I 118th CONGRESS 1st Session H. R. 3147 IN THE HOUSE OF REPRESENTATIVES May 9, 2023 Ms. Houlahan (for herself, Mr. Fallon , and Mr. Wittman ) introduced the following bill; which was referred to the Committee on Armed Services A BILL To establish a defense industrial base advanced capabilities pilot program.

1. Defense industrial base advanced capabilities pilot program (a) Establishment (1) In general The Under Secretary of Defense for Acquisition and Sustainment shall carry out a public-private partnership pilot program to accelerate the scaling, production, and acquisition of advanced capabilities for national security by creating incentives for investment in domestic small businesses or nontraditional businesses to create a robust and resilient defense industrial base. (2) Goals The goals of the public-private partnership pilot program are as follows: (A) To bolster the defense industrial base through acquisition and deployment of advanced capabilities necessary to field Department of Defense modernization programs and priorities. (B) To strengthen domestic defense supply chain resilience and capacity by investing in innovative defense companies. (C) To leverage private equity capital to accelerate domestic defense scaling, production, and manufacturing. (b) Public-Private partnerships (1) In general In carrying out subsection (a), the Under Secretary shall enter into public-private partnerships, consistent with the phased implementation provided for in subsection (e), with for-profit persons using the criteria set forth in paragraph (2). (2) Criteria The criteria referred to in paragraph (1) shall include the following: (A) The person shall be independent. (B) The person shall be free from foreign oversight, control, influence, or beneficial ownership. (C) The person shall have commercial private equity fund experience in the defense and commercial sectors. (D) The person shall be eligible for access to classified information (as defined in the procedures established pursuant to section 801(a) of the National Security Act of 1947 ( 50 U.S.C. 3161(a) )). (3) Operating agreement The Under Secretary and a person or persons with whom the Under Secretary enters a partnership under paragraph (1) shall enter into an operating agreement that sets forth the roles, responsibilities, authorities, reporting requirements, and governance framework for the partnership and its operations. (c) Investment of equity (1) In general Pursuant to public-private partnerships entered into under subsection (b), a person or persons with whom the Under Secretary has entered into a partnership shall invest equity in domestic small businesses or nontraditional businesses consistent with subsection (a), with investments selected based on technical merit, economic value, and the Department’s modernization priorities. (2) Authorities A person or persons described in paragraph (1) shall have sole authority to operate, manage, and invest. (d) Loan guarantee (1) In general The Under Secretary shall provide an up to 80 percent loan guarantee, pursuant to the public-private partnerships entered into under subsection (b), with investment of equity that qualifies under subsection (c) and consistent with the goals set forth under subsection (a)(2). (2) Pilot program authority The temporary loan guarantee authority described under paragraph (1) is exclusively for the public-private partnerships authorized under this section and may not be utilized for other programs or purposes. (3) Subject to operating agreement The loan guarantee under paragraph (1) shall be subject to the operating agreement entered into under subsection (b)(3). (4) Use of funds Obligations incurred by the Under Secretary under this paragraph shall be subject to the availability of funds provided in advance specifically for the purpose of such loan guarantees. (e) Phased implementation schedule and required reports and briefings The program established under subsection (a) shall be carried out in two phases as follows: (1) Phase 1 (A) In general Phase 1 shall consist of an initial pilot program with one public-private partnership, consistent with subsection (b), to assess the feasibility and advisability of expanding the scope of the program. The Under Secretary shall begin implementation of phase 1 not later than 180 days after the date of the enactment of this Act. (B) Implementation schedule and framework Not later than 90 days after the date of the enactment of this Act, the Secretary shall submit an implementation plan to the congressional defense committees on the design of phase 1. The plan shall include— (i) an overview of, and the activities undertaken, to execute the public-private partnership; (ii) a description of the advanced capabilities and defense industrial base areas under consideration for investment; and (iii) implementation milestones and metrics. (C) Report and briefing required Not later than 27 months after the date of the enactment of this Act, the Secretary shall provide to the congressional defense committees a report and briefing on the implementation of this section and the feasibility and advisability of expanding the scope of the pilot program. The report and briefing shall include, at minimum— (i) an overview of program performance, and implementation and execution milestones and outcomes; (ii) an overview of progress in— (I) achieving new products in production aligned with Department of Defense needs; (II) scaling businesses aligned to targeted industrial base and capability areas; (III) generating defense industrial base job growth; (IV) increasing supply chain resilience and capacity; and (V) enhancing competition on advanced capability programs; and (iii) an accounting of activities undertaken and outline of the opportunities and benefits of expanding the scope of the pilot program. (2) Phase 2 (A) In general Not later than 30 months after the date of the enactment of this Act, the Secretary may expand the scope of the phase 1 pilot program with the ability to increase to not more than three public-private partnerships, consistent with subsection (b). (B) Report and briefing required Not later than five years after the date of the enactment of this Act, the Secretary shall provide to the congressional defense committees a report and briefing on the outcomes of the pilot program under subsection (a), including the elements described in paragraph (1)(C), and the feasibility and advisability of making the program permanent. (f) Termination The authority to enter into an agreement to carry out the pilot program under subsection (a) shall terminate on the date that is five years after the date of the enactment of this Act. (g) Definitions In this section: (1) Congressional defense committees The term congressional defense committees has the meaning given the term in section 101(a)(16) of title 10, United States Code. (2) Domestic business The term domestic business has the meaning given the term U.S. business in section 800.252 of title 31, Code of Federal Regulations, or successor regulation. (3) Domestic small businesses or nontraditional businesses The term domestic small businesses or nontraditional businesses means— (A) a small business that is a domestic business; or (B) a nontraditional business that is a domestic business. (4) Free from foreign oversight, control, influence, or beneficial ownership The term free from foreign oversight, control, influence, or beneficial ownership , with respect to a person, means a person who has not raised and managed capital from a person or entity that is not trusted and who is otherwise free from foreign oversight, control, influence, or beneficial ownership. (5) Independent The term independent , with respect to a person, means a person who lacks a conflict of interest accomplished by not having entity or manager affiliation or ownership with an existing fund. (6) Nontraditional business The term nontraditional business has the meaning given the term nontraditional defense contractor in section 3014 of title 10, United States Code. (7) Small business The term small business has the meaning given the term small business concern in section 3 of the Small Business Act ( 15 U.S.C. 632 ).