From the U.S. Government Accountability Office, www.gao.gov Transcript for: How does Industry-Led Independent Research and Development Fit into DOD Planning? Description: Leveraging independent research and development projects conducted by the defense industry in high-tech areas, like cybersecurity and biotechnology, can help the U.S. military maintain battlefield superiority. While the amount and the focus of investments is up to those contractors, the Department of Defense reimburses them to the tune of about $4 to $5 billion annually. However, there are concerns that DOD isn't taking full advantage of this research. We talk with Tim DiNapoli, an expert on military contracting and a director in our Contracting and National Security Acquisitions Team. Related GAO Work: GAO-20-578, Defense Science and Technology: Opportunities to Better Integrate Industry Independent Research and Development into DOD Planning Released: September 2020 [Intro Music] [Tim DiNapoli:] The Department of Defense needs to do a better job in making sure that they have knowledge and visibility into what contractors are doing. [Holly Hobbs:] Hi and welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. I'm Holly Hobbs. Leveraging independent research and development projects conducted by the defense industry in high-tech areas, like cybersecurity and biotechnology, can help the U.S. military maintain battlefield superiority. While the amount and the focus of investments is up to those contractors, the Department of Defense reimburses them to the tune of about $4 to $5 billion annually. However, there are concerns that DOD isn't taking full advantage of this research. Today, we talk with Tim DiNapoli, an expert on military contracting and a director in our Contracting and National Security Acquisitions Team. Thank you for joining us, Tim. [Tim DiNapoli:] Thank you, Holly, for having me on board. [Holly Hobbs:] So, Tim, what kind of research does DOD contract for, and how does that independent research that we're talking about today fit into that portfolio of work? [Tim DiNapoli:] There are three big buckets of research. The first is contracted research and development. That's the type of research that the Department of Defense and other federal agencies do. They award a contract with a very specific statement of objectives, and they ask them to go do something. And that's really on the government's nickel. And we hope at the end of that, we develop a new technology or a new capacity. Then there's independent research and development, now this is research, as you said, that's conducted by the defense industry. It's pretty much up to their choosing of what they focus in and how much they spend on, within some broad parameters. But it really is their effort. The third big bucket is kind of that research that's conducted by the contractors for their own purposes. And this is research that might be used in a commercial application. They don't provide DOD visibility on that research. [Holly Hobbs:] And how much does DOD spend on this research and development? [Tim DiNapoli:] DOD spends about $60 billion dollars a year on its research and development activities. Of that about $15 billion, about a quarter, is spent on science and technology activities. And we reimburse contractors, as you mentioned, to about $4 to $5 billion a year, but it's still money that DOD does reimburse to the contractors. So, to the extent that we can leverage that research and have insights into that research makes it vitally important. [Holly Hobbs:] So, Tim, given the independent nature of these projects, do we know how many of them align with DOD's technology goals? [Tim DiNapoli:] Back in 2018, the secretary of defense issued the National Defense Strategy, which lays out the goals of the U.S. military. Shortly thereafter, the department issued its science and technology modernization goals, and there were 10 of those goals. And those are things like artificial intelligence, cybersecurity, space, among others. The team looked at some 2,400, and change, projects that were completed in 2018, and they matched them up with those 10 modernization priorities. What we found was that 38% of those projects aligned with one of those 10 modernization priorities. So, the question becomes, is 38% good, bad, or indifferent? And to be honest, we're not making a judgment on that because it's just a single data point. But I think the real value in that would be to collect that data over time because is 38% kind of the norm? Is it a baseline? If it goes up to 40 or 42%, is that good or bad? But what if it goes down to 25% or 20%? I think that might cause the department to also reflect upon that alignment to see if there's something wrong from that communication with industry. [ Music ] [Holly Hobbs:] So, it sounds like the Department of Defense is spending a lot of money on research and development projects that could support our national security, but that DOD often does not know how these projects fit into the department's technology goals. Tim, you have a new report out on this topic, did we make any recommendations to DOD on how to improve its oversight of these projects? [Tim DiNapoli:] So, we do think that DOD needs to consider tracking the types of information that would enable DOD to have that visibility over whether or not the independent research and development activities are in alignment with their strategy, so that is one recommendation. The other one, do they look at it? Do they assess where that technology is so they can figure out where they want to invest either on their own behalf or to make different signals? And unfortunately, what we found is that DOD does not use that data and there's a couple reasons, the summaries of the projects vary in their quality. The dollars associated with those projects sometimes are listed as a single dollar as opposed to the actual amount, which would give an indication of the level of investment the contractors are making. And then most importantly, there is no specific fields in that database that would allow contractors to identify which strategic priority the projects were aligning to. And so, we think that was kind of a significant deficiency in the database. [Holly Hobbs:] And last question, Tim, what's the bottom line of this report? [Tim DiNapoli:] Independent research development is vitally important to maintain national security. The Department of Defense needs to do a better job in making sure that they have knowledge and visibility into what contractors are doing, and then using that information to help their own strategic planning purposes. [Holly Hobbs:] That was Tim DiNapoli talking about GAO's recent report on the Department of Defense's research and development projects. Thank you for your time, Tim. [Tim DiNapoli:] My pleasure, Holly. [Holly Hobbs:] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple podcasts, and make sure you leave a rating and review to let others known about the work we're doing. For more from the Congressional Watchdog, the U.S. Government Accountability Office, visit us at gao.gov.