– Government contractors are recognizing the increasing need for artificial intelligence and machine-learning technologies in their offerings.
– American investment in hypersonic weapons represents a fledgling opportunity that contractors should become familiar with.
– The Biden administration’s clean energy initiatives make it imperative for contractors to have a handle on their procurement processes and operations.
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Companies serving the federal government find themselves in a dynamic ecosystem characterized by next-generation technologies, increasingly sophisticated near-peer threats, and global demand for a clean energy economy. Businesses with relevantly skilled employees and in-demand capabilities will prove invaluable to their federal government customers. With such opportunity also comes a heightened need for detailed data management, thorough compliance documentation and zero-trust information security.
Innovation and the evolving battlefield
The nature of defense and government services continues to evolve. The battlefield itself has spread from land, to sea, to sky, to cyberspace and, lastly, to outer space. As if the universe wasn’t enough, discussions are brewing around the metaverse—how can we use it to protect our physical homeland, and what in the metaverse itself will need to be protected?
With the evolution of the battlefield come new government needs and strategies for defense and civilian services. Per USAspending.gov data as of Jan. 20, the number of prime contract and grant actions referencing artificial intelligence and machine learning increased from 372 in fiscal year 2017 to 2,413 in fiscal 2021—a jump of nearly 550%.
The dollar value of contracts centered on AI and machine learning has also trended upward, from $226.2 million in fiscal 2014 to a peak of $2 billion in fiscal 2020 before a slight decline to $1.74 billion in fiscal 2021—with a compound annual growth rate from fiscals 2014 to 2021 of nearly 34%. Growth is primarily driven by the Department of Defense, which accounted for 73.1% and 62.4% of the total spending in 2020 and 2021, respectively.
New needs and strategies mean new capabilities and skill sets are required to serve the government going forward. Given the tight labor market and competitive hiring environment, businesses with relevantly skilled computer and data scientists will continue to be attractive targets for mergers and acquisitions.
Hypersonics
Hypersonic technology—which powers highly maneuverable missiles that fly at Mach 5 (five times the speed of sound) and lower altitudes—is revolutionizing weaponry. Such speed and maneuverability reduce the window for detection and limit the opportunity for adversaries to intercept missiles. This most recent arms race has the United States competing with China and Russia to develop successful hypersonics programs and adequate infrastructure to support them.
According to the Congressional Research Service, U.S. hypersonic weapons will be conventionally armed and “will likely require greater accuracy and will be more technically challenging to develop than nuclear-armed Chinese and Russian systems.” In the United States, research programs are underway via the Navy, Army, Air Force, and Defense Advanced Research Projects Agency, or DARPA.
The fiscal 2022 National Defense Authorization Act would authorize approximately $2.7 billion related to hypersonics technology via the following programs:
| Program | Authorization in $millions |
| Navy: Conventional Prompt Strike Program | $1,498.3 |
| Army: Long-Range Hypersonic Weapon Program | $300.9 |
| Air Force: Hypersonic prototyping | $438.4 |
| Defense-wide: Hypersonic defense | $309.8 |
| Hypersonic engineering and manufacturing development | $111.5 |
| Joint hypersonic technology development and transition | $51.3 |
| Total | $2,710.2 |
The U.S. Government Accountability Office estimates total investment in hypersonic weapons and related technologies will approach $15 billion by 2024 and will primarily be handled by the DOD, Department of Energy and NASA. (The estimate combines actual figures for fiscals 2015 through 2020 and expectations for 2021 through 2024.) The ultimate trajectory of the hypersonics market will depend on a variety of factors, including cost, utility, and successful development and deployment. U.S. programs are still in the test phase, making the outlook of the hypersonics market unknown—in terms of both size and time horizon.
Contractors looking to participate in the growing hypersonics market should be prepared for stringent compliance requirements, given the DOD end customer and heightened information security associated with a modern-day arms race. This, paired with the Biden administration’s focus on supply chain security and resiliency, will require extreme supply chain transparency and related data management capabilities.
Catalyzing America’s clean energy economy
The Biden administration continues the trend of recent administrations by issuing a steady flow of executive orders. On Dec. 8, 2021, President Joe Biden signed an order that attempts to use the scale and procurement power of the federal government to “catalyze America’s clean energy economy.” This comes as no surprise, given that Biden has touted a focus on climate initiatives since embarking on the campaign trail.
The executive order outlines five quantitative targets relating to levels of carbon pollution-free electricity (by 2030), zero-emission light- and heavy-duty vehicle acquisitions (by 2027 and 2035, respectively), a net-zero emissions building portfolio (by 2045), and net-zero emissions from federal procurement and overall federal operations (both by 2050).
In addition to setting these ambitious targets, the executive order also speaks more broadly to new principles that should govern procurement and operations moving forward. These pillars, according to the order, include:
- Achieving climate-resilient infrastructure and operations
- Building a climate- and sustainability-focused workforce
- Advancing environmental justice and equity
- Prioritizing the purchase of sustainable products, such as products without added perfluoroalkyl or polyfluoroalkyl substances, known as PFAS
- Accelerating progress through domestic and international partnerships
These broad pillars have the potential to revolutionize federal procurement practices—not only what is being procured but how it is procured and from whom. They suggest an attention to detail required for all aspects of a company’s operations and supply chain. Tools, processes and documentation put in place to measure and monitor climate goals will likely overlap with or run parallel to those put in place for national security. Put simply, it will be imperative for companies to have a handle on their supply chains.
Federal government contractors should acquire the talent and capabilities required to help the federal government achieve these goals while evolving their operations to demonstrate their ability to be a sustainable, climate-focused ally and partner to their customer. This could include manufacturing products with different materials, or implementing methods of measuring and monitoring climate impacts of projects, processes or general operations.
The takeaway
Contractors with the employees and capabilities to innovate around next-generation technologies and execute clean energy economic initiatives will be well positioned to serve federal government customers. Opportunities will be accompanied by stringent requirements for data management and security, and in some cases updated processes for measuring how procurement practices affect climate goals. Companies that rise to those challenges, though, can expect to thrive.
