolios, companies reported that they could promote existing product lines in the short term while exploring opportunities to remain competitive in the long term, and mitigate the financial risk associated with disruptive technology development. Moreover, GAO found that leading companies also ensure technologies will be relevant in the marketplace by engaging a wide range of internal stakeholders. These companies also reported that they gain leadership buy-in by prototyping technologies before committing to further development and product integration.

While some Department of Defense (DOD) practices closely mirror those of the companies GAO reviewed, DOD's ability to adopt leading commercial practices in its approach to managing science and technology (S&T) investments is limited by its funding policies and culture. Unlike the companies GAO reviewed, DOD leadership does not provide guidance on or assess the mix of incremental and disruptive innovation. As a result, officials reported that DOD labs struggle to find the right balance between these investment areas. Under DOD's budget policy, projects are planned up to 2 years in advance, which can slow innovation and limit lab directors' autonomy as compared to companies. Congress has provided a means for lab directors to initiate work outside of this lengthy process, but it has not been fully utilized. Additionally, responsibilities for technology versus product development also contribute to a culture that discourages collaboration and limits labs' ability to prototype. Yet these issues are not insurmountable, as pockets of each military department have demonstrated, such as through recent efforts to expand advanced prototyping in the labs. Further, Congress has required that by February 2018 DOD create a new Under Secretary of Defense for Research and Engineering (USD(R&E)), which will be charged with developing policies to improve innovation. This position creates an opportunity to develop policies that further promote adoption of leading commercial practices.

DOD relies on innovative technologies to ensure the superiority of its weapon systems and planned to invest about $12.5 billion in fiscal year 2017 to achieve this aim. Recently, DOD's leadership role in fostering innovation has been supplanted by the commercial sector. This has changed DOD's approach to technology development by relying more on commercial innovation.

Conference Report 112-329 included a provision for GAO to review DOD's S&T enterprise. This report assesses (1) the practices leading companies employ to manage technology development and (2) the extent to which DOD can incorporate these practices into its own. GAO interviewed eight large, profitable, leading technology companies (Amazon, Dow Chemical, Honeywell, General Motors, IBM, Qualcomm, Siemens AG, and Valvoline) to identify practices they used to manage, prioritize, and assess their technology portfolios. GAO also met with DOD organizations that manage and execute S&T funds to identify their practices.

What GAO Recommends

GAO recommends that DOD annually define and assess the mix of innovation investments and define, in policy or guidance, an S&T management framework that comprehensively employs leading commercial practices. DOD did not agree with the recommendations, citing its ongoing deliberations on the new USD R&E's role, but did identify some planned actions. GAO believes its recommendations are valid as discussed in the report.

For more information, contact Mike Sullivan at (202) 512-4841 or sullivanm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Priority recommendation

    Comments: In July 2017, the Department of Defense (DOD) disagreed with our recommendation, stating that it would be premature to get ahead of the Secretary of Defense's final decisions on the role of the new Under Secretary of Defense for Research and Engineering (USD(R&E)) until that position is established, as required by law. In July 2018, the Department issued a memorandum finalizing the organizational structures, and roles and responsibilities for USD(R&E), but did not include a requirement for that office to annually define the mix of incremental and disruptive innovation investments for each military department. In September 2019, the Office of the USD(R&E) released an updated science & technology strategy. While the updated strategy acknowledges the need to invest in both incremental and disruptive innovation, the strategy does not define what an appropriate investment mix should be. In lieu of a DOD-wide defined mix set by USD(R&E), in April 2019, the Air Force issued its own science and technology strategy that acknowledged the need for both incremental and disruptive investments and defined what that mix should be. However, recent Army (2019) and Navy (2017) science and technology strategies do not define those military departments' desired mixes of incremental and disruptive innovation investments. In the Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2020, Congress directed USD(R&E) to report further on this issue to the Committees on Armed Services of the Senate and House of Representatives by December 31, 2019.

    Recommendation: To ensure that DOD is positioned to counter both near and far term threats, consistent with its S&T framework, the Secretary of Defense should direct the new Under Secretary of Defense for Research and Engineering to annually define the mix of incremental and disruptive innovation investments for each military department.

    Agency Affected: Department of Defense

  2. Status: Open

    Priority recommendation

    Comments: In July 2017, the Department of Defense (DOD) disagreed with our recommendation, stating that it would be premature to get ahead of the Secretary of Defense's final decisions on the role of the new Under Secretary of Defense for Research and Engineering (USD(R&E)) until that position is established, as required by law. In July 2018, the Department issued a memorandum finalizing the organizational structures, and roles and responsibilities for USD(R&E), but did not require that office to annually assess whether a desired mix of incremental and disruptive innovation investments mix had been achieved. In December 2019, a senior official within the Office of the USD(R&E) stated that DOD's Communities of Interest -- a component of DOD's overarching Reliance 21 framework for science and technology coordination -- are required to plan short- and long-term research and assess that research for an appropriate mix and balance between research priorities. However, as of December 2019, USD(R&E) has not yet articulated what the appropriate mix of incremental and disruptive innovation investments should be for DOD. Therefore, it is unknown the criteria the Communities use to evaluate whether an appropriate balance exists between research priorities, including incremental and disruptive innovation. In the Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2020, Congress directed USD(R&E) to report further on this issue to the Committees on Armed Services of the Senate and House of Representatives by December 31, 2019.

    Recommendation: To ensure that DOD is positioned to counter both near and far term threats, consistent with its S&T framework, the Secretary of Defense should direct the new Under Secretary of Defense for Research and Engineering to annually assess whether that mix is achieved.

    Agency Affected: Department of Defense

  3. Status: Open

    Priority recommendation

    Comments: In July 2017, the Department of Defense (DOD) disagreed with our recommendation, stating that it would be premature to get ahead of the Secretary of Defense's final decisions on the role of the new Under Secretary of Defense for Research and Engineering (USD(R&E)) until that position is established, as required by law. In July 2018, the Department issued a memorandum finalizing the organizational structures, and roles and responsibilities for USD(R&E), but did not require it to define a science and technology management framework that includes a process for discontinuing projects. In December 2019, a senior official with USD(R&E) reported that DOD has successfully implemented flexible funding vehicles such as the Defense Modernization Account that allowed funds to be rapidly moved to promising prototype projects within DOD's science and technology enterprise. In addition, this senior official reported an increased use of Other Transaction Authority by the Defense Innovation Unit and Defense Advanced Research Projects Agency. Nonetheless, the Office of the USD(R&E) has not yet developed policy or guidance that military departments could use to emphasize greater use of existing flexibilities for initiating and discontinuing science and technology projects. Consequently, DOD's processes for initiating and terminating science and technology projects largely remain linked to the annual federal budgeting process, which is not responsive to the rapid pace of innovation. In the Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2020, Congress directed USD(R&E) to report further on this issue to the Committees on Armed Services of the Senate and House of Representatives by December 31, 2019.

    Recommendation: To ensure that DOD is positioned to more comprehensively implement leading practices for managing science and technology programs, the Secretary of Defense should direct the new Under Secretary of Defense for Research and Engineering to define, in policy or guidance, an S&T management framework that includes emphasizing greater use of existing flexibilities to more quickly initiate and discontinue projects to respond to the rapid pace of innovation.

    Agency Affected: Department of Defense

  4. Status: Open

    Priority recommendation

    Comments: In July 2017, the Department of Defense (DOD) disagreed with our recommendation, stating that it would be premature to get ahead of the Secretary of Defense's final decisions on the role of the new Under Secretary of Defense for Research and Engineering (USD(R&E)) until that position is established, as required by law. In July 2018, the Department issued a memorandum finalizing the organizational structures, roles, and responsibilities for USD(R&E), but did not require that office to define, in policy or guidance, a science and technology framework that includes incorporating acquisition stakeholders into technology development programs. In December 2019, a senior official within the Office of the USD(R&E) reported that USD(R&E) actively partners with acquisition stakeholders to ensure technology development programs are relevant to customers. The official cited Rapid Prototyping Programs (RPPs), Joint Capability Technology Demonstrations (JCTDs), and Emerging Capability Technology Development (ECTD) programs as examples where management frameworks in which technology managers actively partner with (1) operational managers from the Combatant Commands or military departments and (2) technology transition managers from the military departments to ensure programs are relevant to customers. However, these efforts are narrow in scope and do not constitute the majority of science and technology investments DOD makes. In addition, the senior official reported that the Army and the Air Force are taking steps to incorporate and integrate acquisition stakeholders into their science and technology projects, but these efforts are in their infancy. In the Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2020, Congress directed USD(R&E) to report further on this issue to the Committees on Armed Services of the Senate and House of Representatives by December 31, 2019.

    Recommendation: To ensure that DOD is positioned to more comprehensively implement leading practices for managing science and technology programs, the Secretary of Defense should direct the new Under Secretary of Defense for Research and Engineering to define, in policy or guidance, an S&T management framework that includes incorporating acquisition stakeholders into technology development programs to ensure they are relevant to customers.

    Agency Affected: Department of Defense

  5. Status: Open

    Priority recommendation

    Comments: In July 2017, the Department of Defense disagreed with our recommendation, stating that it would be premature to get ahead of the Secretary of Defense's final decisions on the role of the new Under Secretary of Defense for Research and Engineering (USD(R&E)) until that position is established, as required by law. In July 2018, the Department issued a memorandum finalizing the organizational structures, and roles and responsibilities for USD(R&E), but did not require it to define, in policy or guidance, a science and technology framework that includes promoting advanced prototyping of disruptive technologies within the labs. In December 2019, a senior official within the Office of the USD(R&E) reported that the Emerging Capability Technology Development (ECTD) program is one framework USD(R&E) uses to promote the prototyping of disruptive technologies within the labs. Under this framework, USD(R&E) co-funds and co-sponsors projects with Federally Funded Research and Development Centers (FFRDCs), University Affiliated Research Centers (UARCs), and the military department laboratories. An integrated management team leads the evaluation and demonstration of technologies and connects technology managers with acquisition programs in the Combatant Commands and the military departments. The senior official further reported that USD(R&E) leverages Rapid Prototyping Funds (RPFs) and Rapid Prototyping Programs (RPPs) to promote and prove advanced demonstrations in military department laboratories. In the Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2020, Congress directed USD(R&E) to report further on this issue to the Committees on Armed Services of the Senate and House of Representatives by December 31, 2019.

    Recommendation: To ensure that DOD is positioned to more comprehensively implement leading practices for managing science and technology programs, the Secretary of Defense should direct the new Under Secretary of Defense for Research and Engineering to define, in policy or guidance, an S&T management framework that includes promoting advanced prototyping of disruptive technologies within the labs so the S&T community can prove these technologies work to generate demand from future acquisition programs.

    Agency Affected: Department of Defense

 

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