Is the Military Attracting New Companies? Assessing First-Time Entrants into the Defense Market

Abstract

Over the last 20+ years, companies outside of the traditional defense industrial base (DIB) increasingly drive innovation in areas critical to national security. This paradigm shift has resulted in the Department of War (DoW) investing billions of dollars into innovation programs, rapid acquisition programs, small business outreach programs, and accelerators (“innovation initiatives” or “initiatives”) that have a stated purpose of making it easier for innovative commercial companies to break into the defense market. In our 2020 Naval Postgraduate School paper, we assessed contract award data from fiscal year (FY) 2010 through FY2019 and determined that, rather than expanding the industrial base, these initiatives primarily benefit entrenched defense contractors. In this paper, we revisited the analysis of new versus existing DoW vendors, using updated datasets from the Federal Procurement Data System (FPDS) between FY2015 and FY2024. We determined that the DoW remains largely inaccessible for nonentrenched contractors, and the majority of first time vendors to the defense market do not purvey commercial technologies. In addition to quantitatively analyzing the types of companies that sell to the DoW, we discuss the underlying issues that have made the defense market so inhospitable towards new entrants. Finally, we offer a series of recommendations for how the DoW can better attract, engage, and retain innovative commercial companies.