Nail-Biter: Biden Reauthorizes AFWERX and Other SBIR Programs

WASHINGTON DC - Sept 30, 2022 - President Biden signed long awaited, edge-of-your seat legislation on Friday re-authorizing among other programs the Air Force's AFWERX division and numerous other technology-advancing initiatives. After being blockaded in Congress by inimitable Senator Rand Paul, the reauthorization passed with uncharacteristically bi-partisan support.

A White House statement dated Friday states: "S. 4900, the “SBIR and STTR Extension Act of 2022,” which authorizes the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and six related pilot programs through Fiscal Year 2025; requires agencies with an SBIR or STTR program to establish a due diligence program to assess the potential risk posed by program applicants’ foreign ties; requires certain departments and agencies to report on national security risks within their SBIR/STTR programs; and establishes increased minimum performance standards for firms that have won a certain number of awards during a specified period of time."

Had this measure not made it through Congress and across the President's desk, thousands of critically needed advanced defense technology projects would have very likely been abandoned entirely for lack of funding.

Although in this writer's opinion, Senator Paul is a national embarassment, he did raise a few important points by questioning the program's methods of securing IP theft from hostile actors, particularly China, and weeding out companies and groups whose only real purpose is to obtain funding, as opposed to create anything of useful technological merit.

The real question now, is what happens in three years.

The extension as enacted is only effective for three years and then is scheduled to sunset again. Those working under SBIR/STTR funding need to start right now figuring out how to avoid facing extinction yet again in 2025. If placating politicians is the prime concern then, what do the politicians want? If Senator Paul's statements are to be taken as sincere, Congress wants better performance in terms of follow-through to dual use[1] commercialization, which in the case of programs like the Air Force's AFWERX initiative means transforming theories perhaps only seen on paper or lab benchtops into what the Department of Defense terms "Programs of Record." That means transforming early pencil sketches into loads of mass-manufactured defense systems into shipping cartons on a truck headed to Defense Logistics Agency warehouses. In other words, performance that can be evidenced by viewing published financial reporting of those companies which are transformed from intriguing ideas into vigorous, American commercial enterprises.

Enter Blockchain?

There is also the critical concern regarding institutionalized, state-backed theft of American intellectual property, which China has been doing not for years, but for decades[2]. Incredibly, documents including the Technical Volumes of SBIR/STTR programs are published openly on the Internet. This has to stop. Moreover absolute methods must be developed and made mandatory to secure IP with unscalable barriers against unauthorized access. The day of machines and equipment being the only manifestation of capital assets is long in the past. For almost all SBIR/STTR companies the principal assets either drive home every day at 5 o'clock or reside in formulae, algorithms and other code that must be barricaded inside of concrete yet ephemeral barriers. Perhaps blockchain may be useful for this but this writer for one, hasn't seen it yet.

Fictional and legendary Star Trek engineer Montgomery "Scotty" Scott is well known for saying "The more they overthink the plumbing, the easier it is to stop up the drain." This writer will continue seeing Blockchain as a great deal of overthought plumbing until somebody proves it out differently useful in securing and securitizing intellectual property.

Another Gaping Hole: Venture Capital for Defense Technologies

There has been a longstanding prejudice in Silicon Valley against funding national defense technology companies. One might interpret this as an echo of distrust of the Military in the aftermath of the Vietnam War. The epicenter of war protests was in Berkeley California, directly to the east and not many miles from Silicon Valley. Much earlier, President Eisenhower warned of the emerging, post-WWII "Military-Industrial Complex." Unfortunately, events in Ukraine and frightening statements recently by China (as well as the continued existence of Western-style liberal democracies) mandate that such old thinking is now buried and that development of cutting edge, superior defense technologies are seen as a New Noble Calling for young people. It is no longer enough to just get rich, as in Silicon Valley. An existential need has emerged for maintaining (or recapturing) America's technological edge in national defense terms.

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[1] The term "dual use" refers to those devices and systems which can and will be used both for military and for commercial markets. The most globally visible example of this can be seen in Boeing's 747, which provides the platform for both highly secured travel of the Commander-in-Chief, and for transporting families and business people across the globe.

[2] Writer Leventhal in past lives sourced technology products and components in Asia over decades.

Writer Howard Leventhal is the founder of an AFWERX-portfolio company and is working on forming a team and resources to create a defense technology incubator in the San Diego region.