Assessment of Industry Attitudes on Collaborating 

With the U.S. Department of Defense in 

Research and Development and Technology Sharing 

Prepared for The U.S. Department of the Air Force 

By Trotta Associates, Inc 

(Revised) 

August, 2003 
iii

Table of Contents 

Table of Contents...........................................................................................................................iii 

Findings and Recommendations..................................................................................................... 1 

1.1 Survey Findings .............................................................................................................. 1 

1.1.1 Why Firms Hesitate to Deal with DoD................................................................... 3 

1.1.1.1 Procurement Complexity..............................................................................................................3

1.1.1.2 Financial Incentives......................................................................................................................4

1.1.1.3 Communications ..........................................................................................................................4

1.1.1.4 Intellectual Property .....................................................................................................................4

1.1.1.5 Product Irrelevance ......................................................................................................................5

1.1.1.6 Small Business .............................................................................................................................5

1.2 Company Recommendations .......................................................................................... 5 

1.2.1 Procurement Complexity ........................................................................................ 5 

1.2.2 Financial Incentives ................................................................................................ 6 

1.2.3 Communications ..................................................................................................... 6 

1.2.4 Intellectual Property................................................................................................ 6 

1.2.5 Small Business........................................................................................................ 6 

PART I – Database Description...................................................................................................... 7 

2. Introduction............................................................................................................................. 7 

2.1 Background..................................................................................................................... 7 

2.2 Technologies Under Review........................................................................................... 8 

2.2.1 Advanced Composites Manufacturers .................................................................... 8 

2.2.2 Batteries .................................................................................................................. 9 

2.2.3 Power Electronics ................................................................................................... 9 

2.2.4 Wireless Broadband.............................................................................................. 10 

3. Characteristics of Companies in the Survey Sample ............................................................ 11 

3.1 Company Legal Status .................................................................................................. 11 

3.2 Foreign Ownership........................................................................................................ 12

3.3 Primary Business Activities.......................................................................................... 12 

3.4 Business Integration Indicators..................................................................................... 14 

3.5 Financial Indicators....................................................................................................... 19 

PART II – Database Analysis....................................................................................................... 26 

PART II – Database Analysis....................................................................................................... 26 

4. Survey Review...................................................................................................................... 26 

4.1 Interpreting the Survey Responses................................................................................ 26 
iv

4.2 Interpreting Factor-Rating Questions. .......................................................................... 27 

4.3 Written Questions ......................................................................................................... 28 

4.4 Yes/No Questions ......................................................................................................... 28

5. Research and Development Projects..................................................................................... 29 

5.1 Stage R&D Communicated to the Federal Government............................................... 29 

5.2 Factors that Motivate Businesses to Communicate R&D............................................. 31 

5.3 Methods Businesses Use to Inform Others about R&D and Technology .................... 35 

5.4 Reluctance to Discuss R&D and Technology with non-Defense Federal Agencies .... 39 

5.5 Why Companies were Reluctant to Discuss R&D ....................................................... 42 

5.5.1 Procurement Complexity ...................................................................................... 43 

5.5.2 Financial Incentives .............................................................................................. 46 

5.5.3 Communication..................................................................................................... 47 

5.5.4 Intellectual Property.............................................................................................. 48 

5.5.5 Product Irrelevance ............................................................................................... 49 

5.5.6 Small Business...................................................................................................... 50 

5.6 Why Working with Federal Agencies is Unattractive .................................................. 51 

5.7 Why Business Interaction with Federal Agencies and Labs is Limited ....................... 54 

5.8 How Can Involvement with Defense Agencies be Increased....................................... 57 

5.9 Collaboration with federal Agencies and Labs............................................................. 58 

5.10 Changes in Government Laws and Policies.................................................................. 61 

5.10.1 Procurement complexity ....................................................................................... 65 

5.10.2 Communications ................................................................................................... 69 

5.10.3 Intellectual Property.............................................................................................. 70 

5.10.4 Financial Incentives .............................................................................................. 72 

5.10.5 Small Business...................................................................................................... 73 

5.10.6 Product Irrelevance ............................................................................................... 74 

5.11 Types of Agreements .................................................................................................... 74 

5.12 Private R&D Projects and a DoD Database.................................................................. 76 

5.13 Reluctance to Participate in DoD R&D Database ........................................................ 78 

5.14 Product Cycle Times..................................................................................................... 80

6. Federal Procurement and Contracting .................................................................................. 83 

6.1 Federal Contracting....................................................................................................... 83 

6.2 Do Government Procurement Practices Discourage Private Companies? ................... 84 

6.3 Company Concerns about defense Logistics Management and the Supply Chain....... 86 

6.4 How Companies Become Aware of Government Opportunities.................................. 88 

6.5 Methods Government Uses to Inform Companies of Procurement Opportunities....... 89 
v

6.6 Why Some Companies Stopped Supplying DoD ......................................................... 90 

6.7 Additional Procurement Information............................................................................ 91 

6.8 What Would Interest You to Become Supplier Again?................................................ 92 

6.9 General Comments........................................................................................................ 93 

6.9.1 Defense Contractors.............................................................................................. 94 

6.9.2 Non-Defense Contractors...................................................................................... 95 

Appendix I - Generic Survey 

Appendix II - Detailed Statistics by Technology Surveyed 

Appendix III - Company Provided Product Descriptions 

Appendix IV - Technology Sharing with Public and Private Entities 
1

Findings and Recommendations 

This assessment was undertaken by Trotta Associates in collaboration with the U.S. Department 

of Commerce at the request of the U.S. Department of the Air Force to review attitudes of 

private companies toward sharing new or promising technologies developed for commercial use 

with the Department of Defense (DoD). It is thought that DoD can leverage technologies 

developed for the commercial market and benefit by saving research and developmental costs for 

materials and components needed in new weapon systems or to enhance the performance of 

existing systems. The Commerce Department conducted a survey to collect the appropriate 

information and prepared the database. 

To facilitate analysis, the survey responses were divided into two major sub-groups: defense 

contractors and non-defense contractors. The expectation was that defense contractors would in 

most cases respond more favorably to most questions in the survey; and thereby, they would 

offer a basis for comparison. Under this criteria, not counting the special category, 427 firms 

responded to the survey, of whom 158 (37%) were classified as defense contractors. In addition, 

44 companies in the special category responded, bringing the total response to 471. 

1.1 Survey Findings

3⁄4 About 85 percent of the surveyed firms have an R&D program. 

3⁄4 Motivations to communicate information about R&D and technology programs were the 

potential for landing contracts or grants from the public sector or to alert the commercial 

market in anticipation of future sales. Non-defense contractors were strongest in alerting 

the commercial market, but were generally weak in all motivations with regard to the 

public sector. 

3⁄4 Methods to inform others of R&D and technology activities strongly favored one-on-one 

briefings and presentations at technical meetings. An emerging method appears to be 

through business web pages. Non-defense contractors were weak in their responses 

regarding the public sector. 

3⁄4 Reluctance to discuss R&D programs was responded to by about 45 percent of the 

companies, so we assume over 50 percent are not reluctant. However, the main concerns 

appear to be the adequacy of funding and the difficult environment in working with the 

federal government. 
2

3⁄4 Constraints on firms from increasing interaction with the public sector were inadequate 

funding and a lack of information. Non-defense contractors also considered smaller 

business size an important constraint. 

3⁄4 Involvement with DoD might be greater for many firms if it were easier to identify 

opportunities and firms were given more timely notification. 

3⁄4 About one-third of defense contracting companies reported they confer, or seek the 

assistance of the federal government on basic or applied research, or engineering and 

development. Less than 5 percent for non-defense contractors reported they did so. 

3⁄4 Few companies have formed agreements, such as joint ventures or CRADAs with any 

federal government agency since 1998. 

3⁄4 Nearly two-thirds of defense contractors would be willing to place R&D project 

information in a restricted access DoD database. Non-defense contractors were less 

willing at 41 percent. 

3⁄4 Factors that influenced their decision not to participate in a DoD database were concerns 

over (risk of) loss of proprietary data, no economic benefit, and loss of competitive 

advantage. Non-defense contractors also reported too much staff time required. 

3⁄4 Government contracting and procurement procedures that discourage firms from seeking 

public sector opportunities were uncertainty of government funding and government 

demand for their products. Companies also cited narrow profit margins, complex 

solicitations, and frequent re-competitions. Non-defense contractors cited DoD cost 

accounting standards, payment delays, and cycle times between bid and award. 

3⁄4 The most preferred method to become aware of government opportunities by a wide 

margin was by e-mail for both groups of contractors. Other methods included broad 

agency announcements, advanced planning briefings with industry, and a central DoD 

website. 

3⁄4 The chief reason some firms stopped supplying DoD in recent years was that the 

commercial market was more profitable. In addition, some cited the decrease in defense 

demand and onerous acquisition regulations. 
3

1.1.1 Why Firms Hesitate to Deal with DoD 

Many companies that indicated a reluctance to discuss their R&D and/or technology programs 

with the federal government submitted written comments regarding how to reduce or eliminate 

their concerns. These comments were sorted into six basic issue categories as enumerated on the 

chart below. Some companies submitted multiple comments, which could be parceled into two 

or three different issue categories. This resulted in more total comments than companies. Thus, 

53 defense contractors submitted 76 comments and 71 non-defense contractors submitted 103 

comments. The comments, arrayed by percent of companies citing each issue, are shown on the 

following chart. 

Major Issues Contributing to Reluctance to Interact 

with the Federal Government 

0%

10%

20%

30%

40%

50%

60%

70%

Procurement

Complexity 

Financial

Incentives

Communications Intellectual

Property

Product

Irrelevance

Small Business

Defense Contractors Non-Defense Contractors

1.1.1.1 Procurement Complexity 

This is the number one issue cited by defense contractors. The regulatory environment and 

bureaucracy impose costs on private companies that discourage and sometimes prevent 

companies from interacting with the federal government. They argue the government process 

differs greatly from their experience in commercial markets. The federal marketplace causes 
4

them to hire extra people to comply with the added and specialized paperwork and to use older 

equipment because of the government approval process; the older equipment may not be suitable 

in a competitive commercial market. The companies are also concerned about speed to market 

and shorter product cycles, which again are critical in a competitive commercial market. In brief, 

these added costs are passed through to the government. In addition, some commercial 

opportunities may be forgone or lost because additional resources and time are used up in the 

process. This issue is of great enough magnitude to force some companies to exit the field. 

1.1.1.2 Financial Incentives 

The stability and adequacy of federal budgets and program funding is determined politically. 

This means funding can be stretched out, reduced, or canceled on short notice. This makes 

investments in government programs risky and sometimes hazardous. Regulatory control 

limiting profits, one-year contracts, and slow moving paperwork do not help the situation. 

1.1.1.3 Communications 

This is the number one issue cited by non-defense contractors. Communication requires 

initiative by sender and receiver, a two-way street. This issue is much larger for non-defense 

contractors, especially those that lack knowledge and experience as to how to obtain information 

about public opportunities accurately and efficiently. The major hurdle (or cost) confronting 

inexperienced companies is reaching a threshold of competence in acquiring information. Most 

companies indicated they prefer one-on-one contacts and technical meetings as methods of 

communicating. Additionally, e-mail has become a major (and very cheap) and preferred 

method of communication. 

1.1.1.4 Intellectual Property 

Competitive knowledge and information costs money to develop and protect, and has value in 

the marketplace. Intellectual property can be the lifeblood of a firm. Intellectual property may 

include engineering know-how, designs, strategic plans, manufacturing processes, or knowledge 

of emerging markets. Many companies consider sharing intellectual property with the 

government a risk, especially if it also has commercial application. The federal government 

should train its people to protect business proprietary information with legal penalties supporting 

its protection. Protection should also be a standard element of contracts unless waived by the 

contracting owner of the proprietary information at issue. 
5

1.1.1.5 Product Irrelevance 

The product differences issue includes products that are not useful to the federal government, 

company structures or orientation not conducive to interaction with the federal government, 

companies that do not engage in R&D, and companies firmly committed to the commercial 

market. 

1.1.1.6 Small Business 

Small business is at a cost disadvantage in complying with paperwork and other government 

regulations that impose costs. Smaller companies may excel at build-to-print on a cost 

competitive basis because of low overhead and quick turnaround. Small firms rarely engage in 

formal research, although individuals employed by these firms may discover things in their dayto-day work. The smartest people tend to migrate to larger firms where the salary and 

opportunity is thought superior. 

1.2 Company Recommendations

Many companies offered specific recommendations in their comments to reduce or eliminate 

concerns about discussing their technologies with the federal government. The comments were 

organized 

1.2.1 Procurement Complexity

1. Adopt closer adherence to commercial contract and accounting practices. 

2. Remove requirements that force companies to maintain two separate legal entities and 

financials. 

3. Make use of more efficient contracting such as cooperative agreements and other transactions. 

4. Make it easier to find the correct person or department to speak with. 

5. Adopt more multiyear procurements. 

6. Stick to long-term commitments. 

7. In many cases government labs compete with industry. 
6

1.2.2 Financial Incentives

1. More government funding needed for dual use technology and transition. 

2. Make more basic science and research funds available. 

3. Allow companies a greater return on investment. 

4. Offer tax and other incentives to collaborate with DoD. 

5. Reward innovation and cost savings 

6. Improve timing of payments. 

7. Shorten time required to award a contract. 

8. Increase order volumes. 

1.2.3 Communications

1. DoD should research available commercial work before funding redundant competitive work. 

2. Have regular information sessions. 

3. Provide information to industry identifying capabilities available at the labs. 

4. Expand communication of collaborative opportunities and federal grant requirements. 

5. DoD should make public lists of technologies it is seeking. 

1.2.4 Intellectual Property

1. Update R&D IP clauses to reflect commercial partners. 

2. DoD should not allow a company’s unique product to be copied by other firms. 

3. Keep proprietary information protected. 

1.2.5 Small Business

Reduce or eliminate growing requirement for cost sharing for small businesses. 
7

PART I – Database Description 

2. Introduction 

2.1 Background

This assessment was undertaken by Trotta Associates at the request of the U.S. Department of 

the Air Force to review attitudes of private companies toward sharing new or promising 

technologies developed for commercial use with the Department of Defense (DoD). It is thought 

that DoD can leverage technologies developed for the commercial market and benefit by saving 

research and developmental costs for materials and components needed in new weapon systems 

or to enhance the performance of existing systems. 

Trotta Associates requested the U.S. Department of Commerce, Bureau of Industry and Security, 

Office of Strategic Industries and Economic Security (BIS) to collect industrial information 

needed for this review. BIS has authority under section 705 of the Defense Production Act of 

1950, as amended (50 U.S.C. 2061-2170), Executive Order 12656, and Executive Order 12919 

to obtain basic economic and industrial information from private concerns where pertinent to 

national defense needs. 

Four technology areas were selected for review: Storage Batteries, Power Electronics, Advanced 

Composites, and Wireless Broadband. The selection of these particular technologies was 

essentially based on three criteria: 1) areas important to DoD, 2) technologies driven by 

commercial markets, and 3) areas with different industry structures and market forces. 

Written surveys were prepared and disseminated to industry in the fall of 2001 and a follow-up 

mailing was sent to delinquent companies in June 2002. The purpose of the surveys was to 

gather information on industry attitudes on collaborating with the DoD on research and 

development projects and technology. Surveys were sent to 1,064 companies representing the 

four technologies. An additional 47 surveys were included at the specific request of the Air 

Force as a special category and sent primarily to companies in the aerospace and electronics field. 

A total of 629 companies responded to the survey and of these 491 provided usable data. 

Unusable surveys included 124 companies exempted from completing the document and 14 

others that were no longer in business. In addition, 87 companies were not at the surveyed 

address and their mailing packets were returned unopened. The 629 figure includes all 
8

companies recorded or entered into the database by September 30, 2002. The following table 

provides a tally of the survey responses for each technology. 

Record of Technology Surveys 

Category Received Mailed % Returned 

Advanced Composites 130 299 43.48% 

Batteries 55 134 41.04% 

Power Electronics 130 300 43.33% 

Wireless Broadband 132 331 39.88% 

Special 44 47 93.62% 

Sub Total 491 1,111 44.19% 

...Bad Addresses -87 

Adjusted Total 1,024 

...Exemptions 124 

...Out of Business 14 

Unusable Responses 138 

Adjusted Results 629 1,024 61.43% 

Not all surveys were completed in their entirety. Some respondents left portions of their returned 

surveys unanswered. This, however, should not affect the statistical results, since a large enough 

sample was received. A copy of the survey document is attached as Appendix I. 

2.2 Technologies Under Review

2.2.1 Advanced Composites Manufacturers

Advanced composites are generally defined as a family of lightweight structural materials with 

reinforcing fibers such as carbon or high strength fiberglass embedded in a matrix material. 

Advanced composites are generally distinguished from other reinforced materials by the use of 

these continuous high-stiffness, high-strength fibers. Advanced composites have gained broad 

usage in aerospace and defense applications including aircraft, land vehicles, spacecraft, and 

ships. Ruggedness and reliability are major differences between commercial and military 

applications. 
9

2.2.2 Batteries

Batteries convert potential chemical energy into electrical energy. Such devices include: alkaline 

cell storage batteries, rechargeable batteries, and lead-acid storage batteries, and batteries of 

nickel cadmium, nickel hydrogen, and nickel metal hydrides. Research is being conducted on 

advanced batteries composed of lithium-aluminum/metal sulfide, lithium polymer, and 

nickel/metal hydride. 

The commercial battery industry is driven by market needs for small long lasting cost effective 

rechargeable batteries. Batteries are the limiting factor in the design of products requiring long 

life, low drain. Cost seems to be the principal driver for much of the commercial market. While 

there are special items (e.g., laptop computer batteries, space craft batteries, etc.) where this is 

not necessarily the case, the high volume in most markets makes cost (not performance) a major 

competitive factor. DoD, on the other hand, has need of a more limited number of high 

reliability, long life, light weight devices to power the new generation of military 

equipment carried by the modern soldier. There is also need for long storage life, highly reliable 

batteries for various weapons applications. In defense applications, cost is less a factor than 

weight or performance. 

2.2.3 Power Electronics

Power electronics are based on solid state electronics technology and include programmable 

logic controllers. More specifically, they are programmable universal electrical power 

converters and controllers with no moving parts. They can convert direct current from a battery 

to alternating current equivalent to utility power and vice versa, control the speed of any kind of 

motor, or control the load on any kind of electrical generator or alternator. Enabling 

technologies are the development of high-speed, high-powered, high-efficiency (low forward 

voltage drop) semiconductors such as the MOs-controlled thyristor (MCT) and highly efficient 

soft-switching flexible inverter electrical circuit topologies such as the Auxiliary Resonant 

Commutated Pole (ARCP) inverter. Applications include: power control and conversion 

requirements needed in fuel cells, wind power electrical generation, direct current (DC) to 

alternating current (AC) power conversion and AC to DC conversion. Ruggedness and 

reliability are the major differences between commercial and military applications. 

The power electronics industry encompasses an array of markets including: computers, 

telecommunications, industrial equipment controls, aerospace, and power generation and 

distribution, which are heavy users of power electronics. Specific products include ac/dc power 
10

supplies, surge protectors, power-conditioning devices, and uninterruptible power systems, 

2.2.4 Wireless Broadband 

Wireless communication equipment refers to complete radio based communication systems 

including mobile switching, transmission and subscriber equipment for the provision of cellular 

paging and personnel communication services. Wireless broadband equipment delivers highspeed digital communication over a wireless medium between two separate sites. With today's 

networks expanding geographically and struggling to maintain data-optimized and highbandwidth connectivity, broadband wireless is quickly emerging. The major performance 

differences would seem to be in overall system transportability (especially the fixed components 

such as relay stations, etc.) 

Operating in the 20 to 30 gigahertz end of the Ka-band spectrum, satellites also will provide 

another avenue of broadband wireless data transmission. 
11

3. Characteristics of Companies in the Survey Sample 

3.1 Company Legal Status

The great majority of companies responding to the survey identified themselves as corporations. 

Of the 481 firms that answered the question about their legal status on the first page of the survey, 

436 or 90.6 percent were the corporate form. The second most popular legal status was the 

Limited Liability Company, or Subchapter S Corporation, which is a hybrid between a sole 

proprietorship or limited partnership and a general corporation. About six percent, 29 companies 

in all, identified themselves as having this structure. Limited Partnerships were about 1.5 

percent, while all other legal structures were each less than 1 percent. 

 

Legal Status of Firms in Database 

(Percent Distribution by Technology and Number of Firms) 

Technology 

Sole 

Proprietor Cooperative 

Limited 

Partnership 

Limited 

Liability 

Corporation Partnership Corporation 

Adv Comp. 0.0% 0.8% 3.1% 7.8% 2.3% 86.1% 

Batteries 0.0% 1.9% 0.0% 3.8% 1.9% 92.5% 

Power El 1.6% 0.0% 0.8% 9.4% 0.0% 88.3% 

Wireless 0.0% 0.8% 0.8% 2.3% 0.0% 96.1% 

Special 0.0% 0.0% 2.3% 4.7% 0.0% 93.0% 

Total 0.4% 0.6% 1.5% 6.0% 0.8% 90.6% 

Most of the surveyed companies manufacture products. Based on legal status, they are probably 

larger in size than the average manufacturing company and in most cases rank in the upper 10 

percent. The high use of the corporate form among surveyed respondents is almost double the 

national average, which is about 47 percent for manufacturers. U.S. manufacturing is comprised 

of more than 360,000 companies, two-thirds of whom are firms with fewer than 20 employees. 

Corporations represent 86 percent of all manufactured sales revenues, and are especially 

predominant among companies with more than $25 million in annual revenues. Nationally, 

Limited Liability Companies account for about one-third of the legal status (versus six percent in 

the survey sample) and about 12 percent share of manufacturing sales revenues. Another 15 

percent of manufacturing firms in the United States are sole proprietorships and 4.2 percent were 

partnerships, and these together represent only two percent of sales.1

 

 

1 1997 Economic Census, Company Statistics Series, EC97CS-1, Issued September 2001, U.S. 

Department of Commerce, Economic and Statistics Administration, Census Bureau, Page 476 
12

3.2 Foreign Ownership

Forty-seven companies reported a foreign parent firm. Twelve of the parent firms were 

headquartered in the United Kingdom, six each in Germany and Japan, four in France, three in 

Canada and the Netherlands, and two in Israel and Taiwan. Nine countries had one each, 

including Switzerland, Norway, Hong Kong, Bermuda, Republic of China, Finland, Australia, 

Denmark, and Italy. The foreign headquartered parent firms were generally well known large 

international companies with R&D functions performed in the foreign country. Several of the 

firms were listed more than once, reporting for multiple technologies. The Bermuda firm was an 

American firm headquartered there presumably for tax purposes. 

3.3 Primary Business Activities

Information on the surveyed companies’ major business activities was requested in Part II 

Products and Services on page 1 of the survey. A total of 482 firms completed this information. 

Close to 84 percent of these firms reported manufacturing and 53 percent reported design as 

major activities in which their companies engage. Assembly operations were reported by about 

38 percent, and research by one-third of the respondents. 

The numbers varied by technology group. In the case of advanced composites companies, more 

than 95 percent identified themselves as manufacturers, the highest percentage within any group. 

However, advanced composite firms had the lowest proportion of firms in each of the other 

business activity areas, usually by a wide margin. This in part is due to the large number of 

smaller firms engaged in the technology; plus the production process is more labor intensive than 

the others, and economies of scale opportunities appear to be lacking, given the current market 

and technology. Moreover, as shown above advanced composites had the lowest percentage of 

corporations as a legal structure at 86 percent. The following table presents the major business 

activities by technology group. 
13

Major Activities Engaged in by Surveyed Firms 

(Number of Firms Reporting Each Activity) 

Technology →

↓ Activity Areas 

Advanced 

Composites Batteries 

Power 

Electronics 

Wireless 

Broadband 

Sub 

Total Special Total 

Manufacturing 123 48 94 99 364 39 403 

Design 21 24 86 93 224 30 254 

Assembly 15 23 60 53 151 31 182 

Research 19 22 53 49 143 19 162 

Test & Evaluation 13 17 43 36 109 22 131 

Integration 2 7 40 40 89 19 108 

Fabrication 14 6 35 15 70 21 91 

Exporter 12 11 16 28 67 7 74 

Repair & Overhaul 4 3 19 23 49 20 69 

Importer 7 11 8 8 34 3 37 

Other 0 3 8 19 30 7 37 

Inspection 0 1 4 6 11 6 17 

# of Respondents 129 54 126 130 439 43 482 

Percent of Firms Reporting Each Activity 

Manufacturing 95.4% 88.9% 74.6% 76.2% 82.9% 90.7% 83.6% 

Design 16.3% 44.4% 68.3% 71.5% 51.0% 69.8% 52.7% 

Assembly 11.6% 42.6% 47.6% 40.8% 34.4% 72.1% 37.8% 

Research 14.7% 40.7% 42.1% 37.7% 32.6% 44.2% 33.6% 

Test & Evaluation 10.1% 31.5% 34.1% 27.7% 24.8% 51.2% 27.2% 

Integration 1.6% 13.0% 31.8% 30.8% 20.3% 44.2% 22.4% 

Fabrication 10.9% 11.1% 27.8% 11.5% 16.0% 48.8% 18.9% 

Exporter 9.3% 20.4% 12.7% 21.5% 15.3% 16.3% 15.4% 

Repair & Overhaul 3.1% 5.6% 15.1% 17.7% 11.2% 46.5% 14.3% 

Importer 5.4% 20.4% 6.4% 6.2% 7.7% 7.0% 7.7% 

Other 0.0% 5.6% 6.4% 14.6% 6.8% 16.3% 7.7% 

Inspection 0.0% 1.9% 3.2% 4.6% 2.5% 14.0% 3.5% 

Most companies in the data sample engage in several of the above listed activities, and a few 

companies engage in all or nearly all of them. Generally, companies that engage in multiple 

activities are both larger and possess a broader range of capabilities; not surprisingly, these larger 

companies are also more likely to interact with DoD. Overall, the typical company engaged in 

3.27 of the listed business activities. This estimate is based on a tally of 467 firms that provided 

this information and also responded to question 11 on page 17 of the survey, which allows 

segregation of companies that have contracted with the U.S. Department of Defense in recent 

years from those that have not. A hypothesis that the former group generally engages in more 

business activities proved to be correct. The results are presented in the following table. The 

column on the far right, labeled “Total,” shows that respondents with DoD contracts engaged in 

an average of 4.31 major activities, while those that did not averaged only 2.51 areas. 
14

Range of Activities Engaged In 

by Defense Contractors vs. Non-Defense Contractors 

(number of activities per firm; averaged by technology) 

Advanced 

Composites Batteries 

Power 

Electronics 

Wireless 

Broadband 

SubTotal Special Total 

A. DoD Contractors 2.62 3.92 4.35 4.35 4.06 5.36 4.31 

B. Non-DoD Contractors 1.64 2.56 3.02 3.15 2.49 3.75 2.51 

Overall 1.81 3.20 3.73 3.60 3.07 5.21 3.27 

% Difference (A/B) 59% 53% 44% 38% 63% 43% 72% 

Number of Respondents 

A. DoD Contractors 21 24 65 48 158 39 197 

B. Non-DoD Contractors 101 27 57 81 266 4 270 

Overall 122 51 122 129 424 43 467 

% DoD Contractors 17.21% 47.06% 53.28% 37.21% 37.26% 90.70% 42.18% 

3.4 Business Integration Indicators

Part II - Question 3 on page 1 of the survey asked companies to identify activities they perform 

in-house versus those they contract out. Business integration as used here simply refers to the 

extent a firm performs various activities in-house, or within the company. This could apply to 

vertical integration or horizontal integration, or a combination of both. A total of 465 companies 

responded to the question. Respondents included 156 defense contractors, 265 non-defense 

contractors, and 44 companies in the special category. In general, companies in each technology 

perform their own R&D, create their own products, and rely on in-house design and engineering. 

About one-third of the companies also manufacture most of their own parts, while less than onefourth purchase more than half the parts they use. In addition, about one in eight firms largely 

manufacture on a build-to-print basis. 

The responses to these activities differed in magnitude between both non-defense and defense 

contractors, and across technologies. Defense contractors, for example, scored higher than nondefense contractors in terms of self-reliance indicators. That is, relatively more defense 

contractors perform their own R&D, create their own products, and a higher percentage rely on 

in-house design and engineering. In addition, 43 percent of defense contractors manufacture at 

least 50 percent (or more) of their own parts, while non-defense contractors recorded only 26 

percent. As for build-to-print, defense contractors were slightly more than non-defense 

companies, 14 to 11 percent, although the function was a minor portion of the either sector’s 

activity. The following table highlights the survey responses by contractor status and technology. 
15

Integration Profile of Companies by Technology 

and Status as Non-Defense or Defense Contractors 

Technology 

Number of 

Companies: Total 

Perform own R&D 

Contract out most 

R&D 

Create own products 

Rely on in-house 

Design & Engr. 

Use Internal/external 

Design & Engr. 

Contract out 

Design & Engr. 

Manufacture 50% of 

parts in-house 

50% or more of parts 

contracted out 

Largely manufacture 

on build-to-print basis 

Number of Defense Contractors Reporting in Each Area 

Adv Comp 21 17 2 18 13 7 3 8 1 6 

Batteries 24 21 1 20 21 5 5 13 4 3 

Power El 63 59 4 50 52 28 19 25 15 10 

Wireless 48 45 3 39 36 19 16 21 13 3 

Number of Non-Defense Contractors Reporting in Each Area 

Adv Comp 101 82 4 68 53 35 21 30 3 18 

Batteries 27 17 3 19 17 10 5 8 7 2 

Power El 56 45 1 39 38 17 14 15 16 4 

Wireless 81 71 3 58 60 28 21 16 35 4 

 Totals of Defense and Non-Defense Contractors and Special Category 

Non-DoD 265 215 11 184 168 90 61 69 61 28 

DoD 156 142 10 127 122 59 43 67 33 22 

Special 44 32 1 29 30 18 15 20 13 10 

Grand Total 465 389 22 340 320 167 119 156 107 60 

Percent of Defense Contractors Reporting in Each Area 

Adv Comp 21 81.0% 9.5% 85.7% 61.9% 33.3% 14.3% 38.1% 4.8% 28.6% 

Batteries 24 87.5% 4.2% 83.3% 87.5% 20.8% 20.8% 54.2% 16.7% 12.5% 

Power El 63 93.7% 6.3% 79.4% 82.5% 44.4% 30.2% 39.7% 23.8% 15.9% 

Wireless 48 93.8% 6.3% 81.3% 75.0% 39.6% 33.3% 43.8% 27.1% 6.3% 

Percent of Non-Defense Contractors Reporting in Each Area 

Adv Comp 101 81.2% 4.0% 67.3% 52.5% 34.7% 20.8% 29.7% 3.0% 17.8% 

Batteries 27 63.0% 11.1% 70.4% 63.0% 37.0% 18.5% 29.6% 25.9% 7.4% 

Power El 56 80.4% 1.8% 69.6% 67.9% 30.4% 25.0% 26.8% 28.6% 7.1% 

Wireless 81 87.7% 3.7% 71.6% 74.1% 34.6% 25.9% 19.8% 43.2% 4.9% 

Percent Totals of Defense and Non-Defense Contractors and Special Category 

DoD 156 91.0% 6.4% 81.4% 78.2% 37.8% 27.6% 42.9% 21.2% 14.1% 

Non-DoD 265 81.1% 4.2% 69.4% 63.4% 34.0% 23.0% 26.0% 23.0% 10.6% 

Special 44 72.7% 2.3% 65.9% 68.2% 40.9% 34.1% 45.5% 29.5% 22.7% 

Grand Total 465 83.7% 4.7% 73.1% 68.8% 35.9% 25.6% 33.5% 23.0% 12.9% 

The greater degree of self-reliance among defense contractors reflects in part the uniqueness of 

the defense market, and possibly the difficulties defense procurement regulations impose on 
16

lower-tier subcontractors, that otherwise must compete primarily in commercial markets. The 

defense market tends to be more rigorous in terms of paperwork and specifications, and often 

distinguished by irregular orders in smaller shipment quantities. These characteristics can wreak 

havoc on business efficiency and productivity, and in extreme cases price a firm out of 

commercial markets. More of the work in this market, therefore, is likely to be brought in-house. 

The graph that follows shows the differences between defense and non-defense contractors 

respecting integration. The reader is reminded that most defense contractors also have sizable 

commercial sales. The differences in integration are, therefore, probably greater than shown. 

Business Integration Indicators

Percent of Firms Reporting Each Activity 

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Mostly build-to-print

Buy 50% or more of parts

Make 50% or more of parts

Contract Out D&E

Use some external D&E

Rely in-house D&E

Create Own Products

Contract Out Most R&D

Perform Own R&D

Non-Defense Contractors Defense Contractors

In contrast, the commercial market is more price/cost driven, standardized in its products, higher 

volume oriented, and worldwide in scope. In short, the commercial sector is more efficient, the 

defense sector more specialized. The defense sector has less volume over which to amortize 

overhead, which makes overhead a higher cost factor. Despite these differences, the two markets 

to a greater or lesser extent will also overlap, often using the same equipment and people to 

provide product to both markets. 
17

Overall, 389 of 465 firms responding perform all or some of their own R&D; 16 of these contract 

out most of their R&D and another six companies farm out all of their R&D, indicating 395 

firms (of 465) have R&D programs. Percentage-wise, about 80 percent of the companies 

perform R&D in-house exclusively, and an additional four percent perform at least some inhouse. Add in those that farm out all R&D, and 85 percent of the firms (i.e., 17 of 20) 

responding to the survey have R&D programs. 

Most of the respondents did not report R&D to be a major activity of their business, based on the 

previous section (2.3 Primary Business Activities). In fact, only about one-third of the 

companies indicated “research” was a “primary activity.” This could be taken to mean that the 

other two-thirds did not consider R&D a critical activity of their business, or they have small 

programs. If taken literally, perhaps many of these companies are not engaged in any significant 

“research” per se, but may be focused primarily on “development.” Development is very close 

to ready-to-market, and has a high probability of success. In addition, development can also be 

costly relative to basic or applied research because it involves the building, tweaking, and testing 

of prototypes. Basic research is far more risky, and applied research, while less risky, has a 

lower success rate than development; and these risks impose constraints on the use of corporate 

capital. 

The National Science Foundation publishes statistics that show the lion’s share of industry’s 

R&D expenditures go for “development” as opposed to basic or applied research. In 2000, of 

$265 billion spent on R&D; industry furnished $181 billion, the federal government, $70 billion, 

and all others (i.e., state governments, academic institutions, and non-profit organizations), 

another $14 billion. Development expenditures accounted for $162 billion (61 percent), with 

$128 billion (79 percent) contributed by industry. The federal government, primarily from 

Department of Defense, supplied $32 billion, the bulk of the remaining 20 percent. The 

following graph presents the NSF data.2

 

 

2

SOURCE: National Science Foundation, Division of Science Resources Studies (NSF/SRS), National 

Patterns of R&D Resources: 2000 Data Update, NSF 01-309 (Arlington, VA, March 2001). Available at: 

http://www.nsf.gov/sbe/srs.nsf01309/start.htm.
18

Sources of R&D Expenditures in the U.S.

in 2000, By Stage of Expenditure

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Development $31,858 $128,418 $1,404

Applied $14,460 $36,400 $4,181

Basic $23,311 $16,222 $8,369

Federal Industry All Other

in $billions

Total Federal: $69.6 b

Total Industry: $181 b

All Other: $14 b

Nationally, about 61 percent of the R&D was characterized as development, 21 percent as 

applied research, and 18 percent as basic research. The federal government supplied about 50 

percent of the basic research funds, while industry supplied another third. Of the applied 

research, industry’s share was much greater at about two-thirds of the total, while the federal 

government was about one-quarter. 

In comparing the four technologies with respect to integration parameters, more similarities are 

apparent than important differences. Defense contractors, for example, were almost uniformly 

more integrated than their commercial counterparts regardless of the technology. As for notable 

differences, the commercial side of batteries scored low in number of firms performing their own 

R&D; as a corollary they also scored highest in contracting out R&D. Advanced composites led 

all others in build-to-print, while wireless broadband had the lowest ratio of firms in that area. 

However, wireless was highest in contracting out 50 percent or more of its parts; and was also 

the leader in performing R&D in-house and in contracting out design and engineering work. 
19

3.5 Financial Indicators

Part III – Question 1 on page 2 of the survey asked the companies for financial information from 

1998 thru 2002. Data for 2001 and 2002 were projected. Of 471 companies returning surveys 

with information on page 2, a total of 386 firms (82%) provided completed or partially 

completed financial statistics. About 45 percent (214) of the companies responded with 

complete statistics (i.e., five years of net sales, cost of goods sold, and net profits). The statistics 

were estimated upward as if all 471 firms in the respondent pool had filed complete information; 

however, they do not purport to represent total values in any of the described sectors. In addition, 

an unknown and probably major portion of most values in the described sectors include 

“unrelated products,” which could not be disaggregated. The battery sector may be the purest, 

although not all firms the sector were canvassed. 

Estimates of financial parameters were derived from “complete” responses because they 

provided five years of solid statistical information, which could be used to establish trends 

for each technology sector. These five-year trends were factored upwards based on all 

reported 2000 data, and then increased proportionately to the number of firms in the 

respondent pool.3

 The following table provides the response breakdown for each technology 

sector. 

Record of Response to Financial Query 

Defense 

 Status Technology 

Respondent 

Pool 

Usable* 

Responses 

Complete 

Responses 

Percent 

Usable 

Percent 

Complete 

Non-Def Adv Comp 102 84 51 82.4% 50.0% 

Non-Def Batteries 27 25 14 92.6% 51.9% 

Non-Def Power El 58 49 20 84.5% 34.5% 

Non-Def Wireless 82 68 25 82.9% 30.5% 

Def Adv Comp 21 15 8 71.4% 38.1% 

Def Batteries 24 19 13 79.2% 54.2% 

Def Power El 65 49 31 75.4% 47.7% 

Def Wireless 48 41 26 85.4% 54.2% 

Both Special 44 36 26 81.8% 59.1% 

 Totals 471 386 214 82.0% 45.4% 

 *Usable responses refers to companies that provided any financial information, whether complete or not. 

 

3 From the table above, five years of net sales were established for advanced composite non-defense 

contractors using 51 complete responses. Then, the 2000 value was calculated for 84 usable responses, and 

compared to the 2000 value from the 51 responses. This ratio was used to increase each year’s data. Lastly, 

the ratio between the 102 firms in the respondent pool and the 84 usable firms was used to increase and 

estimate the sector’s financial results. 
20

Estimated net sales for all sectors combined ranged from $170 (1998) to $201 billion (2000). 

The special category, comprising 44 respondents, accounted for about one-quarter of the 

sales. Non-defense contractors represented another 40 percent and defense contractors about 

one-third. Keep in mind that a probably majority of the defense contractor sales were nondefense. In fact, actual sales to the Department of Defense may be less than 10 percent of 

the totals. However, these sales, regardless of their end-markets, ultimately support the 

companies’ research programs. 

SUMMARY INFORMATION 

Estimated Financial Indicators 

(in $millions) 

Financial 

Measure 1998 1999 2000 2001* 2002* 5-yr Total 

5-yr 

Ratios 

TOTAL NON-DEFENSE CONTRACTORS 

Net Sales $64,414 $67,909 $89,633 $79,476 $71,936 $373,369 100.0% 

Cost of Goods Sold $42,673 $45,857 $61,370 $62,922 $56,809 $269,629 72.2% 

Net Income $3,506 $5,059 $5,767 -$313 $3,004 $17,023 4.6% 

Basic Research $761 $827 $1,079 $1,501 $543 $4,711 1.3% 

Applied Research $3,266 $3,918 $4,145 $4,571 $4,234 $20,134 5.4% 

Capital Expenditures $1,262 $1,204 $2,037 $2,307 $2,312 $9,121 2.4% 

TOTAL DEFENSE CONTRACTORS 

Net Sales $59,027 $65,330 $65,649 $68,129 $40,649 $298,784 100.0% 

Cost of Goods Sold $31,158 $34,508 $36,631 $41,961 $34,277 $178,534 59.8% 

Net Income $2,815 $3,348 $2,528 $1,534 $968 $11,193 3.7% 

Basic Research $1,432 $1,604 $2,091 $2,493 $951 $8,570 2.9% 

Applied Research $1,422 $1,463 $2,241 $2,301 $1,558 $8,986 3.0% 

Capital Expenditures $2,158 $2,389 $4,530 $4,950 $963 $14,991 5.0% 

SPECIAL CATEGORY 

Net Sales $46,851 $44,368 $45,407 $47,370 $52,588 $236,585 100.0% 

Cost of Goods Sold $33,484 $33,795 $34,082 $35,944 $39,921 $177,225 74.9% 

Net Income $2,747 $1,790 $2,128 $1,615 $2,017 $10,298 4.4% 

Basic Research $164 $204 $198 $158 $144 $867 0.4% 

Applied Research $241 $281 $301 $310 $192 $1,325 0.6% 

Capital Expenditures $317 $375 $316 $287 $246 $1,542 0.7% 

GRAND TOTAL 

Net Sales $170,292 $177,608 $200,690 $194,975 $165,174 $908,739 100.0% 

Cost of Goods Sold $107,314 $114,160 $132,082 $140,826 $131,007 $625,389 68.8% 

Net Income $9,069 $10,197 $10,423 $2,836 $5,990 $38,515 4.2% 

Basic Research $2,357 $2,634 $3,367 $4,152 $1,638 $14,148 1.6% 

Applied Research $4,929 $5,662 $6,686 $7,183 $5,984 $30,445 3.4% 

Capital Expenditures $3,737 $3,968 $6,883 $7,545 $3,520 $25,654 2.8% 

*Estimated from projections by respondents 
21

The cost of goods sold refers to the direct costs of producing goods sold. Direct costs 

include purchase of raw materials, energy, and direct labor. Generally, relatively lower 

levels of the cost of goods sold are related to lower volume, labor intensive, non-standard 

production industries that drive higher such indirect costs as administration, selling, certain 

rentals, physical plant and other fixed costs. For the survey respondent group, the cost of 

goods sold averaged 69 percent of net sales. It was highest for the special category at 75 

percent and lowest for the defense group of contractors at 60 percent. The non-defense 

group was about 72 percent. The defense power electronics sector was the lowest of all at 

52.6 percent, and was primarily responsible for the lower overall level attributable to the 

defense group. In the defense group, wireless broadband contractors registered 75 percent 

and advanced composites 78 percent. In the non-defense group, power electronics was the 

highest at 80 percent and wireless lowest at 59 percent – just opposite the defense group. 

Caution is needed before assigning too much credence to these values because the sectors are 

actually quite diverse within themselves and we do not know how much is actually 

purchased by Defense. The range between individual companies can be quite broad. In 

addition, large companies have an undo affect on the results. 

 

Net income (profits) averaged 4.2 percent. As a group, defense contractors averaged 3.7 

percent, while profits for firms in the special category were 4.4 percent, and for non-defense 

contractors, 4.6 percent. In the defense group, losses were reported by the battery sector in 

four of the five years and one year in the wireless broadband sector. For the five years 

(1998-2002) defense battery contractors reported an overall loss of -2.6 percent. In the nondefense group the battery and power electronics sectors each reported losses in 1998. 

Wireless broadband suffered major losses in 2001 and 2002 on collapsing sales. The 

advanced composites sector achieved the highest return of all for the five years at 6.5 percent. 

The sector includes a number of plastic polymer companies, many of whom are not involved 

directly in advanced composites. Nevertheless, these companies may provide a future 

market or support on-going research in the field. 

Research statistics were incomplete. A total of 297 firms provided research statistics, about 

63 percent of the respondent pool (471); and most provided only partial information. 

Relative to the respondent pool about one-third the firms furnished data on basic research 

and 42 percent on applied. Only 38 firms (8%) completed the information in its entirety (i.e., 

five years of basic and five years of applied research). Ninety-nine companies responded by 

completing five years of basic research, and 142 firms completed five years of applied. An 

accounting by technology and defense contracting status is shown on the following table. 
22

Tally of Survey Respondents Reporting Research Statistics 

Defense 

Status Technology Total 

Basic 

Research 

Applied 

Research % Basic % Applied 

Unknown Unspecified 7 7 3 100.0% 42.9% 

 Defense Contractors 

Def Adv Comp 9 4 8 44.4% 88.9% 

Def Batteries 12 7 8 58.3% 66.7% 

Def Power El 37 18 27 48.6% 73.0% 

Def Wireless 37 23 25 62.2% 67.6% 

Def Total 95 52 68 54.7% 71.6% 

 Non-Defense Contractors 

Non-Def Adv Comp 60 29 44 48.3% 73.3% 

Non-Def Batteries 16 12 6 75.0% 37.5% 

Non-Def Power El 34 14 23 41.2% 67.6% 

Non-Def Wireless 56 25 34 44.6% 60.7% 

Non-Def Total 166 80 107 48.2% 64.5% 

 Special Category 

Both Special 29 13 19 44.8% 65.5% 

 Total 297 152 197 51.2% 66.3% 

Overall, estimated research expenditures averaged about five percent of sales during the five 

years 1998 to 2002. This is higher than the national average and probably indicates the 

presence of an emerging and highly competitive situation in these sectors, especially in the 

non-defense contractor sector where expenditures averaged 6.7 percent of sales. 

Basic research averaged about 1.6 percent of net sales and applied, 3.4 percent. The high 

year was 2001, when combined basic and applied research was an estimated $11.3 billion. 

The low was $7.3 billion in 1998. The non-defense sector accounted for one-third of the 

basic and two-thirds of the applied research. The defense sector represented more than 60 

percent of the basic research and less than 30 percent of the applied. The special category, 

undoubtedly understated, was only 4.9 percent of the total. 

Among the defense contractor group, power electronics dominated the numbers, spending a 

total $13.3 billion on research, more than three-fourths the groups total. More than half the 

sectors’ total was basic research. Power electronics also accounted for more than 60 percent 

of the groups’ sales. Advanced composites firms spent eight percent of sales on applied 

research. The non-defense group was led by wireless broadband companies, which logged 

about $17 billion in research expenditures, two-thirds of the groups’ total. Applied research, 

at $14.8 billion, represented nearly13 percent of the wireless sector’s sales. 

Capital expenditures averaged 2.8 percent of sales and totaled $25.7 billion for the five years. 

The defense group accounted for nearly 60 percent of the total and the non-defense group, 
23

most of the remainder. The special category was understated. As with research, power 

electronics again dominated the defense group and wireless broadband the non-defense 

group. 

The details for each technology are shown on the following two tables – the first for nondefense contractors and the second for defense contractors. 

NON-DEFENSE CONTRACTORS

Estimated Financial Indicators for Four Technologies 

(in $millions) 

Financial 

Measure 

1998 1999 2000 2001* 2002* 5-yr 

Total 

5-yr 

Ratios 

ADVANCED COMPOSITES 

Net Sales $10,924 $11,532 $12,869 $12,254 $12,504 $60,084 100.0% 

Cost of Goods $8,229 $8,651 $9,891 $10,533 $9,642 $46,946 78.1% 

Net Profit $957 $899 $905 $600 $544 $3,905 6.5% 

Basic Research $40 $43 $50 $43 $47 $223 0.4% 

Applied Research $688 $908 $627 $562 $678 $3,463 5.8% 

Capital Expenditures $181 $200 $180 $152 $201 $913 1.5% 

 BATTERIES 

Net Sales $10,944 $16,394 $23,479 $20,439 $28,151 $99,408 100.0% 

Cost of Goods $8,426 $12,774 $18,021 $15,553 $22,008 $76,783 77.2% 

Net Profit -$15 $103 $1,123 $380 $1,901 $3,492 3.5% 

Basic Research $35 $21 $41 $33 $59 $189 0.2% 

Applied Research $114 $137 $141 $213 $103 $707 0.7% 

Capital Expenditures $160 $230 $446 $249 $468 $1,553 1.6% 

 POWER ELECTRONICS 

Net Sales $19,232 $17,946 $20,978 $20,205 $18,916 $97,278 100.0% 

Cost of Goods $13,464 $12,685 $16,597 $18,112 $16,573 $77,431 79.6% 

Net Profit -$130 $1,430 $1,233 $452 $1,048 $4,033 4.1% 

Basic Research $361 $408 $432 $780 $167 $2,148 2.2% 

Applied Research $237 $227 $250 $210 $205 $1,129 1.2% 

Capital Expenditures $96 $88 $122 $113 $84 $504 0.5% 

 WIRELESS BROADBAND 

Net Sales $23,314 $22,037 $32,306 $26,579 $12,365 $116,600 100.0% 

Cost of Goods $12,553 $11,747 $16,861 $18,723 $8,586 $68,469 58.7% 

Net Profit $2,694 $2,627 $2,507 -$1,746 -$489 $5,594 4.8% 

Basic Research $325 $355 $556 $645 $271 $2,151 1.8% 

Applied Research $2,228 $2,647 $3,127 $3,587 $3,247 $14,835 12.7% 

Capital Expenditures $825 $685 $1,290 $1,794 $1,559 $6,152 5.3% 

*Estimated from projections by respondents 
24

DEFENSE CONTRACTORS

Estimated Financial Indicators for Four Technologies 

(in $millions) 

Financial 

Measure 

1998 1999 2000 2001* 2002* 5-yr 

Total 

5-yr 

Ratios 

ADVANCED COMPOSITES 

Net Sales $831 $913 $1,206 $796 $1,001 $4,748 100.0% 

Cost of Goods $645 $721 $910 $638 $793 $3,706 78.1% 

Net Profit $41 $38 $54 -$34 $8 $108 2.3% 

Basic Research $1 $1 $1 $0 $1 $3 0.1% 

Applied Research $33 $51 $55 $195 $46 $380 8.0% 

Capital Expenditures $52 $15 $27 $31 $29 $153 3.2% 

 BATTERIES 

Net Sales $5,914 $6,029 $6,031 $6,105 $5,718 $29,797 100.0% 

Cost of Goods $3,945 $3,938 $3,854 $2,665 $4,361 $18,762 63.0% 

Net Profit $43 -$106 -$102 -$175 -$424 -$763 -2.6% 

Basic Research $45 $48 $43 $43 $47 $226 0.8% 

Applied Research $37 $40 $36 $33 $29 $175 0.6% 

Capital Expenditures $211 $202 $169 $189 $175 $947 3.2% 

 POWER ELECTRONICS 

Net Sales $38,673 $44,408 $42,558 $44,267 $18,897 $188,804 100.0% 

Cost of Goods $16,350 $20,137 $20,545 $25,992 $16,310 $99,335 52.6% 

Net Profit $2,269 $2,756 $1,843 $1,792 $847 $9,507 5.0% 

Basic Research $1,214 $1,357 $1,835 $2,138 $487 $7,030 3.7% 

Applied Research $922 $989 $1,656 $1,563 $1,163 $6,294 3.3% 

Capital Expenditures $1,563 $1,869 $3,938 $4,457 $526 $12,354 6.5% 

WIRELESS BROADBAND 

Net Sales $13,609 $13,979 $15,854 $16,962 $15,033 $75,436 100.0% 

Cost of Goods $10,219 $9,713 $11,322 $12,667 $12,812 $56,732 75.2% 

Net Profit $462 $659 $732 -$50 $538 $2,341 3.1% 

Basic Research $173 $199 $212 $311 $417 $1,311 1.7% 

Applied Research $430 $383 $494 $510 $320 $2,137 2.8% 

Capital Expenditures $332 $302 $396 $273 $233 $1,536 2.0% 

*Estimated from projections by respondents 
25

Federal contracts and grants information were incomplete and underreported. No effort was 

made to analyze the data except to note that companies with defense contracts provided the 

majority of responses, as might be expected. Very few companies reported federal grants. 

Statistical information was filed for the five year period. The available statistical 

information for 2000-2002 is presented in the table below. 

Tally of Federal Contracts and Grants, 2000 to 2002 

Defense Total Value (in $000) Firm Count 

Status Technology 2000 2001 2002 2000 2001 2002 

Federal Contracts

 Batteries $1,300 0 1 0 

 Power El $22,208 $21,213 $20,127 1 1 1 

Def Adv Comp $15,900 $6,957 $7,302 5 6 6 

Def Batteries $121,444 $139,796 $145,803 12 12 9 

Def Power El $6,374,679 $8,499,672 $6,989,828 35 34 33 

Def Wireless $1,622,467 $1,703,660 $2,084,716 22 23 16 

Non-Def Adv Comp $250 $100 1 1 0 

Non-Def Power El $32,167 $38,576 $19,682 4 5 5 

Non-Def Wireless $2,928 $61 $1,421 3 1 3 

Both Special $4,773,931 $4,395,280 $4,414,244 31 31 29 

 Total $12,965,975 $14,806,615 $13,683,123 114 115 102 

Federal Grants

Def Batteries $1,000 $1,500 $1,750 1 1 1 

Def Power El $9,192 $11,770 $7,692 6 5 5 

Def Wireless $808 $746 $750 1 1 1 

Non-Def Adv Comp $38 $92 1 1 0 

Non-Def Power El $392 $708 $867 1 2 2 

Non-Def Wireless $2,509 $2,500 0 2 2 

Both Special $10 $10 $310 1 1 2 

 Total $11,440 $17,335 $13,869 11 13 13 
26

PART II – Database Analysis 

4. Survey Review 

4.1 Interpreting the Survey Responses

The survey document sought to answer questions regarding private companies’ attitudes about 

interacting with the public sector and in some cases with other private sector firms. The 

responses are essentially a poll of those companies in the database. This was not a random 

sample. The firms were specifically targeted based on their product and technology orientation. 

Their response depended, at least in part, on their specific capabilities, firm size and integration, 

and previous government experience. For most companies, interaction with the U.S. 

government was limited and for most represented a small proportion of their total revenues, 

which were derived primarily from sales to other private companies. 

More emphasis was ultimately placed on interest and interactions with the U.S. Department of 

Defense, although insight was also gained into relations with other federal government agencies 

and laboratories, a smaller market. The respondent data was separated according to the 

companies standing as contractors to DoD, as alluded to in the discussion above on business 

activities. Question number 11 on page 17 of the survey asked specifically: 

“Has your Business acted as a Prime or a Sub-Contractor on a DoD contract within 

the past five years?” 

A total of 470 companies responded to this question, including 43 firms in the special category. 

Of the total 470, the four technologies were represented by 427 firms, of which 158, or 37 

percent answered “Yes,” we have contracted with DoD in the past five years, while 269 

answered “No,” we have not. The response by technology is presented in the following table. 
27

Status of Companies as Defense Contractors 

Technology # Yes # No Total Percent Yes 

Advanced Composites 21 102 123 17.1% 

Batteries 24 27 51 47.1% 

Power Electronics 65 58 123 52.8% 

Wireless Broadband 48 82 130 36.9% 

Four-Sector Total 158 269 427 37.0% 

Specials 39 4 43 90.7% 

Grand Total 197 273 470 41.9% 

The four technologies: advanced composites, batteries, power electronics, and wireless 

broadband were bundled into a single four sector total in consideration that responses as divided 

into defense and non-defense contractors were for the most part similar across the technologies. 

The detailed responses by individual technologies, including the special category, are presented 

in tabular form in Appendix II. 

4.2 Interpreting Factor-Rating Questions.

Beginning with question 4 on page 3, 22 questions in the survey were of the statement-option 

type, where a statement concerning an aspect of public/private interaction is made followed by a 

list of factors or conditions for the respondent to evaluate. The respondent evaluated each 

condition by selecting one of four levels of either frequency or agreement as the case might call 

for, and checking the appropriate level. The method we used to measure and graph these 

responses applied weights to the levels. For various questions, the four options formed a 

frequency range: not at all, slightly, moderately, and most often; or an agreement range: disagree, 

slightly agree, agree, and strongly agree, depending on the question’s logic. Options were 

weighted from 0 to 1 as follows: 

not at all = 0; slightly = 1/3; moderately = 2/3; and, most often = 1. 

For a specific factor, these weights would be summed and then divided by the number of 

respondents. The result would have a percentage value from 0 to 100. For example, assume 10 

companies responded to factor A as follows: 1 = not at all, 3 = slightly, 3 = moderately, and 3 = 

most often. The weighted sum then equals: [1 x 0] + [3 x 1/3] + [3 x 2/3] + [3 x 1] = 6. Divide 

this by 10 (10 companies), and the answer is 0.6 or 60 percent. 
28

Most factor-rating questions included an “Other” option where companies were given the 

opportunity to list and evaluate additional factors. These are added to the parent question 

analysis where appropriate. 

4.3 Written Questions

Questions 13 on page 7, 15 on page 8, and 25 on page 11 asked the survey respondents for 

written comments. These are summarized in sequence in the write up that follows. In addition, 

an itemized list of the comments, arranged by the major issues they addressed is provided. 

4.4 Yes/No Questions

Beginning with question 16 on page 8, the survey contained 21 Yes/No questions. These were 

evaluated based on the percent of respondents that answered “Yes”. Five of the Yes/No 

questions were actually a list of Yes/No options which could be graphed. Some of the Yes/No 

questions had qualifiers, for example, “No” or “No, but want to,” which required additional 

explanation. 
29

5. Research and Development Projects 

5.1 Stage R&D Communicated to the Federal Government 

Question 4 on page 3 and question 5 on page 4 asked companies to identify the stage in the R&D 

process when they communicate R&D results to non-DoD federal agencies and labs and to DoD 

agencies and labs. Each question included three stages labeled A to C. A blank category labeled 

D was provided for companies to write-in and evaluate other stages. The four options ranged 

from not at all, rarely, moderately, and most often (a frequency range). 

The response to question 4 regarding non-defense federal agencies was very small. Only 18 

defense and 19 non-defense contractors responded, which is less than 10 percent of the 

companies in the database. It is difficult to make judgments based on such sparse data, except to 

assume that very little communication of this sort is taking place at these stages. Reinforcing 

this conclusion, the weighted percentages in this frequency range for each stage in the R&D 

process were also very low, especially basic research discovery, which is rarely undertaken by 

private firms. In fact, defense contractors scored only 8.3 percent in this stage. Non-defense 

contractors were less than 10 percent in every category. 

The write-in category registered a high percentage for both contractor groups, but again, 

involved a very small sample size. Several companies listed patent applications, export 

licensing, FCC approvals, and EPA compliance as the stage in the R&D process when their 

communication occurred, which is not really the forms of communication and technology 

sharing of interest here. A few mentioned commercial dealings, such as with prime contractors 

and new product introductions. These, however, are not directly connected to federal 

government agencies. Others reported they do no R&D, or have no experience dealing with 

federal agencies. The following table shows the number of responses and the weighted 

percentage for each category. 
30

Responses to Question 4 Page 3 Defense 

Contractors 

Non-Defense 

Contractors 

4. At what stage in the R&D process does your business 

communicate R&D results to federal agencies and labs? 

Total 

Responses Percent 

Total 

Responses Percent 

A. Basic research discovery 16 8.3% 17 2.0% 

B. Proof-of-principle 17 23.5% 17 3.9% 

C. Beta-level device 17 35.3% 16 8.3% 

D. Write-in Categories 18 79.6% 19 73.7% 

 

The response to question 5, communication with defense agencies and labs, was much greater, in 

fact more than 90 percent of the respondents in the database answered the question. However, 

the percentages of companies that actually communicate R&D activity were low, especially for 

non-defense contractors where communication approached zero percent. For example, of 243 

non-defense contractors that responded to the basic research discovery stage, only three 

companies cited most often versus 225 that cited not at all. By comparison, of 142 DoD 

contractors that responded to the basic research discovery stage, 89 companies reported not at all, 

while just 10 reported most often. 

Based on these results, relatively little R&D process communication takes place, and what does 

occur is concentrated among a rather small group of firms. The write-in category included 

product improvements on existing contracts, performance information, design verification and 

reliability, specifics requested at time of RFQ, and new product announcements, all generally 

outside the purview of the question. As in the previous question, very few companies responded 

to this write-in portion. The following table presents the stage of communication with DoD 

agencies and labs for the categories shown. 

Responses to Question 5 Page 4 Defense 

Contractors 

Non-Defense 

Contractors 

5. At what stage in the R&D process does your 

business communicate R&D results to DoD agencies 

and labs? 

Total 

Responses Percent 

Total 

Responses Percent 

A. Basic research discovery 142 20.2% 243 3.6% 

B. Proof-of-principle 145 32.4% 241 4.1% 

C. Beta-level device 144 37.3% 242 4.8% 

D. Write-in Categories 22 66.7% 24 19.4% 
31

5.2 Factors that Motivate Businesses to Communicate R&D

Questions 6 and 7 on page 4, and question 8 on page 5 asked companies to identify factors that 

motivate them to communicate R&D programs and technology to other companies, to other 

federal government agencies, and to the Department of Defense, respectively. Each question 

included six factors, labeled A to F. A blank category labeled G was provided for companies to 

write-in and evaluate other motivational factors. The four options ranged from not at all, slightly, 

moderately, and most often. 

Question 6 asked companies to weigh factors that motivate them to communicate information 

about their R&D programs and technology to other companies. Over 90 percent of the survey 

filers completed this question. 

Defense contractors reported that the potential for landing contracts or grants represented their 

strongest motivational factor. This factor registered 60.2 percent on the frequency scale. Their 

desire to awaken the market and sensitize potential buyers was a close second at 57.4 percent. 

Non-defense contractors were motivated by a desire to awaken the market, recording 57.8 

percent. All other suggested motivational factors registered less than 40 percent for both groups 

of contractors. Write-ins were overwhelmingly related to promoting current or future sales, or to 

attracting new business. A few other companies noted that collaborations with other firms, 

resolution of performance problems, and technical marketing were also factors. Only four 

defense firms and 21 non-defense contractors provided write-ins. 
32

Motivations to Communicate with Companies (pg 4-6)

0% 10% 20% 30% 40% 50% 60% 70%

F. Contract requirement

E. Potential contracts

D. Claim credit

C. Awaken market

B. Recruit partners

A. Attract capital

Non-Defense Contractors

Defense Contractors

Question 7 asked the companies the same question regarding motivations toward communicating 

with non-defense federal government agencies. In this case, no factor achieved even 50 percent, 

which indicates generally less involvement and experience working with non-defense agencies. 

The potential for winning contracts or grants was 48.7 percent for defense contractors; not as 

strong a motivation as it was for dealing with private companies. This may be related to the 

smaller size of non-defense agency R&D budgets as well as their focus on other technologies 

than those under review. All other factors registered a frequency of less than 40 percent. 

Noteworthy is the low rating of 20.1 percent tallied for leveraging federal lab know-how, and 

23.1 percent for collaborating with federal labs on a cost sharing basis. Non-defense contractors 

showed little interest. In fact, the high percent rating was only 16.3 percent, and three of six 

ratings registered less than 10 percent. This low rating may at least in part be related to 

ignorance, as opposed to actual company intent. Their lowest motivational rating was only 7.3 

percent for collaborating with federal labs on a cost sharing basis. In this instance, 205 of 239 

responses were not at all, or nearly 86 percent of the companies; only four companies checked 

most often. 
33

Only 21 write-ins were submitted. These included patents, export licensing, and EPA 

compliance. These are regulatory compliance instances, which impose costs on companies faster 

than benefits, and may influence the perception some companies have of the government. 

Overall, defense contractors registered about three times (32 percent) the motivational 

percentage of non-defense contractors (11 percent). 

The very low percentage recorded for non-defense contractors points to a general lack of 

experience and (we assume) more frequent support role many of them play as sub-contractors to 

larger firms. The following chart shows the motivational factors companies reported for nondefense federal agencies and labs. 

Motivation to Communicate with Non-DoD Agencies (pg 4-7)

0% 10% 20% 30% 40% 50% 60%

F. Contract Requirement

E. Potential contracts

D. Inform decision

makers

C. Leverage know-how

B. Cost-sharing

A. Secure funding

Non-Defense Contractors

Defense Contractors

Question 8 recorded motivations of companies to communicate their R&D programs to the 

Department of Defense. Well over 90 percent of the companies responded to this question. 

defense contractors rated each of the seven listed factors at higher percentages than they had for 

non-defense federal government agencies, although the overall percentage of all ratings 

combined was still rather low at 38.6 percent. The motivational profiles were otherwise very 

similar. The potential for winning contracts or grants was 59.1 percent. However, only two 
34

other factors were over 40 percent; these were efforts to make key DoD decision makers aware, 

45.4 percent, and to secure government funding, 42.6 percent. 

Non-defense contractors registered much lower results, as they had with non-Defense agencies. 

The profiles were very similar. Three factors were below 10 percent, while the high was only 

18.8 percent. More than 81 percent of their overall responses were not at all. These results 

indicate most of the non-defense contractors were unfamiliar and lacked experience with the 

Department of Defense, and again apparently supports the presumption of some companies in 

their role as venders to primes. 

Only 17 companies submitted write-ins and only four of these were defense contractors. These 

companies cited lack of experience, lack of knowledge, and no R&D. One firm cited a joint 

venture in which contracts and grants are sought. 

The following graph displays the motivations that company respondents reported influence 

communicating R&D programs to the Department of Defense. Note the similar profile, but 

difference in magnitude between defense and non-defense contractors. 
35

Motivation to Communicate with DoD (pg 5-8)

0% 10% 20% 30% 40% 50% 60% 70%

F. Contract Requirement

E. Potential contracts

D. Inform decision

makers

C. Leverage know-how

B. Cost-sharing

A. Secure funding

Non-Defense Contractors

Defense Contractors

5.3 Methods Businesses Use to Inform Others about R&D and Technology

Question 9 on page 5, and questions 10 and 11 on page 6 asked companies to identify methods 

used to inform private companies, non-defense federal agencies and labs, and Defense agencies 

and labs of their R&D activities and technologies. Each question contained seven methods 

labeled A to G. A blank category labeled H was provided for companies to write-in and evaluate 

other methods. The four options ranged from not at all, rarely, moderately, and most often. 

Question 9 asked the companies how they inform other private companies about their R&D and 

technology activities. The most common method for both defense and non-defense contractors 

was one-on-one briefings, which was over 70 percent in both cases. Other significant methods 

included presentations at technical meetings and business web pages. The former method was 

62.5 percent for DoD contractors, and 56.6 percent for non-DoD contractors, while the latter 

method was 55.8 percent and 49.2 percent, respectively. Defense contractors scored fairly high 

in articles in professional journals (51.2 percent) and in press releases (48.4 percent). Overall, 
36

DoD contractors averaged 50.4 percent for all methods compared to 42.4 percent for non-DoD 

contractors. 

Defense contractors appear to be more proactive than non-DoD contractors and more likely to 

exploit opportunities in the federal government marketplace and at the margin, the commercial 

marketplace. This may be because they tend to be larger, more experienced and have resources 

dedicated to do so, which seems to be a common theme in many other areas of the survey. More 

than one-third of the non-DoD respondents reported not at all, compared to one-fifth of the DoD 

contractors. This indicates, among other things, that fewer of the non-DoD contractors have 

R&D programs. 

Only 15 respondents provided write-ins. Some of these overlapped with the given methods. 

However, one firm mentioned using direct mail and another mentioned brochures to inform other 

companies. The following chart presents the preference among survey respondents for various 

methods to inform other private companies of their R&D activity and technology. 

Methods Used to Inform Other Companies (Pg 5-9)

0% 10% 20% 30% 40% 50% 60% 70% 80%

G. Unsolicited

proposals

F. Contract proposals

E. Business web pages

D. Professional journals

C. Press releases

B. One-on-one briefings

A. Technical meetings

Non-Defense Contractors

Defense Contractors
37

Question 10 asked businesses to evaluate methods used to inform non-defense federal 

government agencies and labs of R&D activities and technologies. In overall average, defense 

contractors faded to only 37.2 percent for informing non-DoD federal agencies and labs 

compared to over 50 percent for informing private companies. Non-defense contractors faded 

even more to only 15 percent compared to 42 percent for informing private companies. This 

reflects a sharp rise in not at all reporting and is another clear indication of fewer opportunities 

available for these technologies in the non-defense federal sector, particularly for the 

technologies under review. 

Defense contractors that responded by checking the not at all option rose from 21 to 39 percent, 

while non-defense contractors rose from 34 to more than 73 percent. The highest percentage 

values recorded by defense contractors include one-on-one briefings at 49.8 percent and 

presentations at technical meetings at 48.1 percent. The factor profile was very similar to that of 

private company methods, while the magnitudes were greatly reduced. Companies with defense 

business are more likely to also have business with non-defense federal agencies. 

Twenty-two firms submitted write-ins, including six defense contractors. Companies reported 

patent applications, filings with the FCC, and export compliance. Still others indicated they use 

direct mail, fax, or email. The following chart summarizes the responses to methods used to 

inform non-defense federal government agencies and labs of R&D activity and technology. 
38

Methods Used to Inform Non-DoD Federal Agencies (Pg 6-10)

0% 10% 20% 30% 40% 50% 60%

G. Unsolicited proposals

F. Contract proposals

E. Business web pages

D. Professional journals

C. Press releases

B. One-on-one briefings

A. Technical meetings

Non-Defense Contractors

Defense Contractors

Question 11 addresses methods used by businesses to inform the Defense Department of their 

R&D activities and technologies. Defense contractors reported one-on-one briefings and 

presentations at technical meetings as both over 50 percent. Two other methods, business web 

pages and articles in professional journals were over 40 percent. Again, the method profile 

mimicked the profiles seen for other companies in question 9 and other federal agencies in 

question 10. In fact, the profile was almost the same as that of non-defense federal agencies. The 

overall method to inform average was 37.6 for defense versus 38.5 for other federal agencies. 

Non-DoD contractors methods were all lower than 15 percent, and taken all together, averaged 

only 10 percent. Based on magnitudes, the variations appear somewhat correlated to public 

versus private market size, especially for non-defense contractors. Here, the commercial sector 

far outstrips the federal government sector. 

Over 81.2 percent of the non-DoD contractors checked not at all; and only 3.1 percent checked 

most often. Very little communication appears to take place, reaffirming the conclusion that the 

great majority of non-defense contractors are not familiar and inexperienced in dealing with the 

federal government. Only 16 companies provided write-ins. These were mostly the same 

companies responding to question 10 with the same comments. 
39

Companies cited patent applications, filings with the FCC, and export compliance, and others 

said they use direct mail, fax, or email. 

The following chart profiles the methods used to inform Defense Department agencies and labs 

of private R&D activities and technology. 

Methods Used to Inform DoD (Pg 6-11)

0% 10% 20% 30% 40% 50% 60%

G. Unsolicited proposals

F. Contract proposals

E. Business web pages

D. Professional journals

C. Press releases

B. One-on-one briefings

A. Technical meetings

Non-Defense Contractors

Defense Contractors

5.4 Reluctance to Discuss R&D and Technology with non-Defense Federal Agencies

Question 12 and 14 on page 7 asked companies to identify the causes for their reluctance to 

discuss R&D programs and new technologies with federal agencies and labs. Each question 

offered eight possible reasons labeled A to H. A blank category labeled I was provided for 

companies to write-in and evaluate other reasons. The four options ranged from disagree, 

slightly agree, agree, and strongly agree. Companies willing to discuss their work were 

requested not to complete these questions. 
40

Question 12 asked firms why they were reluctant to discuss R&D programs and new 

technologies with non-defense federal agencies and labs. A total of 68 defense contractors and 

117 non-defense contractors responded to question 12, which equates to about 43 percent of all 

firms in each category. This can be interpreted to mean about 57 percent of the firms would be 

willing to discuss their operations. 

In percent, defense contractors ranked below 50 percent in all eight instances, which implies the 

absence of a strong or consistent cause for reluctance. The high of 48.5 percent was recorded for 

both working with federal agencies is too difficult and the absence of federal funds for 

development. The low value, i.e., where the most disagreed with the premise, was that their 

R&D was not applicable to non-DoD uses. In fact, two-thirds of the 66 respondents to this 

reason disagreed with its premise. As for non-DoD contractors, the most cited cause of their 

reluctance to discuss their technology was working with federal agencies is too difficult (58.4 

percent). A close second was financial rewards are inadequate (53.7 percent). The low at 18.3 

percent was that federal researchers appropriate my company’s ideas. 

Write-ins numbered only 20, of which four were defense contractors. Additional reasons given 

included; due to no R&D, lack of experience, and lack of awareness. Other firms cited 

government accounting rules and government reluctance to use commercial practices and 

contracts both of which could also be considered as working with federal agencies too difficult. 

One firm noted its strong focus on consumer markets left federal agency contract work 

unimportant. The following chart presents a profile of the causes for some companies reluctance 

to discuss their R&D programs and new technologies with non-defense federal agencies. 
41

Reluctance to Discuss with Non-DoD Federal Agencies (Pg 7-12)

0% 10% 20% 30% 40% 50% 60%

H. Technology relevance

G. Development funding

F. Erratic interest

E. Slow to acceptance

D. Financial rewards

C. Difficulty working

B. Data protection

A. Appropriate ideas Non-Defense Contractors

Defense Contractors

Question 14 asked firms why they were reluctant to discuss R&D programs and new 

technologies with Defense agencies and labs. A total of 68 defense contractors and 121 nondefense contractors responded to question 14, which equates to about 43 percent of all defense 

contractors and 45 percent of non-defense contractors. This can be interpreted to mean that 

between 55 to 57 percent of the firms were willing to discuss their operations. 

The strongest response cited by DoD contractors was financial rewards are inadequate (52.9 

percent). All other reasons were below 50 percent. Three of the eight, however, were in the 40 

to 50 percent range, while the other four were less than 40 percent. The low value was 

commercial technology not useful to DoD at only 13.2 percent. Non-DoD contractors registered 

two categories more than 50 percent, working with DoD is too difficult (54.6 percent) and 

financial rewards are inadequate (50.1 percent). The low for non-DoD contractors was DoD 

researchers appropriate my company’s ideas, which matched their low for non-DoD federal 

agencies. Overall, the magnitudes were roughly the same, although individual factors differed. 

Profiles of both defense and non-defense contractors were closely aligned to non-DoD agencies. 
42

Write-ins were submitted by 20 firms, mostly the same companies commenting on non-defense 

federal agencies. One comment by a foreign-owned company pointed to its headquarter country 

(Japan) as imposing policy limitations on U.S. defense work. The following chart profiles the 

reasons companies are reluctant to discuss R&D programs with Defense agencies and labs. 

Reluctance to Discuss with DoD (Pg 7-14)

0% 10% 20% 30% 40% 50% 60%

H. Technology relevance

G. Development funding

F. Erratic interest

E. Slow to acceptance

D. Financial rewards

C. Difficulty working

B. Data protection

A. Appropriate ideas Non-Defense Contractors

Defense Contractors

5.5 Why Companies were Reluctant to Discuss R&D

Companies reluctant to discuss their R&D programs with the federal government were asked to 

submit written comments by question 13 on page 7 and question 15 on page 8 of how to reduce 

or eliminate their concerns. Question 13 was directed toward non-defense agencies, and 

question 15 toward defense agencies. Our review of these submissions found substantial overlap. 

Responses were combined and duplicate comments removed. 

Some companies submitted multiple comments, which could be parceled into two or three 

different issue categories. This resulted in more comments than companies. Thus, 53 defense 
43

contractors submitted 76 comments and 71 non-defense contractors submitted 103 comments. 

The comments were placed into six issue categories as shown on the following table. 

8-13/5 Reluctance to Discuss R&D and Technology with the Federal Agencies 

Defense 

Contractors 

Non-Defense 

Contractors Combined Total 

Major Issues Cites Percent Cites Percent Cites Percent 

Procurement Complexity 32 60.4% 25 35.2% 56 45.2% 

Financial Incentives 18 34.0% 14 19.7% 33 26.6% 

Communications 5 9.4% 27 38.0% 32 25.8% 

Intellectual Property 12 22.6% 12 16.9% 24 19.4% 

Product Irrelevance 4 7.5% 15 21.1% 19 15.3% 

Small Business 5 9.4% 10 14.1% 15 12.1% 

Total Companies 53 71 124 

The table displays the issue categories in descending order of the combined total of both types of 

contractors, showing procurement complexity and financial incentives as the central issues. 

Substantial differences in the relative weights, however, occur between defense and non-defense 

contractors for each issue, except perhaps for intellectual property or small business where the 

differences are their narrowest. The largest difference is communications. Here, only 9.4 

percent of defense contractors considered communication a hindrance to discussing their R&D 

and technology with the federal government. However, 38 percent of Non-defense contractors 

saw this as a problem. With them it ranked their number one issue. The runner-up was 

procurement complexity, mentioned by 35.2 percent of the companies. 

What follows is an itemized list of the company comments by basic issues for each group of 

contractors. 

5.5.1 Procurement Complexity

Defense Contractors (cited by 32 of 53): 

1. Be more responsive to industry input in the program development stage. Set more realistic 

goals, targets. Don’t "pick our brains" with modest phase one projects and not through good 

later phases. 

2. Deal on commercial basis. 

3. DoD could embrace more commercial standards 

4. Eliminate cost share requirements for non-procurement (other transactions) activity. 

Improve long range budget planning. 
44

5. Eliminate federal procurement laws and allow agencies to purchase commercial products. 

6. Eliminate government agency competition with industry 

7. Eliminate Mil. Specs which are difficult to understand. 

8. DD-250 and other "Forms" are cumbersome and require special training to complete. 

9. Favored contractor status for R&D 

10. For new and high risk technologies remove the restriction(s) to manufacture in the United 

States. Actively support the DoD developments to have commercial impact. 

11. Fund development work without requiring government ownership to data. 

12. Don't have individuals with conflict of interest managing funded development. 

13. Get the DOE labs out of space. 

14. Government procedures and requirements should not increase manufacturing costs. 

15. Increase speed of bringing contracts to fruition. 

16. Increased collaboration of various sub-contractors on major programs for DoD 

17. Less bureaucracy 

18. More government to industry contacts 

19. Provide a "Quit Claim" agreement for a period of time on a technology area under 

development. 

20. Question the infrastructure built around existing technologies. Incentives given to 

labs/agency that field new technology. 

21. Reduce the amount of paperwork/red tape - it costs more to document the product process 

than they are worth. 

22. Shorten sales cycle - our company has been working with one DoD agency for over two 

years to license software for a large deployment. 

23. Streamline procurement process; greater flexibility in negotiating individual intellectual 

property rights. 

24. There are so many concerns; we would recommend working with the Integrated Defense 

Commercial Company (IDCC) to commercialize government procurement. 

25. Simplify contracts. 

26. Have contracts that are clear and easy to understand by both parties. 

27. Eliminate requirements for products to be on a GSA schedule. 

28. Non-DoD federal labs need to be more willing to allow companies to retain rights to work 

done on a cost share basis. 

29. Simplify contracts and provide sourcing status with R&D partners. 

30. Do not use Commerce Business Daily or Statement of Work type procurement notices when 

commercial products are being sought. 

31. Where appropriate move technology into operation quickly. 

32. We are not reluctant based on any of the issues above. If there is any hesitancy, it is due to 

typical government agency desire to fund very long range technologies that do not have 

nearer term commercial potential. 
45

Non-Defense contractors (cited by 25 of 71):

1. Reduce bureaucracy with contracts. Reduce reliance on government accounting standards 

because they do not always fit business standards. Improve negatives outlined in Question 

30 on page 13. 

2. A more open mind-set in federally funded research and development labs would be welcome. 

3. Allow sole source when it is "best in breed." 

4. De-bureaucratization; opportunity for exclusivity, no bidding plus ability to retain ownership 

of technology. 

5. DoD research procurement process heavily favors established contractors. Encourage new 

contractors to participate in DoD R&D by lowering barriers to entry. 

6. Eliminate bureaucracy by empowering just two technical representatives. 

7. Government agencies do not have appropriate sense of urgency and speed to market for 

potentially commercial ventures. 

8. Have a government liaison that is committed to obtaining and acting on the information 

presented. 

9. Have government utilize commercial planning, management, and contracts. This is 

permitted by national policy and law (e.g., Commercial Space Act of 1998 P.L. 105-303), but 

is widely ignored and inconsistently used. 

10. Improve timing of paperwork and payments 

11. Let businesses develop technology, but not burn time documenting and accounting. 

12. Make government contract process less demanding on possible strategic partners (develop 

strategic partner relationships with innovative companies). 

13. Modifications to procurement law that mirror commercial law, especially protection of 

technical data and intellectual property 

14. Multi-year programs- consistent funding, more favorable T's and C's, W.R.T. Patents, I/P 

ownership and use. 

15. Purchase product directly from my company under standard commercial business practices. 

16. Reduce difficulty in getting funding and better notification of potential business. 

17. Reduce paperwork, tracking, office management. Be very sensitive to our need for 

commercial profit and return. Too many restrictions on how to spend funds. 

18. Simplify contracts. 

19. Simplify federal Acquisition Regulations and Accounting Regulations. 

20. Creation of cross-agency forums 

21. Reduce the difficulty in working with agencies and soliciting development funds. 

22. Reduce paperwork and improve decision period process for doing or not doing the work. 

23. Run the government like a business. 

24. More communication at the start of projects. Dedicated resources to the project. Cost 

estimates during time lined events. 

25. Reduce or eliminate the cost of doing business (i.e., the bureaucracy). 
46

5.5.2 Financial Incentives

Defense Contractors (cited by 18 of 53):

1. Budget and program stability is an issue inhibiting our ability to work with government 

agencies. 

2. DoD seems to have a difficult time actually receiving the funds they expect for given areas of 

R&D. 

3. Expanded use of funded Broad Area announcement opportunities; profit incentives for 

unique technology 

4. Make more R&D funds available. 

5. More funding by DoD 

6. More funding directed to go outside government agencies 

7. Non-DoD agencies should have more funds (discretionary) to investigate and follow through. 

Discuss and have funds available to act on new things. 

8. Pricing based on quality, delivery, service 

9. Provide adequate funding on a timely basis. 

10. Provide financial incentive for sharing of data 

11. Provide funding 

12. Provide greater financial rewards for acceptable R&D technologies 

13. Provide R&D subsidies on tax credits for companies whose R&D efforts result in 

international sales thus generating income for the U.S. Government, i.e., like Canada! 

14. Profit sharing incentives to increase financial rewards; higher assurance of funding. 

15. Money made available for advancements in mature technologies 

16. We would consider an R&D relationship if there was enough money guaranteed. 

17. Incentive for operation/fielding on new technology 

18. Do not usually see direct benefit in end product sales potential in near term. ROI is not early 

enough to be of interest. 

Non-Defense Contractors (cited by 14 of 71):

1. A clear path to substantial return on investment for the company. 

2. A priority business opportunity with a government agency. This could include funding which 

assisted the commercial business. 

3. Be very sensitive to our need for commercial profit and return. Too many restrictions on 

how to spend funds. 

4. Clear financial benefits for participating; simplify process. 

5. Commercial incentives and TAX incentives. 

6. Demonstrate financial rewards; publicize a process for working with agencies 
47

7. More favorable terms and conditions, W.R.T. Patents, intellectual property ownership and 

use. 

8. Permit greater company profit. 

9. Reduce difficulty in getting funding. 

10. Reduce or eliminate the cost of doing business (i.e., the bureaucracy). 

11. Increase funding for applied research, including manufacturing readiness, in wireless 

electronic components for non-DoD applications. 

12. Improve timing of paperwork and payments. 

13. Make it financially feasable to develop the products. 

14. Reduce the difficulty in working with agencies and soliciting development funds. 

5.5.3 Communication

Defense Contractors (cited by 5 of 53):

1. Be forward with the long term intent of the program and how many suppliers will be 

involved. 

2. Communicate needs more effectively. 

3. Make more information available, re available funds. 

4. My company needs to know what agencies; which contacts; and, what kind of work. 

5. Publication and communication of government needs and technical interests. 

Non-defense Contractors (cited by 27 of 71): 

1. Adequate information and communication training for improved understanding. 

2. Awareness of DoD groups/needs/activities. 

3. Better educate private industry on how government agencies conduct R&D programs and 

handle propriety data. 

4. Better identify funds available for specific research. 

5. Better notification of potential business. 

6. Channel to access needs to be well understood. 

7. Increase interaction with these agencies and increase visibility of the programs. 

8. Know more about the type of programs for which there is interest. 

9. More mutual communication 

10. Need to better understand opportunity. 

11. Our company has little or no experience in this area. 

12. Publicize a process for working with agencies. 

13. Send information about DoD labs, research programs, potential R&D funding and potential 

contracts. My company will review and determine if further communication/collaboration is 

appropriate. 
48

14. Show me a revenue opportunity. 

15. We are not aware of DoD's R&D needs and hence we have not participated. 

16. We are not equipped or experienced to make any suggestions. 

17. We have no experience working with DoD so we don’t have enough information to evaluate 

above issues. 

18. We need more time and money and interest to be aware of the possibilities to participate. 

19. We would discuss, but we have never been asked. There is no interaction. 

20. We would perform R&D on a needs basis. 

21. Clearly identify process and funding. 

22. Opportunity has not arisen. 

23. Our company has little or no experience in this area. 

24. More communication 

25. We have no experience working with non-DoD government agencies. If the agencies could 

take the initiative to contact us and provide more information, that would be helpful for us to 

evaluate the feasibility. 

26. Better communicate access channels. 

27. We have no idea of the fit of our product or how to approach these agencies. 

5.5.4 Intellectual Property

Defense Contractors (cited by 12 of 53):

1. Don't harass private companies to provide proprietary financial information that is irrelevant 

to the proposed development cost. 

2. Good strong non-disclosure agreements 

3. More protection of company proprietary technology used as a springboard to new research 

4. More training of government agencies on protection of proprietary information 

5. Non-Disclosure Agreements 

6. Risk of inadvertent intellectual property or data loss. 

7. The use of outside contractors by the government can limit discussions due to concern over 

leakage/disclosure of information. Put in place safeguards against leakage/disclosure of 

information. 

8. Tougher restrictions and protection of knowledge shared with DoD 

9. While we are willing to discuss R&D programs with companies and Government Agencies, 

we do so under the terms of a written Non-Disclosure Agreement. 

10. Demonstrate that companies need not be concerned about government protection of 

proprietary information. 

11. Stronger non-disclosure language in contracts 

12. Have non-disclosure agreements that are clear and easy to understand by both parties 
49

Non-Defense Contractors (cited by 12 of 71):

1. Clearly communicate to industry that R&D is conducted under non-disclosure. Have a well 

understood program to ensure government employees can not use intellectual property 

exposed to them during their work for the government if they transition to the private sector. 

2. Confidentiality agreements, exclusivity agreements, and patent and trademark rights 

3. Confidentiality agreements. 

4. Higher government employee ethics, especially for government contractors. 

5. Intellectual property protection 

6. No problem for pre-sales evaluation, but is a concern for R&D level collaboration. 

7. Protect secrets. 

8. Unwilling to discuss new technologies until patent protected. Will discuss after patent 

approval. 

9. Protection of companies intellectual property 

10. Allow the company to retain proprietary data. 

11. General concern about tainting of company's IP 

12. Keep proprietary information protected. 

5.5.5 Product Irrelevance

Defense Contractors (cited by 4 of 53):

1. Our R&D efforts are mainly with DoD prime contractors; not with DoD directly 

2. Our research organization is structured soley for internal product and process development. 

We are not currently structured for joint development programs. 

3. This is mostly not applicable since our plant operation does very little pro-active R&D. Most 

of our work and formulations are done based upon customer's demands and requirements. 

4. My company produces revenue by producing in high volume. Government does not buy in 

high volume. 

Non-Defense Contractors (cited by 15 of 71):

1. My firm does not generally interact with DoD and non-DoD agencies or R&D efforts 

because we are a supplier of RVC resins and not end-use products. 

2. Change scope of products. 

3. My company does not perform R&D relevant DoD agencies. 

4. Most of our business has no applicability to DoD or federal agencies. 

5. Our product line does not match government needs. 

6. Our technology is not useful to DoD. 
50

7. We are strictly commercial. 

8. We sell industrial automation equipment and do not target government or DoD accounts. 

9. We work primarily in product sectors that are not of interest to DoD. 

10. We are not opposed to discussing our R&D programs with non-DoD agencies, but we are so 

far down the supply chain that it is typically not applicable. 

11. My company does not generally interact with federal agencies or R&D efforts because we 

are a supplier of RVC resins and not end-use products. 

12. We would have to change the scope of our products from non-technical to technical. 

13. My company’s R&D is not applicable to non-DoD uses. 

14. In our industry we would not use government agencies to commercialize R&D. 

15. Our business is a toll (service) business. We have no R&D. 

5.5.6 Small Business

Non-Defense Contractors (cited by 5 of 71):

1. Make it easier for small companies to bid on technology proposal directly without going 

through large government system integrators. 

2. Need a non-burdensome method for smaller business to pursue R&D contracts and grants. 

3. Shorten sales cycle - our company has been working with one DoD agency to make it easier 

for small companies to bid on technology proposal directly without going through large 

government system integrators. 

4. Substantial barriers to entry for limited available funding. 

5. Government agencies favor working with "systems integrators" vs. component and material 

suppliers and make it difficult to apply for grants. 

 

Non-Defense Contractors (cited by 10 of 71):

1. Communicate needs and embrace small manufacturing companies. 

2. Develop a small business "fast track" process. 

3. We are not opposed to discussing our R&D programs with non-DoD agencies, but we are so 

far down the supply chain that it is typically not applicable. 

4. We do not want to enter into programs for federal agencies - do not have resources to pursue. 

5. We have two people working part-time. I doubt we could handle the paperwork, even if we 

had ideas of interest (which we don't). 

6. My business is too small to pursue true research. We develop products from existing 

technology. 

7. Obtaining government contracts/rewards is too demanding on the resources of a small 

company like mine. Make process easier. 
51

8. Develop a fast track process for smaller businesses. It appears that information from a 

smaller organization is not as highly regarded as information generated by a larger 

organization. 

9. Communicate needs to small enterprises. 

10. We are too small (90 people) and must focus on our business plan. Not interested in 

government contracts at present. 

5.6 Why Working with Federal Agencies is Unattractive

Question 16 asked companies if they found interaction with non-defense federal agencies and 

labs unproductive. A total of 141 defense contractors and 217 non-defense contractors 

responded. Seventy-five of the defense contractors and 62 of the non-defense contractors 

responded in the affirmative, and 66 defense and 155 non-defense contractors responded in the 

negative as shown on the following table shows these numbers and the percent in the affirmative. 

Companies with negative responses were asked to complete question 17. 

8-16. Does your business find it productive to interact with non-Defense 

Agencies and Laboratories in performing R&D, technology development, 

and engineering work in connection with developing new products? 

Respondent Yes No Total 

Responses 

Percent 

Yes 

Defense Contractors 75 66 141 53.2% 

Non-Defense Contractors 62 155 217 28.6% 

All Respondents 137 221 358 38.3% 

Question 17 on page 8 asked companies to identify reasons they found working with non-defense 

federal government agencies on R&D, technology development, and engineering in developing 

new products unattractive. Question 17 listed five possible reasons labeled from A to E. A 

blank category labeled F was provided for companies to write-in and evaluate additional reasons. 

The four options ranged from disagree, slightly agree, agree, and strongly agree. 

Companies that responded negatively to question 16 were asked to complete question 17. 

However, defense contractors taken altogether scored only 33.5 percent, while non-defense 

contractors scored 23.7 percent in response to question 17. This is a mild response. In fact, the 
52

highest score for any reason was only 40.5 percent recorded by defense contractors for federal

researchers are slow to respond and to complete work. Non-defense contractors recorded only 

33.6 percent for the same reason. A close second for defense contractors was that agencies will 

not make multi-year contracts (39.2 percent). Non-defense contractors also recorded 33.6 

percent for little is learned interacting with federal researchers. 

The write-in category included many respondents with little or no experience working with nondefense federal agencies. Some reported little relevance to their technologies. Some cited 

inadequate financial rewards, bureaucracy, or lack of resources. All told, a small minority of 

firms actually found working with non-defense federal agencies unattractive. These results are 

shown on the following graph. 

Negatives Working with Non-Defense Fed. Agencies (Pg 8-17)

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

E. Unreliable partners

D. Multi-year

commitments

C. Slow response

B. Facilities outdated

A. Little learned

Non-Defense Contractors

Defense Contractors

Question 18 asked companies if they found interaction with Defense agencies and labs

productive. A total of 142 defense contractors and 211 non-defense contractors responded. A 

total of 100, or 70.4 percent of the defense contractors reported in the affirmative. However, 

only 23.7 percent, less than one in four of the non-defense contractors responded in the 

affirmative. Most of the 161 non-defense contractors that responded in the negative to this 
53

actually had no experience working with Defense agencies, at least not in developing new 

products. Their response may actually mean unproductive by omission, not by commission. 

Compared to non-defense federal agencies, defense contractors jumped over 17 percentage 

points, while non-defense contractors fell by nearly five. In the case of defense contractors the 

difference may simply relate to the larger size of the defense market for these technologies. For 

non-defense contractors, the regulatory experience with EPA, NASA, or Energy may be 

responsible for their higher number with non-defense federal agencies. The table below shows 

these numbers and the percent in the affirmative. 

8-18. Does your business find it productive to interact with Department of 

Defense federal agencies and laboratories in performing R&D, technology 

development, and engineering work in connection with developing new 

products? 

Respondent Yes No 

Total 

Responses 

Percent 

Yes 

Defense Contractors 100 42 142 70.4% 

Non-Defense Contractors 50 161 211 23.7% 

All Respondents 150 203 353 42.5% 

Question 19 on page 9 asked companies that responded negatively to question 18 to identify the 

reasons why they found working with Defense agencies unproductive. However, like 

respondents to question 17 above, defense contractors overall scored over 28.6 percent and nondefense contractors, 31.3 percent. For the five reasons, 42 defense contractors disagreed a total 

of 138 times compared to just 15 times for most often. The two highest values recorded by 

defense contractors were that federal researchers are slow to respond and to complete work (39.7 

percent) and agencies will not make multi-year contracts (35.9 percent). Note that these results 

are about the same as tallied for non-defense federal agencies. Non-defense contractors recorded 

only 31.7 percent for federal researchers are slow to respond and to complete work and only 30.3 

percent for little learned interacting with federal researchers. Non-defense contractors also 

recorded lopsided totals. In their case, 313 disagrees were recorded compared to 46 cites of most 

often. 

Write-ins were similar to non-defense federal agencies’ reports with a few exceptions. A 

Japanese owned firm reported the Japanese government imposes limitations on interaction with 

the U.S. Defense Department. Another firm cited proprietary concerns and another compliance 

and audit issues. Many of the comments mirrored those of previous questions 13 and 15. The 

following chart profiles the companies’ response to question 19. 
54

Negatives Working with DoD (Pg 9-19)

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

E. Unreliable partners

D. Multi-year

commitments

C. Slow response

B. Facilities outdated

A. Little learned

Non-Defense Contractors

Defense Contractors

5.7 Why Business Interaction with Federal Agencies and Labs is Limited 

Questions 20 and 21 on page 9 asked companies to review a list of factors that might limit their 

interaction with non-defense federal government and Defense agencies and labs, respectively. 

These questions were of the yes/no type. Question 20 listed six factors labeled A to F and 

question 21 listed eight labeled A to H. A blank category labeled G for question 20 and I for 

question 21 was provided for companies to write-in additional limiting factors. All listed factors 

in question 20 were also in question 21, although not in the same order. Additional factors in 21 

included (B) limited to the scope of business products and services and (H) because products 

have no DoD application. About 80 percent of the firms responded to these questions. 

Question 20 asked respondents to identify factors that limit their interaction with non-defense 

federal agencies and labs. Defense contractors leading constraint was a lack of contracts (66.4 
55

percent). This was followed by a lack of information on contracts and R&D opportunities (60.2 

percent) and limited to circumstances where a federal agency contracted my firm (59.5 percent). 

The lowest value was corporate policies restricting involvement (11.1 percent). Non-defense 

contractors cited their chief limitation as the lack of information on contracts and R&D 

opportunities at 62.1 percent. Second was by business size and resources, which was 55.6 

percent (item B on graph). No other answer exceeded 45.1 percent. Interestingly, corporate 

policies restricting involvement registered only 4.9 percent (9 yes; 173 no), which rules that out 

as a constraint. 

Write-ins predominantly cited lack of experience and lack of relevance. Other comments 

included limited opportunities, not enough volume, and compliance and audit issues. The 

following graph presents companies responses to limitations to their interaction with non-defense 

federal agencies. 

Interaction with Non-DoD Fed. Agencies Limited By (Pg 9-20) 

0% 10% 20% 30% 40% 50% 60% 70%

F. Contract

opportunities

E. Grant opportunities

D. Corporate policy

C. Contract information

B. Company resources

A. Development

contracts

Non-Defense Contractors

Defense Contractors

Question 21 asked respondents to identify factors that limit their interaction with Defense 

agencies and labs. Defense contractors, as they had for non-defense federal government 
56

agencies, identified lack of contracts (56.1 percent) as their leading constraint. Three other 

limitations scored above 50 percent included limits to circumstances where a federal agency 

contracted my firm (55.9 percent), to the scope of business products and services (54.1 percent), 

and by a lack of information on contracts and R&D opportunities (52.9 percent). Non-defense 

contractors cited their chief limitation as the scope of business products and services (59.6 

percent) followed by the lack of information on contracts and R&D opportunities at 56 percent. 

Third was business size and resources, which chimed in at 53.2 percent. All other constraints for 

both defense and non-defense contractors were below 50 percent. Based on these results, most 

companies would welcome additional involvement with the Defense Department. 

As in question 20, write-ins cited lack of experience or lack of relevance as major limitations for 

many firms. Other comments included commercial priorities take precedence, inadequate 

financial rewards, protecting proprietary information, and compliance and audit issues. The 

following graph presents companies’ responses to limitations to their interaction with defense 

agencies. 

Interaction with DoD Limited By (Pg 9-21)

0% 10% 20% 30% 40% 50% 60% 70%

H. No applications

G. Contract opportunities

F. Grant opportunities

E. Corporate policy

D. Contract information

C. Business size

B. Product scope

A. Development contracts

Non-Defense Contractors

Defense Contractors
57

5.8 How Can Involvement with Defense Agencies be Increased 

Question 22 on page 10 asked companies to identify factors that constrained their involvement in 

defense R&D and manufacturing programs. The question listed eight possible concerns labeled 

from A to H. A blank category labeled I was provided for companies to write-in and evaluate 

additional factors. The four options ranged from disagree, slightly agree, agree, and strongly 

agree. 

Both defense and non-defense contractors cited the difficulty in identifying opportunities as their 

chief constraint. Defense contractors recorded 57.4 percent for this response, and non-defense 

contractors 62 percent. Almost 46 percent of defense contractors cited lack of timely notification 

as their second concern. All other concerns were less than 40 percent. Write-ins again 

mentioned companies’ lack of experience and the relevance of their product. Others cited 

difficulties with bureaucracy, government program stability, and lack of financial benefit. A few 

companies stated they were not interested. The following chart presents this information. 

Factors Impacting Industry Involvement in DoD R&D (pg 10-22)

0% 10% 20% 30% 40% 50% 60% 70%

H. Slow payments

G. Accounting standards

F. Size bias

E. Perceived favoritism

D. Timely notification

C. Identifying opportunities

B. Intellectual property

A. Collaboration rules

Non-Defense Contractors

Defense Contractors
58

5.9 Collaboration with federal Agencies and Labs

Question 23 on page 10 and question 24 on page 11 asked companies to identify areas where 

they seek assistance, collaboration, or contracts with federal agencies and labs. Each question 

listed six factors labeled from A to F. The questions were yes/no types. The response for “No” 

had two forms: first “No” without qualification, and second “No, but want to.” Note that 

companies responding “No,” without any qualifications could not also respond “No, but want 

to.” The responses were mutually exclusive. The following table presents the results for both 

questions, which will be followed by a written discussion. 

10-23. Does your business confer with, seek the assistance of, collaborate with, or contract with 

Non-DoD agencies and labs on? 

Defense Contractors Non-Defense Contractors 

Stage and Intended Use of 

R&D 

Total 

Response % Yes 

% No, 

Want to 

Total 

Yes & 

Want to 

Total 

Response % Yes 

% No, 

Want to 

Total 

Yes & 

Want to 

A. Basic for commercial 150 22.0% 19.3% 41.3% 252 11.9% 18.3% 30.2% 

B. Applied for commercial 152 23.0% 30.3% 53.3% 251 12.7% 25.5% 38.2% 

C. Eng./Dev. for commercial 152 22.4% 32.2% 54.6% 252 11.9% 23.4% 35.3% 

D. Basic for defense use 151 15.2% 25.2% 40.4% 251 2.4% 19.9% 22.3% 

E. Applied for defense use 153 24.2% 32.0% 56.2% 251 3.2% 25.1% 28.3% 

F. Eng./Dev. for defense use 148 23.0% 33.1% 56.1% 250 4.4% 23.6% 28.0% 

For question 23 on page 10, note that less than 25 percent of defense contractors responded in the 

affirmative in regard to non-defense federal agencies for each of the six listed stages. Thus, 

more than three-quarters of the companies do not confer or seek the assistance from the nondefense public sector at the research, engineering, or development level relating to either 

commercial or defense usage. 

The percent that reported no, but want to was over 30 percent for four of the listed stages. 

Adding the affirmative and no, but want to responses together, the same four stages exceeded 50 

percent. The two stages less than 50 percent were basic research relating to either commercial or 

defense usage. Both of these were closer to 40 percent. One possible conclusion about this 

difference, collaboration in basic or applied research is more distantly pre-competitive, and in 

these areas government funding may be a substitute for private funding, since private funding 

may be more difficult to justify. Another conclusion, based on the small affirmative response to 

the question, is that most of these companies are not directly involved in basic research. 
59

The response of non-defense contractors was much weaker. Affirmative responses were all 

below 13 percent. Engineering and development related to defense products was only 2.4 

percent; in fact, only six firms of 251 responded affirmatively. Understandably, significantly 

more companies reported in the affirmative for categories related to commercial usage than for 

defense, although the values remain small. In addition, relatively fewer firms indicated no, but 

want to, where percentages ranged from about 18 to 26 percent. 

The following chart illustrates the percentages by contractor group for the combined affirmative

and want to responses just discussed. 

Interaction with Non-DoD Agencies (Pg 10-23) 

0% 10% 20% 30% 40% 50% 60% 70%

F. Development

E. Applied research

D. Basic research

Defense Products

C. Development

B. Applied research

A. Basic research

Commercial Products Non-Defense Contractors

Defense Contractors
60

11-24. Does your business confer with, seek the assistance of, collaborate with, or contract with 

DoD agencies and labs on? 

Defense Contractors Non-Defense Contractors 

Stage and Intended Use of 

R&D 

Total 

Response % Yes 

% No, 

Want to 

Total 

Yes & 

Want to 

Total 

Response % Yes 

% No, 

Want to 

Total 

Yes & 

Want to 

A. Basic for commercial 149 19.5% 18.1% 37.6% 255 2.0% 15.7% 17.6% 

B. Applied for commercial 149 30.9% 21.5% 52.3% 252 3.6% 20.2% 23.8% 

C. Eng./Dev. for commercial 152 29.6% 24.3% 53.9% 253 3.6% 20.6% 24.1% 

D. Basic for defense use 149 18.1% 26.8% 45.0% 252 2.0% 21.4% 23.4% 

E. Applied for defense use 150 30.0% 30.0% 60.0% 252 4.8% 28.2% 32.9% 

F. Eng./Dev. for defense use 150 28.7% 31.3% 60.0% 254 4.7% 26.8% 31.5% 

Question 24 asked the same question as 23, but in regard to collaborations with the Department 

of Defense. Responses were very similar for defense contractors. Most categories showed gains 

in the affirmative response, while those that responded no, but want to were smaller. The 

combined totals were marginally down for commercial usages and up for defense. 

Non-defense contractors were remarkably low in the percentages responding in the affirmative. 

The high was only 4.8 percent. The companies that checked no, but want to were also in the 

minority, but a much higher proportion then the affirmatives. The following chart provides a 

profile of these responses. 
61

Do You Confer or Contract with Defense (Pg 11-24) 

0% 10% 20% 30% 40% 50% 60% 70%

F. Development

E. Applied research

D. Basic research

Defense Products

C. Development

B. Applied research

A. Basic research

Commercial Products Non-Defense Contractors

Defense Contractors

5.10 Changes in Government Laws and Policies

Question 25 on page 11 asked companies to write-in what changes in federal law, policy, 

operations, and program management are needed to make working with DoD organizations more 

attractive and productive. In all 167 companies submitted 209 written comments in response to 

this question, which were parceled into the same six major issue categories as questions 13 and 

15 on pages 7 and 8 of the survey. Ninety-one defense contractors submitted 115 of the 

comments and 71 non-defense contractors submitted 94. In addition, 52 submissions were 

deleted that lacked an opinion. These were generally non-defense contractors, many with no 

direct contact with the federal government. 

More companies recommended simplification in the regulatory environment then any other issue 

by a wide margin; what we refer to as procurement complexity. Almost two-thirds of defense 

contractors suggested changes in reference to this issue alone, and over 50 percent of the nondefense contractors. The upshot of their comments is that the government market is very 
62

different from commercial practices. This difference adds to government transaction costs and 

may penalize companies less familiar with the process. 

A second major issue was communications, this much more so among non-defense contractors. 

In fact, 31 percent of the non-defense contractors thought communications between DoD and the 

private sector was inadequate and needed improvement. The following table presents the 

company responses. 

11-25 Changes needed in federal law, policy, operations, and program 

management to make working with DoD more attractive & productive. 

Defense 

Contractors 

Non-Defense 

Contractors Combined Total 

Major Issues Cites Percent Cites Percent Cites Percent 

Procurement complexity 59 64.8% 37 52.1% 96 57.5% 

Poor Communication 16 17.6% 22 31.0% 38 22.8% 

Intellectual property 16 17.6% 8 11.3% 24 14.4% 

Financial Incentives 13 14.3% 10 14.1% 23 13.8% 

Small Business 10 11.0% 7 9.9% 17 10.2% 

Product Differences 1 1.1% 8 11.3% 9 5.4% 

Total Companies 91 76 167 

 

Many comments were similar or the same made for questions 13 and 15 regarding reducing or 

eliminating company reluctance to discuss R&D programs with the federal government. Two 

exceptionally lengthy comments were submitted by aerospace companies, which are reproduced 

here in their entirety. One company was identified in the special sector and the other in the 

power electronics sector. These are presented in full. 

Comment One, start: 

“Our key recommendations relate to improving access to information about our R&D 

opportunities, recognizing the inherent risks in R&D in the performance criteria for contracts, 

and streamlining the contractual reporting requirements and mechanisms. 

For many contractors, especially small organizations and those for whom Government R&D and 

production contracts are not a dominant business, it is difficult to maintain full awareness of the 
63

R&D opportunities that exist. [We suggest that the government be more proactive in pushing the 

information on R&D opportunities to qualified and interested contractors. This will ensure 

government access to very creative and productive solutions that do not reside with the 

established players.] 

One way to accomplish this is to establish a database of all contractors and would-be contractors, 

along with their self-identified capabilities, resources and interests. Contractors should be able to 

update their info online in real-time. The government then pushes the info on all new 

procurements compatible with a certain subset of interests and capabilities to the applicable 

contractors to give them the opportunity to compete for the job. 

Contractors could give permission to share their database info with large contractors and systems 

integrators who may be looking for subcontractors on large procurements. [Just the on-going 

awareness of the government's interests may prompt companies to target their independent R&D 

toward the government's needs.] 

Another strategy for R&D alignment is to provide the major R&D procuring agencies with a 

pool of funds that can be awarded as tax credits to companies who can use their own funds to 

conduct R&D beneficial to the government. This would push companies to tune their R&D to 

the government’s need and toward dual-use synergies. 

A key aspect of this would be to avoid the cost and bureaucracy of past R&D reimbursement 

programs, and to leave it to the discretion and judgment of a senior board within the contracting 

agency. Such a program might be weighted or otherwise targeted to smaller companies to 

accomplish the objective of fostering new and creative solutions via wider participation. 

Government procurement typically treats R&D contracts as having a fixed outcome in terms of 

technical results and completion schedule within a certain budget. When these targets are missed 

- not uncommon if we are truly doing R&D - the environment is not very forgiving and reserves 

may not be available to deal with what should be a statistically expected condition. We 

recommend that success criteria for R&D be viewed more as [statistical] distributions, and that 

reserves be held and allocated to worthy projects by the contracting agencies. 

Obviously, safeguards against sheer non- or mal-performance must still be applied. [Lastly, the 

reporting requirements and mechanisms for R&D should be streamlined, simplified, and tailored 

to the nature of the work.] Some progress seems to have been made in this arena, but we 

recommend that continuous critical review and improvement efforts be maintained.” 

Comment One, end. 
64

Comment Two, start:

“Fully use flexibility allowed in existing laws and national policies for commercial practices and 

contracts. 

A fundamental problem is that the government's determination of fee/profit does not consider 

private investment recovery (e.g., incurred cost and G&A = total cost, and then a percentage for 

fee/profit is applied). This approach assumes the government has participated in the investment 

of the particular product or service, through recovery of IR&D and B&P [bid and proposal] on 

government contracts. This is not the case for privately-funded products and service, which must 

be offered and contracted on a "market price" basis. 

Government use of commercial acquisition practices and creative investment incentives could 

help existing and emerging commercial companies provide competitive services to the 

government as well as develop new markets and compete for business worldwide. 

Unfortunately, the government continues to use traditional acquisition regulations and 

procedures when commercial products, services, practices and mechanisms are available. The 

use of the traditional approach seems to arise from a lack of adequate training of government 

acquisition personnel in the use of commercial practices and a risk-averse acquisition culture that 

discourages innovation. Consequently, much procurement that would benefit from commercial 

designation is not so designated, and instead is structured using more traditional acquisition 

procedures. 

In many circumstances, commercial companies must either forgo government business 

opportunities or compromise their commercial business model by accepting contracts with many 

expensive, government-unique requirements. When a commercial company forgoes government 

business, the government misses the opportunity to access innovative, competitive products and 

services from a non-traditional government source. 

The use of commercial practices and contracting mechanisms in government acquisitions can be 

a "win-win" situation. Commercial practices and contracts are useful, effective management 

tools for the government to meet its needs by focusing resources on mission success (i.e., to pay 

for performance and results rather than overhead). They also allow companies to provide their 

commercial products and services to their government customers at competitive prices, making 

the American tax dollar stretch further. 

Commercial practices encourage innovation and efficiency, making the U.S. industrial base more 

competitive by lowering costly and burdensome expenses related to non-productive governmentrequired activities and reporting. This, in turn, frees up manpower and capital to stimulate new 
65

markets and creates incentives for the private sector to develop new technology. (See white 

paper from Aerospace Industries Association on "Creating an Environment for Commercial 

Practices and Investment in Space," (See Appendix III) or at time of this writing the article is 

available at: 

www.aia-aerospace.org/issues/commission/commission_spacepractices.pdf). 

Comment Two, end. 

5.10.1 Procurement complexity

Defense Contractors (cited by 59 of 91)

1. Eliminate federal government cost accounting standards; eliminate cost and pricing data 

requirements and certifications; and procure R&D on commercial terms and conditions. 

2. Streamlined procurement; reduced reporting requirements; and simplified contracts. 

3. Accounting control 

4. Closer adherence to Commercial Contract and Accounting practices. 

5. Continuous streamline acquisition 

6. cost accounting requirements 

7. Delete the preponderance of DoD/FAR regulations that do not need to be imposed on R&D 

effort and eliminate reliance of NASA clauses that are unique to NASA. 

8. Ease of working with agencies and getting to right people 

9. Eliminate all CAS, FAR, compliance, cost accounting, and audit provisions. Liberalize IPR 

provisions. 

10. Eliminate cost principles of the EAR 

11. Eliminate federal procurement laws and allow agencies to purchase commercial products. 

12. Elimination of "red tape" which slows projects and adds cost. Also, provide a better 

understanding of any opportunities. 

13. Fast track approach to select truly technically competent companies at a reasonable (not 

necessarily lowest) price 

14. Faster process 

15. Favored supplier status for R&D companies and provisions for contractual alliance if R&D 

leads to commercialization 

16. For other than R&D, follow commercial practice and delete government unique terms and 

conditions. 

17. Greater acceptance throughout DoD for utilizing commercial products and suiting them for 

defense use instead of relying on historical government contractors to design from scratch 
66

one shot (or few copy) items. DoD is missing great opportunities to tap into the commercial 

expertise that is developed. 

18. Greatly reduce internal R&D capability of DoD agencies; it inhibits use of industry for DoD. 

19. Improve training, shorten acquisition deadlines, eliminate superfluous regulatory oversight 

and greater use of multi-year (long term) programs/funding. 

20. Improved program continuity and delivery schedules 

21. In many cases, labs compete with industry due to the recent growth in their technical 

capabilities. If the labs' involvement was limited, it would encourage more teaming with 

industry. This limitation could be tied to funding categories. For example: 25% on 6.1 

programs, 15% on 6.2 programs and 5% on 6.3 programs. 

22. Less bias regarding preferred technical approaches, commercial contracting terms 

23. Less bureaucracy 

24. Less restrictive export control regulations when dealing with registered Canadian companies 

25. Less time consuming to complete bids 

26. Long term commitments 

27. Make DoD "easy to do business with." Too much red tape, paperwork, controls, etc. 

28. Make it simpler/easier to "purchase, rent, utilize" the capabilities available at the labs, etc. 

29. Make rules item-specific instead of using the same procurement regulations applicable to 

both butler and space laser acquisition. 

30. Many changes would be required so we suggest working with commercial industry groups 

like the IDCC. 

31. Make paperwork less complicated (especially billing) 

32. More streamlined and direct "point of contacts" without as many split responsibility at 

program/project level. 

33. More truly multiyear procurements, elimination of TINA and CAS 

34. Multi-vendor telecommunications services environment required. Currently no new 

providers are able to provide services under FTS 2000 regulations. 

35. Possibly less paperwork 

36. Procurement and regulations outdated; based on 20-year life cycle, etc. Change procurement 

laws to recognize today's technology life cycle and the fact that 2/3 of funding for R&D in 

the U.S. comes from private sector. Government needs to make it easier for contractors to 

"sell" them technology. 

37. Procurement Process needs to be streamlined to allow cost appreciation and in turn, deliver 

product to consumer in a timelier manner. 

38. Procurement regulations need to be revised to promote the use of commercially available 

technologies rather than reinforcing cost-plus, invented-here mentalities whereby contractors 

reinvent the wheel over and over on various programs on a more expensive and less efficient 

basis. 
67

39. Product changes require too many signatures and take too long to sign off on. Reduce the 

path to critical people. 

40. Recognition of commercial business pricing and project management; broad use of other 

transaction agreements; updating R&D. 

41. Reduce or eliminate administrative oversite in areas of socio-economic programs; financial, 

property, and certain quality programs. 

42. Reduced paperwork. For example, assist by offering on-line downloadable templates in 

Word or Excel for forms, reports, material control, etc., and more active inquiries (sourcing) 

from DoD and other Agencies. 

43. Relax ITAR regulations, demand "buy America" first. 

44. Remove requirements that cause us to maintain two separate legal entities and financials. 

45. Require less red tape! 

46. Research available commercial alternatives before funding redundant, competitive work. 

47. Shorten sale cycles, empower individuals to make decision to implement new technologies 

48. Shorten the time required to award a contract 

49. Shorter times from R&D to production. 

50. Simpler proposals, less onerous contracting procedures. 

51. Simplify contracts; institute preferred sourcing status with R&D partners. 

52. Simplify procedures 

53. Statute that would remove the DOE labs from space work. They are competitors. They also 

compete with DoD labs. Strictly limit use of OTA and section 845 transactions. 

54. Streamline bidding process, make more funding available. 

55. The coordination of R&D in space technology across all federal organizations needs to be 

streamlined. It should be consistent with a Technology Road Map (See Space Technology 

Alliance). More direct involvement in the Laboratory development and other architecture 

processes. 

56. The SBIR program needs to be eliminated as a method of developing second/alternative 

sources of supply for production programs and development programs. 

57. The willingness of DoD to consider alternative sources for existing and future products is 

imperative to provide more attractive and productive relationships. 

58. Too bureaucratic - massive reporting requirements. 

59. Use of more efficient contracting instruments such as "cooperative agreements" and "other 

transactions" as we do with DOE. 

Non-Defense Contractors (cited by 37 of 76)

1. Access to product specifications and simplification of quoting process. 

2. Accounting methods should allow direct commercialization charges and patent costs to 

grants and contracts. 
68

3. Change procurement policy, increase order volumes, shorten bid-delivering purchasing 

cycles, and reduce vendor qualification period and paperwork involved. 

4. Contract to the private sector on certain projects - cost factors discussed and payment plans 

met. 

5. Eliminate bureaucracy. Empower 2 technical representatives. Communicate goals. Stick to 

long-term commitments. Reward innovation and cost-saving. Simplify application, 

accounting, and regulatory language. 

6. Faster decision making and funding, commitments to quantities beyond prototype, protection 

of IP and patents. 

7. Faster, less red tape, movable to keep confidential and change intellectual property 

ownership 

8. If DoD were to operate in a fully commercial manner. 

9. Improve the ease of dealing with the agencies. 

10. Improve timing of paperwork. 

11. Less bureaucracy, evidenced by this mandated long survey 

12. Less bureaucracy. 

13. Less legal adversarial relationship, federal acquisition and accounting regulations/red tape 

simplification 

14. Less paperwork 

15. Less red tape would encourage more projects. 

16. Less red-tape 

17. More accessibility, less bureaucracy. Work with private industry in a similar manner in 

which 2 industries would work together. 

18. Most of the DoD research is controlled by DARPA, which favors large projects and 

incumbent contractors. The DoD research laboratories (AFRL, NRL, ARL) must be 

empowered to select their own research partners directly. 

19. Much less paperwork, reporting, accounting overheads; emphasize dual-use 

commercial/military. 

20. Need fewer laws, not more. Free purchase directories for DAR. 

21. Purchase product directly, following standard commercial practices. 

22. Reduce bureaucracy with contracts and reduce reliance on government accounting standards 

because they do not always fit business standards. 

23. Reduce paperwork and process overhead (i.e., reporting requirements, meetings) 

24. Reduce paper/administrative burden; eliminate outdated standards (i.e. built-in bias for 

certain suppliers). 

25. Reduce security constraints. 

26. Reduce reporting mandates and additional compliance requirements. 

27. Separate routine procurement postings from those requiring development. 

28. Simplified accounting, better marketing of opportunities, simplified procurement procedures 
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29. Simplify accounting systems 

30. Simplify administration, cost accounting and reporting requirements. Major overhaul of 

government procedures needed. More lead time is needed as resources very thin. 

31. Simplify the rules. 

32. Simplyfied contractual and audit procedures. 

33. Too complex to simply state what changes are needed. 

34. Too complicated [simplify] 

35. Uniform MIL Specs that allow use of existing commercial products and mimic actual enduse requirements. 

36. Update the labs to current standards of technology. 

37. Work with commercial business or commercial terms. 

5.10.2 Communications

Defense Contractors (cited by 16 of 91)

1. Better communication of the opportunities to private industry; when receiving a contract, 

there is a risk that DoD programs could be pulled, leaving our investment in development of 

the contract worthless. 

2. An easy method to help small companies identify opportunities. 

3. Awareness of DoD requirements 

4. Better communication of needs, timeliness 

5. Better communication of collaborative opportunities and federal grant requirements. 

6. Communication structure 

7. Ease of finding requirements and getting to right people. Ease of working with agencies 

8. Fund contracts for products that are suitable for our manufacture. 

9. Knowing what if any contracts are available. 

10. Made aware of opportunities. Regular information sessions. 

11. On one hand, open the system up as much as possible re: contracting information - continual 

improvement necessary. 

12. Provide more information to industry identifying the capabilities available at the labs, etc. 

13. Publication and communication of government needs and technical interests. 

14. There needs to be better publicity about how to get involved in these programs. 

15. We do not know how to begin. We need an easy way to learn how to present my company to 

DoD. 

16. We need to know how and why DoD and non-DoD agencies need specialty films. 

Non-Defense Contractors (cited by 22 of 76)

1. Better communicate access channels 
70

2. Better communication on DoD areas of research and development and improved means of 

identifying opportunities for joint work. 

3. Better knowledge of opportunities 

4. Better system for distributing requirements and documents, especially at early stage concept 

development initiatives 

5. DoD needs to make inquiries known and seek out services. 

6. DoD should, if they want to work with us, have some way to inform us of their 

interests/needs. 

7. Guiding and targeting technical companies like ours to specific projects. 

8. Improve programs designed to help companies find opportunities to assist DoD organizations. 

9. Knowledge of the programs would encourage more projects. 

10. Make policies, opportunities more available (paraphrased answer). 

11. Make programs and opportunities more visible. 

12. Make public lists of technologies DoD is seeking. 

13. Make the opportunities within DoD more visible. 

14. Require more knowledge of opportunities. 

15. Need to understand opportunity. 

16. No suggested law changes. The DoD is very large and it is very difficult to find the correct 

person or department to speak with. 

17. Perhaps better dissemination of opportunities including presentation of business benefit. Onsite presentations to companies not involved with DoD projects would help. Explain 

available opportunities and present cases where other companies, not previously involved in 

DoD projects, realized a business benefit. 

18. There is a lack of follow-up and the overall process including overall goals has been unclear. 

19. Unfamiliar with those laws and policies. There should be a mechanism to bring strategic 

companies like my company into the national discussion for we are conducting R&D and 

selling products that will dictate the future of telecommunications. 

20. My company would be interested in working with DoD organizations to provide website 

hosting, video conferencing and video streaming services if it were easier to learn about 

potential opportunities and if the contractual process was not overly complicated 

21. We don't know where to locate information which parallels our capabilities. 

22. We need to be able to work with organizations to determine their needs. This requires access 

to contracts and formations. 

5.10.3 Intellectual Property

Defense Contractors (cited by 16 of 91)
71

1. Allow DoD organizations to enter into and be bound by non-disclosures with respect to 

intellectual property. 

2. Allow exclusivity in intellectual property ownership. 

3. Allow data developed under cost share type agreements to be treated as "Limited Rights" 

data by the government. 

4. Changes in intellectual property ownership rights allow companies more control and 

protection of their IP. This is particularly needed in those cases where IP was born out of 

companies' research and development work. DoD needs to invest more in technology 

development, reduce the cost match percentage required in other transaction agreement 

contracts. 

5. Improved data rights. 

6. Improved understanding of rights in technical data. 

7. Intellectual property rights 

8. Intellectual property, re: procurement rules 

9. Issues dealing with intellectual property regarding services paid for and use of product 

developed from those services. 

10. Make intellectual property rights the same for Canadian and US companies with industry 

owning the inventions. 

11. Protect confidential information of companies in a way that penalizes individuals that misuse 

provided information. Allow companies to retain ownership of confidential information. 

12. Protection of proprietary information 

13. Provide better IP protection - tough to reach a proper balance - continual improvement 

necessary. 

14. Stronger non-disclosure language in contracts 

15. Update R&D IP clauses to reflect commercial partners' R&D. 

16. We would be prepared to work for the DoD if we did not have to obtain and maintain 

security clearance. 

Non-Defense Contractors (cited by 8 of 76)

1. DoD wants best available technology but also hates to be sole sourced. If you get a unique 

product approved, DoD will push your competition to copy it. Therefore, you do not always 

feel rewarded for providing the best. 

2. Guarantee intellectual property security. 

3. Improved management of intellectual property. 

4. Keep proprietary information protected. 

5. Protection for company intellectual property. 

6. Protection of intellectual properties - not government owned. 

7. Strengthen confidentiality. 

8. W.R.T. Patents, I/P ownership and use. 
72

5.10.4 Financial Incentives

Defense Contractors (cited by 13 of 91)

1. A consistent and reliable funding plan with multi-year committed funding. 

2. Discourage DoD agencies from seeking industry cost sharing; recent DoD policy statement is 

not being adopted uniformly. 

3. DoD must continue to fund R&D for "mature" technology including flight control and 

propulsion. Only SBIR's remain funded in these broad areas. Funding has been near zero for 

many years. 

4. Greater return on investment 

5. It would benefit private contractors if more basic science and research funds were available 

instead of being directed to government labs and organizations. 

6. More consistent funding and higher allowable profits 

7. More government funds for dual-use R&D and transition! 

8. More projects/contracts and less "low price" contract awards, source credit for quality and 

delivery, as well as R&D, cost sharing program for improving value (price, quality, life, 

services). 

9. Our R&D is directed at opportunities for production. When an R&D opportunity does not 

have a clear production opportunity there is little interest in the R&D opportunity. 

10. Prompt payment 

11. Prompt payment of progress payments and better adherence to program time lines. 

12. Speed up contract progress payments; increase allowable contract. 

13. The intellectual property ownership and R&D collaboration rules need to be changed to 

assume an adequate return on investment can be generated. 

Non-Defense Contractors (cited by 10 of 76)

1. A shorter cycle with regard to "time to revenue". My company’s experiences with SBIR 

R&D are that from the time the contract is awarded until funds begin to flow to the company 

is much too long. With a shorter cycle we would be more aggressive in pursuit of 

government contracts. 

2. Improve ability to make profit. 

3. Improved timing of payments. 

4. Make them more appealing. 

5. More latitude in use of funds 

6. More profit margin 

7. Multi-year programs - consistent funding, more favorable terms and conditions 

8. Need financial incentive. 
73

9. Offer incentives to collaborate with DoD. Possible tax incentives for R&D efforts in 

conjunction with DoD projects. 

10. Permit greater company profit. 

5.10.5 Small Business

Defense Contractors (cited by 10 of 91)

1. Do not use Research and Development Contracts as an automatic set aside for small business. 

2. DoD organizations collaborate primarily with Prime Contractors; they should work with the 

subcontractors that supply products and processes to the Primes. 

3. Increase preference for small businesses. 

4. Make it easier for small companies to be aware of federal opportunities. 

5. Make opportunities available to consulting firms of smaller size. This would save 

government money due to lower overhead. 

6. More stress on R&D by small business. 

7. Most contracts are awarded to the Primes. Award more contracts directly to the 

subcontractors and keep them simple and straightforward so they can be managed at lower 

costs. 

8. One major issue is that the DoD agencies use large defense contractors and do not use 

innovative "off the shelf" solutions from small companies. This needs to change so that more 

fast paced smaller companies can successfully work with DoD organizations. 

9. Reduce or eliminate growing requirements for cost sharing for small businesses, especially in 

SBIR/STTR program. Current policy seems to make cost sharing mandatory for Phase II 

funding. 

10. My firm has not had any direct business relationship with the federal government. We would 

like to engage in a business relationship with the federal government if the government 

processes, procedures, and standards requirements were simplified for small organizations. 

Non-Defense Contractors (cited by 7 of 76)

1. Available funding for small businesses. 

2. DoD should work with small companies. 

3. General recognition of limited resources of small companies. 

4. I work for a small company that is a fully-owned subsidiary of a larger company. 

Consequently, we are not a small business and don’t get the benefits. Please change the 

definition of small business in regard to government technical R&D contracts (SBIR, etc.) 

5. It will be helpful if DoD can promote joint R&D programs designed for smaller companies. 
74

6. More money for small business research programs. Ability to collaborate with larger 

companies in limited activities, with the goal of enhancing the technical and market success 

of the developed project 

7. Small companies do not have the resources to follow the myriad rules necessary to compete 

with R&D at the federal level. 

5.10.6 Product Irrelevance

Defense Contractors (cited by 1 of 91)

1. Our current working with DoD is through our joint venture with another company. That 

company maintains and handles the relationships and contracts 

Non-defense Contractors (cited by 8 of 76)

1. Again our products are not related to core competitors in the DoD 

2. No comment- our firm has no particular interest in working with any Governmental agencies 

as our products are solely for the commercial marketplace. 

3. Not qualified to answer this question since we have no experience in this area. For our 

company it is a matter of focus, some companies focus on military/government work as a 

business strategy and structure their businesses accordingly; we do not. 

4. Not sure. Our business has little, if any, overlap with the interest of DoD. Some of our 

customers do have involvement with DoD and other federal agencies 

5. My company’s technology is not useful to DoD 

6. Technology must match between DoD and our business. 

7. We are only interested in commercial business. 

8. We don’t see any application for our products within DoD or non-DoD related government 

organizations. 

5.11 Types of Agreements

Question 26 on page 11 asked companies to identify types of agreements they had with any 

federal agency involving R&D conducted since 1998. The question listed six agreement types 

labeled from A to F. A blank category labeled G was provided for companies to write-in 

additional agreement types. The question was a yes/no type. If the response was “Yes, the 

company was asked to identify if the arrangement was with DoD and/or another federal agency. 

Roughly 40 percent of the defense contractors have some sort of R&D agreement with the 

federal government. Less than 10 percent of non-defense contractors had such agreements. The 
75

predominant form of agreement was research and development contracts. About 20 percent of 

defense contractors were involved in CRADAs. Very few were engaged in joint ventures or 

technology licensing. 

Most of the agreements were with the Department of Defense, although other federal 

government agencies were well represented. Many companies that cited R&D agreements with 

DoD also cited agreements with non-DoD agencies. Write-ins mostly cited agreements with 

other companies. Additional write-ins cited various types of interaction with the federal 

government, such as supply contracts, sharing test results, and SBIR. The following table 

reflects this information. 

11-26 For the purposes of conducting R&D, since 1998 has your business and any federal agency

entered into a... 

Defense Contractors Non-Defense Contractors 

Types of Agreements Yes No With 

DoD 

Other 

Federal 

Agency 

Yes No 

With 

DoD 

Other 

Federal 

Agency 

Joint venture 9 137 5 4 2 246 6 0 

Formal Cooperative Research and 

Development Agreement (CRADA) 31 119 16 17 9 236 7 5 

Technology license 9 139 6 4 7 240 6 4 

Formal Work-for-others agreement 10 136 6 5 4 243 6 2 

Other formal collaboration 13 132 7 5 1 244 6 1 

R&D contract 57 93 34 25 9 239 7 5 

Other 8 13 5 2 6 34 1 2 

Question 27 on page 12 asked companies that responded “Yes” to question 26 to report the 

number of agreements with listed federal government agencies from 1998 to 2000, and estimate 

those for 2001 and 2002. An all other category was provided for other federal agencies not 

specifically listed. About 3,000 agreements were reported for the five years. The most 

agreements were identified for 2001 (629). Agreements with the Defense Department were 

highest in 1998 at 470. 

Defense contractors accounted for about 98 percent of the total reported agreements. 

Significantly, just one company reported about one-third of the agreements, and just 12 

companies reported more than 80 percent of the total. The number of agreements provides no 

insight into their value. We believe the value is also top heavy with perhaps the top 100 

accounting for over 50 percent of the total value, although this cannot be verified with the given 

data. 
76

The Department of Defense accounted for more than three-fourths of the agreements. The 

Department of Justice was a distant second with about eight percent. The table below shows the 

aggregated results of those companies that reported R&D agreements with various federal 

government agencies. 

12-27 If you answered “Yes” in Question 26, please report the number of agreements 

with each listed federal agency for each year in the table displayed here. 

AGENCY YEAR 1998 1999 2000 2001** 2002** 

Central Intelligence Agency 0 0 12 1 0 

Department of Commerce 20 11 13 12 8 

Department of Defense 470 455 383 433 421 

Department of Energy 18 21 31 53 38 

Department of Justice 40 42 52 53 50 

Dept of Transportation 0 3 1 2 1 

Environmental Protection Agency 1 2 4 5 3 

Nat’l. Aeronautics & Space Admin 29 26 30 44 19 

National Institutes of Health 0 0 0 0 0 

National Science Foundation 2 1 4 2 2 

National Security Agency 1 2 2 2 0 

Other Agencies 19 26 21 22 20 

Column Total – Total Agreements 600 589 553 629 562 

with Defense Contractors 588 576 542 613 550 

with Non-Defense Contractors 12 13 11 16 12 

 **Estimates 

5.12 Private R&D Projects and a DoD Database

Questions 28 and 29 on page 12 asked companies about their R&D projects. The questions were 

yes/no types. Question 28 asked if the companies were currently engaged in R&D projects that 

might be of interest to DoD. Two additional options were, “perhaps, but need more information” 

and “perhaps, but we do not intend to pursue DoD uses”. Question 29 follows by asking the 

companies if they would be willing to place R&D project information into a DoD restricted 

access database. 

Question 28 asked the companies if they were engaged in R&D projects that might be of interest 

to the Department of Defense. About 55 percent of defense contractors responded in the 
77

affirmative, another 21 percent thought perhaps, but needed more information, and 3.9 percent 

thought perhaps, but do not intend to pursue. Only 14 percent of non-defense contractors 

answered in the affirmative, another 27 percent thought perhaps, but need more information, and 

nine percent thought perhaps, but were not interested in pursuing. 

Twenty percent of the defense contractors and 50 percent of the non-defense contractors 

responded with an unqualified no, which may be interpreted to mean they do not engage in 

research or development. Overall, this was about 39 percent of the all companies filing surveys 

with the Commerce Department. Another 3.9 percent of defense contractors and 9.1 percent of 

the non-defense contractors do not wish to pursue the issue, although they apparently have ongoing research and or development projects. In any case, these are presumably out of DoD’s 

reach based on survey results. Combining these with the unqualified no answers indicates more 

than 45 percent of the companies are unable or unwilling to share technology with DoD. These 

results are shown on the following table. 

12-28 Are you currently engaged in any research and development projects that you 

believe might be of interest to DoD? 

Response Categories Defense Contractors 

Non-Defense 

Contractors 

All 

Contractors 

Yes 84 37 121 

Perhaps, need more 

information 33 70 103 

Perhaps, don't intend to 

pursue 

6 24 30 

No 31 132 163 

Total Responses 154 263 417 

% Yes 54.5% 14.1% 29.0% 

% perhaps, need more 

information 21.4% 26.6% 24.7% 

% perhaps, don’t intend 

to pursue 3.9% 9.1% 7.2% 

% No 20.1% 50.2% 39.1% 

Question 29 asked the companies if they would be willing to place information about their R&D 

projects into a restricted database for use within the Department of Defense. The responses were 
78

consistent with the previous question. Among defense contractors, 96 of 142, or about twothirds responded in the affirmative. This roughly compares with 84 affirmatives and 33 that 

checked perhaps, but need more information of 154 that responded to question 28, or about 

three-fourths that responded favorably. 

The non-defense contractors responded with 100 affirmatives out of 244 that answered the 

question; a total of 41 percent. For question 28, 30 firms answered yes and another 70 said 

perhaps, but need more information; this was very close to 41 percent. In general, the closer a 

technology gets to the competitive horizon the less likely most companies are willing to share the 

data. This could at least partly explain the slight variation in defense contractors’ willingness to 

share their data between questions 28 and 29. The Defense Department could strengthen its 

intellectual property obligations, or even consider compensating companies for unauthorized 

disclosures to possibly allay these concerns. The following table presents the responses to 

question 29. 

 

12-29 Would your company be willing to place information about its research and 

development projects into a restricted access database for use within DoD? 

Defense Contractors 

Non-Defense 

Contractors 

All 

Contractors 

Yes 96 100 196 

No 46 144 190 

Total Responses 142 244 386 

Percent Yes 67.6% 41.0% 50.8% 

5.13 Reluctance to Participate in DoD R&D Database

Question 30 on page 13 asked companies to identify reasons they would not participate in a DoD 

R&D database, and is a follow-on to the previous two questions. The question listed twelve 

reasons labeled from A to L. A blank category labeled M was provided for companies to writein and evaluate other reasons. The four options ranged from not at all, slightly, moderately, and 

greatly. 

Defense contractors major concern affecting their decision to participate in a defense research 

and development database was risking loss of proprietary information. This concern scored 69.1 

percent. Of 149 defense contractor companies reporting, 70 (47 percent) indicated their decision 

would be influenced greatly by this concern, and another 40 companies cited moderately. Not 

far behind this concern was the influence of no economic benefit (66.4 percent), potential loss of 
79

competitive advantage (65.8 percent), assists competition (64.4 percent), and poorly defined 

awards (61.3 percent). For all 12 reasons listed, defense contractors averaged 54.7 percent. 

Non-defense contractors’ major concern was no clear economic benefit, which at 71.9 percent, 

included 114 companies (about half) of the 231 respondents citing it influences them greatly. 

Second was the requirement for too much staff time, followed by risking loss of proprietary 

information, both about 67.6 percent. The fourth reason at 65.8 percent was loss of competitive 

advantage. Seven of the 12 reasons recorded more than 60 percent. The average for all reasons 

was 59.1 percent, with more than one-third on average marked as influencing the companies 

greatly. 

 

It is evident that concerns for intellectual property are a big issue for both sets of firms. This is 

also an issue in the previous two questions and other areas of the survey. Intellectual property 

relates to several reasons such as risks loss of proprietary information, potential loss of 

competitive advantage, and assists competition, which ranked one, three, and four for defense 

contractors and three, four, and seven for non-defense contractors. Another major area of 

concern is economic. This area too relates to several questions in other areas of the survey. 

Related reasons include no clear economic benefit, poorly defined rewards, too much staff time, 

and uncertain costs. These reasons ranked two, five, six, and seven for defense contractors and 

one, six, two, and eight for non-defense contractors. 

A big difference between defense and non-defense contractors was their evaluation of defense

not a major factor in areas of interest, which is not surprising. Here, defense contractors 

recorded only 31.9 percent compared to non-defense contractors with more than twice the 

influence at 64.1 percent. Almost half the defense contractors cited not at all (70 of 143) while 

about 20 percent of the non-defense contractors (42 of 219) did the same. At the other extreme, 

only 18 defense contractors (13 percent) and 92 non-defense contractors (42 percent) cited 

greatly. 

This may be a reflection of differing experience levels between the two groups, which influences 

their perception. It may also be an accurate reflection of the underlying reality, where nondefense contractors’ technology is generally not relevant to defense. This second argument 

would appear to support the smaller firm = narrower capability hypothesis presented in the firm 

capability section (see page 7***** on Business Activity). The following chart presents the 

data in graphic form. 
80

Influences on Decision not to Participate with DoD (Pg 13-30)

0% 10% 20% 30% 40% 50% 60% 70% 80%

L. DoD interest

K. Economic benefit

J. Process transparency

I. Staff time

H. Uncertain costs

G. Patent license

F. Defined rewards

E. Commercial advantage

D. Proprietary info

C. Website security

B. Assists competition

A. Patent pending

Defense Contractors Non-Defense Contractors

5.14 Product Cycle Times

Question 31 on page 13 asked companies to identify product cycle times from R&D to 

marketable products. They were asked to indicate these times in years or in months as applicable 

to their situation. For presentation purposes, all data was converted to months. A total of 73 

defense contractors (46.2 percent) and 109 non-defense contractors (40.5 percent) responded to 

the question. In addition, 24 responses of 43 possible were received from companies in the 

special category. This special category data regarding product cycle timing is presented for 

comparative purposes. Average and median cycle times and standard deviations were calculated 

for each technology. 

For the four technologies under review, 182 companies provided information on their product 

cycles. The average time from R&D to marketplace was 21.4 months with a median (or mid-
81

point) of 12 months. Companies ranged from only one month to 12 years, and the standard 

variation was 22 months. If anything, these numbers show the technologies and products under 

review are highly differentiated with numerous variations. What is true in general is also true for 

the individual technologies, as each showed this characteristic. The special category showed an 

average of 41.4 months, median of 36 months, and a standard deviation of 13.7 months. 

The differences in average cycle times between defense contractors and non-defense contractors 

were significant for advanced composites and power electronics. In both cases, the average 

cycle times of non-defense contractors were much longer. However, only eight reports were 

received for advanced composite defense contractors, which could easily misconstrue the data. 

The average of 13.1 months is about 35 percent less than the 20-month average recorded for the 

more numerous non-defense contractors. One firm reported 144 months as its product cycle, 

which was four times longer than anyone else. If this firm is removed from the aggregate 

calculation, the remaining non-defense contractors fall to 15 months which appears to be more 

reasonable. Non-defense power electronics companies also showed longer cycle times than 

defense contractors at 26.9 months versus 21.6 months. The median for the defense contractors 

is 18 months, while that for non-defense contractors is 24 months. 

Another method of viewing variation is to look at the middle 80 percent of the companies in 

terms of cycle times, or lop-off 10 percent from each end of the distribution. This will remove 

the extremes on both the low and high ends and automatically reduce the standard deviation. In 

addition, by cutting off the upper extreme the average cycle time will fall because the high 

extremes have no limit while the minimum cannot be less than zero. Thus, the middle 80 percent 

(146 companies) averaged 17.5 months cycle time with a standard deviation of 9.8 months. Not 

surprisingly, the range narrowed considerably, varying from 3 to 36 months, instead of 1 to 144 

months in the larger database. 

Not all of the 182 companies reported they perform research, although close to 95 percent did. 

About 60 percent of the firms, however, do not consider their R&D programs one of the is major 

activities of their business. Their average cycle time was 16.7 months. The firms with research 

activity were more than 26 percent higher than those without. The longer cycle time for firms 

with research as a major activity is not entirely unexpected. Firms active in development should 

have a shorter cycle time, all else being equal. We cannot report how many research firms were 

actually reporting their research cycle; some may have reported their development cycle, which 

would muddy the calculation. However, the difference is intuitively obvious, and the 26 percent 

is probably a low-end estimate. The following table provides the calculations for each 

technology and other factors in the discussion of product cycle times. 
82

13-31 For any ongoing research related to your technology, when do you 

anticipate that the results of your R&D will be available in the marketplace?

Defense Contractors Responses Average Median Range Variation 

Advanced Composites 8 13.1 9 3-36 10.6 

Batteries 15 19.8 12 6-60 14.0 

Power Electronics 34 21.6 18 3-120 21.7 

Wireless Broadband 16 21.9 12 1-60 18.5 

Total 73 20.4 12 1-120 18.8 

Middle 80 percent 59 17.1 12 6-36 9.5 

Non-Defense Contractors Responses Average Median Range Variation 

Advanced Composites 29 20.0 12 1-144 25.4 

Batteries 14 20.6 12 2-72 18.7 

Power Electronics 29 26.9 24 1-120 22.9 

Wireless Broadband 37 20.5 12 1-108 24.7 

Total 109 22.1 12 1-144 24.0 

Middle 80 percent 87 17.7 12 3-36 10.1 

All Contractors Responses Average Median Range Variation 

Advanced Composites 37 18.5 12 1-144 23.2 

Batteries 29 20.2 12 2-72 16.4 

Power Electronics 63 24.0 22 1-120 22.4 

Wireless Broadband 53 20.9 12 1-108 23.0 

Total 182 21.4 12 1-144 22.0 

Middle 80 percent 146 17.5 12 3-36 9.8 

Special Category Responses Average Median Range Variation 

Defense Contractors 22 43.6 36 3-120 13.4 

Non-Defense Contractors 2 17.0 17 ~ ~ 

Total 24 41.4 36 3-120 13.7 
83

6. Federal Procurement and Contracting 

As in the previous section, this section presents data separately for defense contractors and nondefense contractors based on respondents answer to question 11 on page 17. 

6.1 Federal Contracting 

Responses to questions one, two, and three on page 13 are presented on the following table. The 

first question had to do with the companies’ previous experience in competing for a government 

contract. Almost 92 percent of defense contractors indicated they had competed for a 

government contract. We assume the eight percent (13 of 154) that had not competed were 

subcontractors to defense prime contractors and had no direct business with DoD. The majority 

of non-defense contractors (62.2 percent) competed for (non-DoD) government contracts. Per 

page 13, question 2 the great majority of defense contractors were interested in supplying the 

federal government, and a strong majority of non-defense contractors were interested. The same 

interest is evident for supplying the Department of Defense, shown by question 3. 

Federal Contracting Experience and Future Willingness 

DoD Contractors Non-DoD Contractors 

Yes/No Questions on Page 13 

Number of 

Responses % Yes 

Number of 

Responses % Yes 

1. Has your Business ever competed for a federal government 

contract? 

154 91.6% 259 62.2% 

2. Is your Business interested in becoming a supplier to the 

federal government? 

150 94.0% 251 61.0% 

3. Is your Business interested in becoming a 

supplier to the DoD? 86 88.4% 251 61.0% 

Sub-part of 3: Already work with DoD 68 8 

Combining the responses, the three questions illustrate a willingness to supply the federal 

government and/or the Department of Defense on the part of most companies. Many view the 

government as another business opportunity, if not for developing technology, than as a straight 

sale. The companies that indicated no interest might be content with their current situation or 

concerned about intellectual property, financial rewards, or regulatory complexity. Some firms, 

in addition, probably cannot afford the overhead. 
84

Question 4 on page 14 asked the companies how aware they were of the technology capabilities 

of defense and non-defense government agencies. The four options ranged from not at all, 

slightly, moderately, and greatly. Responses to this question point to a general lack of awareness 

about government technology capabilities, even among defense contractors. Of 158 defense 

contractors, only 18 indicated they were greatly aware of technology capabilities within the 

Defense Department, and only eight were greatly aware of the capabilities within non-defense 

federal agencies. Non-defense contractors were even less aware, as might be expected. The 

majority (152 of 261) of non-defense contractors reported that they were not at all aware of the 

capabilities of either defense or non-defense federal agencies. 

14-4 How aware is your Business of the technology capabilities of? 

Defense Contractors (158) Not At All Slightly Moderately Greatly Percent 

A. Department of Defense agencies 

and labs 33 63 44 18 43.2% 

B. Non-DoD federal agencies and labs 35 73 42 8 38.2% 

Non-Defense Contractors (261) Not At All Slightly Moderately Greatly Percent 

A. Department of Defense agencies 

and labs 152 70 35 4 19.4% 

B. Non-DoD federal agencies and labs 152 70 35 4 19.4% 

6.2 Do Government Procurement Practices Discourage Private Companies?

Question 5 of page 14 asked companies to identify government contracting and procurement 

practices that discourage them from seeking federal procurement opportunities. The question 

listed 19 possible explanations labeled from A to T. A blank category labeled U was provided 

for companies to write-in and evaluate other possibilities. The four options ranged from not at 

all, slightly, moderately, and greatly. 

The following chart presents the company responses to government procurements practices that 

discourage them from seeking procurement opportunities. 
85

Government Procurement Discouragements (Pg 14-5) 

0% 10% 20% 30% 40% 50% 60%

 T. Prime subcontracting

 R. Solicitation complexity

 Q. Accounting standards

 P. Facility capability

 O. Packaging/marking

 N. Proposal cost

 M. Award delays

 L. Profit margin

 K. Payment delays

 J. Billing complications

 I. Delivery schedules

 H. Deviation/waivers

 G. Contract duration

 F. Uncertain funding

 E. Uncertain demand

 D. Re-competition

. C. Compliance req

 B. 1st Article test

 A. Qualified List

Non-Defense Contractors

Defense Contractors

As the table shows, defense contractors were most concerned with the uncertainty and 

fluctuations of government funding (53.6 percent) and the uncertainty of government demand
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(51.8 percent). Non-defense contractors were most concerned with the complexity of 

solicitations (54.8 percent), uncertainty of government demand (53.3 percent), and narrow 

payment margins (51.5 percent). Close behind were the costs of bids and proposals (49.5 

percent) and uncertainty and fluctuations of government funding (48.5 percent). Write-in 

comments were predominantly from companies that had no experience or knowledge to make a 

judgement. 

6.3 Company Concerns about defense Logistics Management and the Supply Chain

Question 6 on page 15 asked companies to identify the degree to which DoD Logistics 

Management practices discourage them from doing business with the Department of Defense. 

The question listed eight possible practices labeled from A to H. A blank category labeled I was 

provided for companies to write-in and evaluate other possibilities. The four options ranged 

from not at all, slightly, moderately, and greatly. 

DoD Logistics Management Discouragements (Pg 15-6) 

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

H. Warranty requirements

G. Bundled orders

F. Arsenal Act

E. Design availability

D. Specifications

C. Waivers/deviations

B. Order paperwork

A. Delivery disruption

Non-Defense Contractors

Defense Contractors
87

As can be gathered from the chart the response to question 6 was rather weak. The strongest 

concern was specifications for defense items differ from the same commercial product. This was 

only 43.4 percent, recorded for non-defense contractors. This was also the highest for defense 

contractors, but at only 38.6 percent. Non-defense contractors recorded 39.9 percent for 

clearance of paperwork associated with defense orders. This was also second highest for defense 

contractors (32 percent). Write-ins were from companies with no experience and lack of 

knowledge. 

Question 7 on page 15 asked companies to identify supply chain issues that discourage them 

from accepting or seeking Department of Defense contracts. The question listed seven possible 

practices labeled from A to G. A blank category labeled H was provided for companies to writein and evaluate other possibilities. The four options ranged from not at all, slightly, moderately, 

and greatly. 

Non-defense contractors had the strongest response at 50.4 percent, too costly for expected 

benefit. The only other response above 40 percent was the uncertainty of demand by both 

defense and non-defense contractors. 

Supply Chain Discouragements (Pg 15-7) 

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

G. Expected benefit

F. Logistics support

E. Product qualification

D. Commercial

production

C. Demand uncertainty

B. Sub-tier suppliers

A. Order quantity

Non-Defense Contractors

Defense Contractors
88

6.4 How Companies Become Aware of Government Opportunities

Question 8 on page 16 asked companies to identify how they most frequently become aware of 

Defense and non-defense government procurement opportunities. The question listed twelve 

possible methods labeled from A to L. A blank category labeled M was provided for companies 

to write-in and evaluate other methods. The four options ranged from not at all, rarely, 

moderately, and most often. 

As might be expected, defense contractors scored higher than non-defense contractors in every 

category, as communication is an important first step to obtaining contracts. None of the 

methods, however, were particularly dominant, and all were less than 50 percent. The high was 

only 46.9 percent, pointing to broad agency announcements. Next was business associate at 45.9 

percent, and then Commerce Business Daily at 43.8 percent. The average overall response by 

defense contractors was 33.1 percent compared with only 14.9 percent by non-defense 

contractors. 

The most frequent response by defense contractors was not at all, which appeared 40.7 percent of 

the time. Only two-thirds of the non-defense contractors responded, which probably means that 

only about 10 percent of the companies actually communicate with DoD at all. The not at all

answer overwhelmingly dominated the non-defense contractors responses; in fact, for some of 

the methods nearly 80 percent cited not at all. The following chart presents the results to 

question 8 on page 16. 

 
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Sources of Awareness of Federal Opportunities (Pg 16-8)

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

L. Business associates

K. Newspapers

J. Society announcements

I. Professional journals

H. Trade shows

G. Write Ins

F. DoD Website

E. E-mail

D. Professional meetings

C. BAA's

B. Planning briefings

A. CBD

Non-Defense Contractors

Defense Contractors

6.5 Methods Government Uses to Inform Companies of Procurement Opportunities

Question 9 of page 16 asked companies to identify the best way to inform them of Defense and 

non-defense government procurement opportunities. The question listed twelve possible 

methods labeled from A to L. A blank category labeled M was provided for companies to writein and evaluate other methods. The four options ranged from not at all, rarely, moderately, and 

most often. 

E-mail distribution was the overwhelming first choice of defense contractors and non-defense 

contractors alike as the preferred method to learn about federal procurement opportunities. 

defense contractors registered a very strong 83 percent for the method with 91 of 147 companies 

answering most often in their response. Non-defense contractors scored 65.5 percent. Defense 

contractors scored 61.5 percent for broad agency announcements and more than 50 percent for 

several others. Non-defense contractors registered low percentages for all other methods. About 

13 defense contractors and 14 non-defense contractors submitted write-ins. These mentioned 
90

direct mail and telephone contact as additional alternatives. The chart below presents these 

results. 

Best Way to Inform of Federal Opportunities (Pg 16-9) 

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

L. Business associates

K. Newspapers

J. Society announcements

I. Professional journals

H. Trade shows

G. Write Ins

F. DoD Website

E. E-mail

D. Professional meetings

C. BAA's

B. Planning briefings

A. CBD

Non-Defense Contractors

Defense Contractors

6.6 Why Some Companies Stopped Supplying DoD

Question 10 on page 17 asked companies to identify reasons they stopped providing goods and 

services to the Defense Department since 1998. The question listed eleven possible reasons 

labeled from A to K. A blank category labeled L was provided for companies to write-in and 

evaluate other methods. The four options ranged from not at all, slightly, moderately, and 

greatly. 

The response to question 10 was very small. Only 29 defense contractors and 36 non-defense 

contractors responded to the question. In addition, the most commonly checked reason was not 

at all, which accounted for more than two-thirds of the answers. Keeping this in mind, the high 

percent reason was that the commercial market was more profitable. This, however, was only 31 

percent for defense contractors and 36.9 percent for non-defense contractors. The chart below 

shows these results. 
91

Reasons Stopped Supplying DoD (Pg 17-10)

0% 5% 10% 15% 20% 25% 30% 35% 40%

K. Reoriented focus

J. Size discrimination

I. Payment delays

H. Business acquisition

G. New ownership

F. Sold business

E. Commercial profitability

D. Decreased demand

C. Procurement practices

B. DoD regulations

A. Acquisition regulations

Non-Defense Contractors

Defense Contractors

6.7 Additional Procurement Information

Questions 11 to 19 on page 17 and 18 were yes/no questions that further distinguish the 

companies in the database between defense and non-defense suppliers. Question 11 was used to 

determine the major division between defense and non-defense contractors used throughout this 

report. To restate the results of this question, a total of 158 companies reported they had acted as 

a prime or a sub-contractor on a DoD contract within the past five years and 269 reported they 

had not. Responses to this question and the others are shown in the following table. 
92

Defense/Industry Involvement 

DoD Contractors Non-DoD Contractors 

Yes/No Questions on Page 17 and 18 Number of 

Responses % Yes Number of Responses % Yes 

11. Has your Business acted as a Prime or a Sub-Contractor 

on a DoD contract within the past five years? 158 100.0% 269 0.0% 

12. If you answered “Yes” to Question 11, did your Business 

sell product to the Department of Defense as a commercial 

or non-developmental item? 

150 60.0% 7 0.0% 

13. Does your Business currently have a defense contract? 157 59.9% 266 1.5% 

14. If your Business sells products and services directly to 

the Department of Defense, are they sold at catalog pricing, 

i.e., from a published price list? 

135 41.5% 91 31.9% 

15. Do you have a separate business unit, subdivision, or 

office that is devoted exclusively to providing R&D services 

to the federal government? 

158 7.6% 263 0.8% 

16. Do you have a separate business unit, subdivision, or 

office that is devoted exclusively to manufacturing products 

for the federal government? 

157 8.9% 262 0.0% 

17. Do you use the same employees, facilities and 

equipment to manufacture commercial and DoD products? 157 93.6% 145 63.4% 

18. If your Business sells product directly to the DoD, is the 

production lead-time quoted the same as quoted to your 

commercial customers? 

124 81.5% 47 76.6% 

19. Is your Business registered in Central Contractor 

Registration (CCR)? 135 74.1% 242 19.0% 

6.8 What Would Interest You to Become Supplier Again?

Question 20 on page 18 asked companies to identify reasons they found working with federal 

government agencies and DoD agencies on R&D, technology development, and engineering in 

developing new products unproductive. Each question listed five reasons labeled from A to E. 

A blank category labeled F was provided for companies to write-in and evaluate other reasons. 

The four options ranged from disagree, slightly agree, agree, strongly agree. 
93

Only 21 defense contractors and close to 200 non-defense contractors responded to this question. 

Non-defense contractors were strongest in their response to fair practices in purchasing and a fair 

profit at 48.7 percent. This was also the strongest issue for the few defense contractors that 

responded. This might indicate a concern that existing defense contractors are too entrenched 

and difficult to dislodge from the DoD business. The write-ins were submitted mostly by 

companies not interested in government work. The chart presents these results. 

Would Supply If Government Changed (Pg 18-20) 

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

F. Profitability

E. E-commerce practices

D. Contract Sustainment

C. Order volumes

B. Purchasing cycles

A. Procurement policy

Non-Defense Contractors

Defense Contractors

6.9 General Comments 

The final page 19 of the survey gave companies the option to write general comments. A total of 

173 companies did so. Sixty-two companies were defense contractors, 93 were non-defense 

contractors, and another 18 were not identified as either. Many of the comments were statements 

of exemption and many others were clarifications of certain responses to other questions in the 

survey. A number of companies were upset with being asked to complete the survey when they 
94

considered it did not apply to them. Many others made useful comments. Selected comments 

are reproduced here. 

6.9.1 Defense Contractors

1. This survey was mostly not applicable to our operations. We make no finished goods. We 

sell raw materials to plastics industry. Other manufacturers make end products. Once in a 

great while we might supply product for a customer who is using our product in a DoD 

application. 

2. Most of the survey does not apply to our company. We are a manufacturing company and do 

not perform R&D on any regular basis. 

3. Government contracts tend to be limited in quantity releases, indefinite deliveries, etc. which 

for small companies makes it hard to be economical in buying materials and components. 

My company tends to release only small quantities at a time due to limited funds, thereby 

putting small businesses at a disadvantage. 

4. The government acquisition needs to focus on Best Value efforts and Buying Practices. The 

small gross profits on particular contracts do not make it economically feasible to operate a 

business, particularly on FFP contracts. 

5. Ready, willing and able to accept government contracts. However, since our manufacturing 

is based in Germany, this has become difficult. 

6. Our company was founded to sell products to DoD. Today, we only support a small amount 

of old military spare parts. We would be interested in working with the Government but we 

don't see a clear financial return. 

7. In general DoD does not often contract for components on a multi-year basis like most 

commercial firms. Budget constraints cause many delays in funding, which impacts a 

supplier. The escalation of costs is not fully recoverable. 

8. This survey should have been sent to business leaders instead of engineers. I am an 

individual contributor for design and analysis rather than business development. Therefore, 

this survey has been answered with my very limited knowledge of the business field. 

9. Conducting business with the federal government generally requires employees with 

extensive experience in this area to be successful. As a small company, funding specialized 

resources for an area that has such long sales cycles and smaller profit margins is difficult. 

Only now that we have grown to a sufficient size are we now able to begin adding these 

resources and are beginning to reach the government market. 

10. We do very little contracting with any branch of the government. Therefore, we have an 

extremely small knowledge of the various programs for research and the like. 
95

6.9.2 Non-Defense Contractors

1. My company serves the metal casting industry...primarily patternmakers, mould makers and 

plastic tool builders. We have not solicited the U.S. government for business mainly because 

of paperwork complexity and supplier qualification requirements. 

2. Is there a document available that explains the how to, where to, and what to regarding 

government business? Is there an easy way to find sorted opportunities to bid on instead of 

looking for a needle in a haystack? 

3. This survey has little to do with the fine and specialty chemical business of my company. 

Our only interaction is the production of anhydrides which are subsequently used by other 

companies for the possible production of composite materials. 

4. Although everyone at my company loves their country, the political and social agendas 

embedded into the federal contract and procurement process along with the incessant 

volumes of bureaucratic record keeping make it impossible for us to seek business with the 

government. We would love to sell plastics to the government if it behaved like an ordinary 

customer. This would be the same for joint development efforts if they were ordinary 

business relationships. Unfortunately, we are not resourced properly to participate as things 

stand today. This survey may be the starting point to turn this situation around. 

5. This was very difficult to complete due to the fact that the longest portion of our internal 

R&D is done by out Swiss parent company overseas. I answered these questions with data 

from our US department to the best of my ability. We do virtually no R&D here in the states. 

6. It is hard to answer questions about the DoD because we've never thought much about 

opportunities with the DoD. We did have two men from the DoD stop in and review our 

operations just to familiarize themselves with our capabilities and how they may apply. I 

can't make much comment because I can’t pass judgment in many of these areas. We haven't 

worked with the federal Government, so I don’t know how hard or easy it may be. 

7. My company’s engineering resins would provide products for government contracts, but we 

are not aware of any government applications that would utilize our nylon and pet resin 

compounds. 

8. My company has only provided test material to NASA. We have never done any other 

business with the DoD. We do not have an R&D function. That is why "N/A" is used as an 

answer on several questions. We are willing to look at future defense projects and are willing 

to share our knowledge. 

9. Since our business centers around converting synthetic fibers into short cut lengths, we do 

not perform much R&D work on the end fiber products. Instead, our R&D and design & 

engineering is focused on improving our production machinery and production processes. 

10. Most of this survey does not apply to this company. We have never worked with the US 

government. Our R&D is strictly for internal use. 
96

11. We have no experience (to the best of my knowledge) dealing with DoD or non-DoD 

agencies for the last 50+ years. I could not accurately answer most questions without more 

information and/or experience. 

12. As a custom plastics manufacturer, we are not involved in pure research. We can however 

offer our engineering and manufacturing experience and expertise in producing complex, 

difficult to mold, products thus offering economic and performance improvements. 

13. We have no interest in doing business with the federal government. 

14. Most questions not answered because we have no experience in the given field. 

15. My company wishes to focus 100% on the commercial market. 

16. My company holds or has pending patents on some of the most compelling technology in the 

power electronics industry. Certainly this technology could benefit DoD or other federal 

agencies. We will be presenting a professional advancement course on some of these 

developments at Power Systems World in October 2002. If we can be of service and we can 

be paid for that service we would have an interest in doing business with the government. 

17. I found that filling out this survey was a great waste of time. 

18. My company is a commercial manufacturer of vacuum and flow instrumentation. We fund 

our own R&D. We occasionally sell our products to DoD and other government agencies 

under our commercial terms and conditions at published catalogue spec.'s and prices. We 

will build special products for DoD and other government agencies if contacted by them 

directly, but only under our commercial terms and conditions. 

19. We have no interest in government contracts therefore this questionnaire is irrelevant. Why 

don't you have this as an exemption up front? 

20. No incentive to share R&D without near term revenue. 

21. I have no experience with the DoD and therefore cannot answer the majority of questions. 

22. We would love to do business with the U.S. Government, but we are a small company. The 

government seems to only award contracts to big companies. We are a low cost 

manufacturer and our R&D is spent on machines we make ourselves to improve quality, cost 

and efficiency. 

23. My company is a state-of-the-art startup company. Funding and policies to favor/ease 

market entry are the areas that would interest us the most. We are selling the future of highspeed internet access, voicemail communications and video transmission. Government 

policies and laws to nurture and aid in the viability of our efforts are most welcomed. 

24. My company is interested in collaborating with DoD in R&D areas that are aligned with its 

business objectives. The empowerment of DoD research laboratories to select their own 

research partners can increase the participation of companies like ours in DoD R&D. 

25. Our company's last DoD contract was with LLNL about 10 years ago. We worked on a 

proposal for about 18 months for a DoD subcontract from a major prime contractor, 

expending about $100,000 and did not win the job. Proposal efforts seem MUCH too 
97

expensive and involved... we made the decision to focus on commercial and industrial 

business instead of government. 

26. We are a very small company and do not provide R&D services for any other organizations, 

just for our own product development