Defense Technology: The Payoffs for Economic and Military Security Historically, this Nation's policies to support the development of advanced industrial technology were motivated primarily by national security concerns. This linkage traces back to post-Revolutionary times, when the government spurred the development of an interchangeable parts approach to manufacturing to meet a pressing need for rifles. The government's impact on manufacturing was significant then and it remained so, at least until recently. During and after World War II, new high-technology industries were driven and assisted by the government's push to strengthen national security. Defense programs dominated the Federal Government's R&D portfolio. The payoffs were substantial, with U.S. industry benefiting from defense-driven investments. But an increasingly inflexible defense acquisition process lengthened production cycles and increased costs at the same time that commercial enterprises began the drive to reduce costs and time to market. Defense systems' development needs and benefits diverged from the industrial main- stream, which was spurred by stiff overseas competition and dramatic tech- nology advances. Today, though defense continues to blaze the trail in key areas of leading-edge research, the rate at which that innovation is actually moved into production often lags well behind that of commercial industry in important sectors such as computers and microelectronics. Three Pillars of a 21st-Century Defense Technology Strategy The Clinton Administration intends to reverse this trend and will pursue more efficient and effective strategies for defense investments in technology. The three pillars that will serve as the foundation for a 21st-century defense technology strategy are: o Reform the current Department of Defense (DOD) acquisition process, now biased against the use of commercial processes and products within defense systems. o Focus more R&D within DOD on dual-use products and processes, empha- sizing the need to achieve advances in high-tech defense systems that are affordable. o Reach out globally to our allies, to benefit from international cooperation on a technology-by-technology basis. These strategic thrusts are beginning to redirect this Nation's massive defense investment so that it is both more effective and more supportive of our broader industrial base. Reform the current DOD acquisition process to encourage the use of commercial processes and products within defense systems. By using compo- nents, technologies, and subsystems developed by commercial industry when- ever possible, defense should be able to attain three compatible objectives: o Shorten development times, increasing the pace at which innovation is incorporated into new defense systems in critical areas. Introduce the commercial high-tech sector's continuous stream of improvements and updates during both the development and deployment phase. o Reduce costs for procuring leading technology to satisfy military needs. Commercial components, technologies, and subsystems in many instances can meet functional needs at lower costs than technology that is military-driven and customized. Eliminate unnecessary military specifications, testing requirements, and procurement procedures. o Prepare for building back military capabilities. Close integration with the private sector is imperative if the Nation is to be equipped to quickly gear up its capabilities. Focus more R&D within DOD on dual-use products and processes, emphasizing affordable advances in high-tech defense systems. Investments in technologies that are both critical to defense systems and vital to commercial industries serve a dual use. Dual-use technologies include manufacturing processes as well as products. For example, the Microelectronics Manufacturing Science and Tech- nology (MMST) Program supported by DOD was designed to develop fast, flexible, cost-effective techniques for manufacturing semiconductors. The primary goal was to meet military needs for relatively small batches of semi- conductors at affordable cost, but the technology is valuable to commercial production as well. In fact, it was developed in partnership with the commer- cial division of Texas Instruments. Reach out globally to our allies, to benefit from international cooper- ation on a technology-by-technology basis. Technology today is global, flowing with relative freedom across national boundaries. We need to ensure that the flow of defense technology-related knowledge is not just one way. In the recent past, we have shared considerable expertise and technology with our allies. A part of our strategy now must be to strengthen our relationships with allies and explore how they may be helpful to us in solving technology-based problems. Progress to Date The Administration has taken concrete steps to implement its new vision for a defense strategy, which makes the most of our national investment in technology by supporting both military and economic strength: o DOD is explicitly emphasizing dual-use R&D to better integrate defense technology development with commercial industry. This is a break from past Administrations' unwillingness to address defense technology's dual-use needs and opportunities. Application of critical technologies will be accelerated in four focused "thrust areas": information technology, manufacturing, materials, and advanced simulation and training. o President Clinton has changed the name of the Advanced Research Projects Agency (ARPA) to reflect its new focus on dual-use technologies. ARPA is rebalancing its advanced research portfolio while continuing its emphasis on electronics and information processing; it is also strongly supporting the High Performance Computing and Communications Initiative and the National Information Infrastructure, two notable dual-use efforts. ARPA also is seeking to transform manufacturing production processes through advances in materials, equipment, design-process integration, agile manufacturing, and enterprise integration. A key to ARPA's strategy is its emphasis on partnerships and cost sharing. o The Administration successfully launched the Technology Reinvestment Project (TRP), the largest multiagency technology program ever conducted by the Federal Government. President Clinton introduced this top- priority dual-use effort in March 1993 as a cornerstone of his $1.7 billion Defense Reinvestment and Conversion Initiative. The TRP stresses partnering among industry, government, and universities; it has drawn a powerful show of interest, especially from industry. TRP funds are available for three key areas: technology development, to create new technologies with the potential for commercialization within 5 years; technology deployment, to disseminate existing technology for near-term commercial and defense products and to support improved use of technologies in small businesses; and manufacturing education and training, to strengthen engineering and workforce capabilities necessary for a competitive industrial base. Six Federal agencies jointly manage and implement the TRP. Led by the Defense Department's ARPA, the other participating agencies are the Commerce Department's National Institute of Standards and Technology, the Departments of Energy and Transportation, the National Aeronautics and Space Administration, and the National Science Foundation. Project managers sought broad participation through an "800" hotline and a series of regional briefings sponsored by the White House. The hotline received 35,000 calls and 55,000 information packages were distributed, reflecting an extraordinary level of interest. More than 2,800 proposals, requesting $8.5 billion, were submitted in response to the offer of $472 million in merit-based, matching Federal grants from the TRP. Proposals were received from organizations in all 50 states and the District of Columbia. The President on October 22 announced the first successful applicants: 41 projects accounting for $140 million in requested Federal matching funds. The remainder of the awards will be announced in November. Planning is under way for an expected follow-up round of competitions for the TRP. o Technology application efforts and acquisition are beginning to reflect the new strategy for integrating defense and commercial technologies. Advanced Technology Demonstrations (ATD) in DoD are increasing the focus on manufacturing and speeding the rate at which new technology is fielded by our military. For example, the Technology for Affordability "thrust" is now seeking major advances in design tools, process integration and control, and production management. o DOD is emphasizing technology in the acquisition process to improve efficiency. An example is a greatly enhanced Continuous Acquisition Life- Cycle Support (CALS) program, which aims to automate much of the routine work associated with logistics support. Another element is automation of the procurement process, with pilot programs being launched to electronically advertise and respond to procurement requests. DOD intends to take an active part in the expected large- scale movement of business information into the National Information Infrastructure. o To encourage defense firms to participate in dual-use cooperative R&D, the Administration has clarified regulations regarding the use of independent research and development (IR&D) funding as part of a firm's contribution to a cost-sharing proposal. Use of IR&D monies as part of industry matching funds is permitted in certain kinds of cooperative arrangements involving contractors working jointly with others (e.g., joint ventures, teaming arrangements, and consortia). o DOD has launched a major new initiative with Japan to gain access to its commercial technologies, manufacturing know-how, components, and sub- systems. This effort seeks to better balance the significant amounts of U.S. defense technology that flow to Japan, with a compensating flow of dual-use technologies obtained from commercial firms in Japan for use in defense applications. The emphasis is on fostering company-to-company linkages that gain access for our defense industrial base to Japanese expertise and information. o DOD has proposed significant new initiatives in jointly developing military systems with our NATO allies. Joint development programs can lead to additional expense since language, cultural, and institutional differences typically must be overcome. But this Administration is firmly convinced that gains from splitting development costs with partners and from interoperability of systems can greatly exceed the incremental costs of taking the trouble to work with allies. A dual-use strategy as discussed above offers clear advantages to the military. Defense planners know that the way to get the most out of shrinking dollars is to buy as much as possible from commercial manufacturers who, under the discipline of the market, must give their customers good value high quality, reliable products embodying the latest and best tech- nologies at competitive prices. While the dual-use approach is not as central to the interests of commercial companies, they too will benefit. Defense spending for dual-use R&D and procurement has a more than proportionate effect on advancement of technology, because investments will be heavily weighted to leading-edge technologies with potentially broad application. Nevertheless, defense spending makes up a small and declining share of a $5.5 trillion to $6 trillion economy. Civil-military integration is just one part, though an important part, of successful conversion to a post-Cold War economy. The best and broadest conversion strategy must also include govern- ment investments that lift the performance of the whole economy. This means: o investing in first-class education and training of all our workers; o forming R&D partnerships with industry on promising technologies that are primarily commercial as well as dual use; and o developing new national initiatives that meet widely agreed public needs while also fostering the advance of technology, the growth of knowledge- intensive, wealth-generating industries, and the creation of high- quality jobs. Other sections of this progress report deal with these broader strategies for transition to a post-Cold War world.