One of the purposes of this type of prototyping can be to  further disruptive innovation. Major Acquisition Programs Selected Prototyping Approaches That Addressed Key Risks

The programs we reviewed used prototyping primarily to reduce technical  risks, investigate integration challenges, validate designs, and mature  technologies. Of the 22 MDAPs we reviewed, 17 used some form of  prototyping during technology development and 5 did not prototype. Prototyping provided programs with information on technology  maturity, the feasibility of the design concepts, potential costs, and the  achievability of planned performance requirements, which helped inject  realism into their business cases. For example,  prototyping helped programs improve system performance. DOD Has Established New Initiatives to Increase Prototyping and Innovation, but Does Not Have a Strategy to Guide Its Investments

To help ensure U.S. military capabilities outpace those of potential  adversaries, DOD has expanded prototyping efforts focused on  innovation, including disruptive innovation, and has started several new  initiatives outside of major acquisition programs to address gaps in its  innovation portfolio. However, these initiatives face barriers, such as  limited funding and competing priorities. Literature on private sector  innovation, including the use of prototyping, identifies key enablers for  these types of efforts, such as developing a strategy for innovation,  identifying relative levels of investments that align with innovation goals,  and protecting funding for technology investments that have higher risk,  but perhaps more reward across the enterprise. DOD has taken steps  that are consistent with a few of these enablers, but lacks others, such as  an innovation strategy that could also address the role of prototyping. The  distribution of resources among different buckets is dictated by the  organization’s strategy. The NDAA for Fiscal Year 2017 included a provision that could provide  more information about funding for select prototyping initiatives outside of  acquisition programs. Recommendations for Executive Action

To help ensure DOD takes a strategic approach for its prototyping and  innovation initiatives and overcomes funding and cultural barriers, we  recommend that the Secretary of Defense direct the Assistant Secretary  of Defense for Research and Engineering to take the following four  actions:
Develop a high-level DOD-wide strategy, in collaboration with the  military services and other appropriate DOD components, to  communicate strategic goals and priorities and delineate roles and  responsibilities among DOD’s prototyping and innovation initiatives. Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess (1) how the Department of Defense (DOD)  has used prototyping prior to system development on major defense  acquisition programs, and (2) what steps DOD has taken to increase  innovation through prototyping activities conducted outside of major  defense acquisition programs. DOD’s Use of Prototyping on Major Programs Prior to System Development

To address our first objective, we examined 22 major defense acquisition  programs that had a Milestone B decision, which approves entry into  system development, between December 2009 and February 2016, or  anticipated receiving Milestone B approval by February 2016 when we  began our selection process. This increase is driven  by new projects as well as testing and development efforts on existing  projects.
Why GAO Did This Study

DOD invests roughly $70 billion annually in weapon system research, development, test, and evaluation, including prototyping activities. Prototyping can help reduce risk in weapon system acquisition programs by improving understanding of technologies, requirements, and proposed solutions. It can also contribute to innovation by demonstrating the value of new technologies or systems.
House Conference Report 114-102 accompanying a bill for the fiscal year 2016 National Defense Authorization Act included a provision for GAO to review how DOD's research and development funds are used and whether this approach effectively supports activities such as prototyping. This report assesses (1) how DOD has used prototyping prior to system development on major defense acquisition programs, and (2) what steps DOD has taken to increase innovation through prototyping activities outside of major defense acquisition programs. GAO examined prototyping activities for 22 MDAPs that planned to enter system development between December 2009 and February 2016 and 7 prototyping-focused initiatives with the stated purpose of promoting innovation.

What GAO Found

The Department of Defense (DOD) has used prototyping on its major defense acquisition programs (MDAP) primarily to reduce technical risk, investigate integration challenges, validate designs, mature technologies, and refine performance requirements. Of the 22 programs GAO reviewed, 17 used prototyping before starting system development. For many of those programs, prototyping provided information that helped introduce realism into their business cases by providing information on technology maturity, the feasibility of the design concepts, potential costs, and the achievability of planned performance requirements.
DOD has developed new initiatives that are outside of major defense acquisition programs to increase prototyping and further innovation. However, these initiatives face barriers, such as limited funding, a risk averse culture, and competing priorities. Literature on private sector innovation identifies key enablers for these types of efforts, such as developing an innovation strategy, aligning investments with innovation goals, and protecting funding for riskier projects. DOD has taken steps that are consistent with a few, but not all, of these enablers. For example, DOD does not have a department-wide strategy that communicates strategic goals and priorities and delineates roles and responsibilities to guide the prototyping initiatives. This could lead to unproductive or poorly coordinated investments later. DOD's initiatives also face competition for funding, particularly with acquisition programs. One strategy to address funding issues called “strategic buckets” involves allocating resources to different types of projects based on an organization's strategy (see figure). DOD has not set strategic funding targets for its initiatives. Failing to do so could prevent them from gaining traction and puts their long-term success at risk.

What GAO Recommends

GAO is making four recommendations, including that DOD develop a department-wide innovation strategy that includes prototyping and adopt a more strategic approach for funding prototyping efforts across DOD. DOD concurred with the recommendations and is currently working on this strategy.