These products are the focus of this report because  they are often produced by companies that do not work regularly with  DOD (non-traditional companies). However, available industry data, as well as DOD studies, indicate that it  may be difficult for the department to attract non-traditional companies to  sell or further develop their products for DOD’s own use. As shown in  table 1, one reason for this is that DOD is not a significant customer for  top innovative companies. Together, these challenges create an environment wherein the selected  non-traditional companies told us that their resources might be better  spent pursuing commercial business where the cost to compete is lower  and selection decisions are faster. Two of the 12 non-traditional  companies in our review are currently not pursuing business with DOD as  a result of these challenges. For example, one of the 12 companies GAO  spoke to conducted a cost comparison study and found that it took 25 full  time employees, 12 months and millions of dollars to prepare a proposal  for a DOD contract. In contrast, the study found that the company used 3  part time employees, 2 months, and only thousands of dollars to prepare  a commercial contract for a similar product. This official said the company  is no longer doing business with DOD. Commercial  cloud service providers price their services based on the amount of  services a customer uses every month, which could vary based on  changing needs  In addition, in response to a DOD request for information, officials from a  non-traditional company that provides data integration and analytics  products stated that DOD issued a request for proposals to develop a  military-unique solution for a requirement that could be met with existing  commercial products. § 2377, which requires DOD to determine  whether commercial items exist that can satisfy its needs, in whole or in  part. DOD Is Taking Some Actions to Address the Challenges Faced by Non-Traditional Companies

Congress and DOD recognize that changes to laws, regulations, and  DOD’s implementation practices are needed to address the challenges  cited by companies and are taking steps to address them. DOD is in  the process of implementing some of the provisions. In addition, DOD established an 18 person advisory panel of current and  former DOD executives, referred to as the 809 Panel, to identify  opportunities to streamline the acquisition process. The panel will then issue a final report in  2018. Military Services Are Taking Steps to Reduce Contracting Cycle Times

The military services have also initiated efforts to streamline or  standardize their contracting processes, one of the major challenges  identified by non-traditional companies. Agency Comments

We are not making recommendations in this report. We sent a draft of this  report to DOD for advance review and comment. Appendix I: Objectives, Scope, and Methodology

This report describes (1) key challenges identified by non-traditional  companies when trying to do business with Department of Defense  (DOD) and (2) actions DOD is taking to address them. Private sector investment could include  funding from DOD. We selected these 12 companies based on several factors, including the  extent to which the company had conducted business with DOD,  company size, and the types of technologies they have developed. We then grouped these into six overarching challenges that  nearly all of the non-traditional companies said they faced when trying to  doing business with DOD. Third, we met with senior DOD personnel and acquisition  professionals from across the three military service departments and the  Office of the Secretary of Defense to identify military-specific initiatives  focused on addressing some of the cited challenges and collected  pertinent documentation on these efforts.
Why GAO Did This Study

Private industry investments in research and development have significantly outpaced DOD's own spending in this area over the past three decades. Recognizing that this situation is likely to continue, Congress has passed legislation aimed at enabling DOD to leverage technologies made by companies that do not typically do business with it, referred to in this report as non-traditional companies.
A Senate report included a provision for GAO to review DOD efforts to attract non-traditional companies that could potentially develop their commercial products for DOD's use. This report describes (1) key challenges identified by non-traditional companies when trying to do business with DOD and (2) actions DOD is taking to address them.
To perform this work, GAO conducted interviews with 12 non-traditional companies. Companies were selected based on size, the amount of business they had with DOD, and the type of technology they produce. GAO discussed the nature of the challenges identified with the companies. In addition, GAO obtained information from DOD on steps it is taking to mitigate identified challenges through document reviews and interviews with military service and Office of the Secretary of Defense officials.

What GAO Found

According to representatives from 12 innovative companies that do not typically do business with the Department of Defense (DOD), there are several challenges that deter them from selling their products and services to DOD or further developing their products and services for military use. These challenges can be grouped into the six areas shown in the table below.
According to these company representatives, collectively these challenges have created an environment where companies choose to either not pursue DOD business or believe that their resources could be better spent pursuing commercial business where the cost to compete is lower and selection decisions are made faster. For example, 1 of the 12 companies GAO spoke with conducted a cost comparison study and found that it took 25 full time employees, 12 months and millions of dollars to prepare a proposal for a DOD contract. In contrast, the study found that the company used 3 part time employees, 2 months, and only thousands of dollars to prepare a commercial contract for a similar product.
DOD is taking steps to implement some of the requirements that Congress mandated in recent legislation to address some of these challenges, as well as implementing other innovative solutions. For example, as required by Congress, DOD established an advisory panel to identify opportunities to streamline the acquisition process, including recommending regulations that should be eliminated. The panel, which consists of 18 current and former DOD executives, expects to issue a final report in 2018. Each of the military services also has efforts underway to shorten their contracting process. In addition, DOD established an innovation unit in April 2015 to reach out to companies that do not typically do business with the department and facilitate business agreements within a desired period of 60 days using the process below.
Because many of the steps and initiatives that DOD is undertaking are in the early stages of implementation, it is too early at this time to determine whether they will address all of the challenges identified by companies that normally do not do business with the department.

What GAO Recommends

Although GAO is not making recommendations, DOD reviewed a draft of this report and had no comments.