Firms think twice before investing in DoD.

• Author: Erwin, Sandra I.
• Position: Defense Watch

* The United States has the most technologically advanced military force. But Pentagon officials worry that the innovation gap is rapidly narrowing.

Adversaries learn quickly. Just like they managed to defeat U.S. armored vehicles in recent wars with relatively unsophisticated buried bombs, they will find other means to counter American technology. Pentagon strategists predict enemies will use nontraditional weapons such as satellite jamming and computer viruses to disable U.S. military hardware.

The Pentagon needs to get creative as it plans the weapons of the future, officials have said, and it needs private-sector help.

Such calls for public-private collaboration to build the nation's technology future should be music to corporate executives' ears. But these are unusual times. Companies were happy to benefit from the military budget largesse of the past decade, but they know the gravy train is grinding to a halt. Those companies that are committed to the defense business are now expected to "put their skin in the game," as was suggested by Air Force Lt. Gen. Christopher C. Bogdan, program executive officer of the F-35 Joint Strike Fighter.

Corporations in the defense sector are a rare breed. Unlike mainstream businesses, they are not truly operating in a free market and depend on the government for most of their revenues. But they are just as bottom-line driven as any other sector of the economy, and they must weigh national security concerns against shareholders' pressure to deliver profits.

Whether companies are ready to take on more risks in defense projects as research budgets decline is still unclear. The Pentagon has made specific pleas to companies to target their corporate independent research-and-development investments, known as IR&D, at areas where the military needs the most help. The problem, executives contend, is that the Pentagon doesn't provide detailed enough forecasts of what technologies it will need, nor does it allow for open lines of communication between government and industry representatives to discuss specifics, one on one.

When the Defense Department does provide seed money for new technologies, it often does not plan to transition from the lab to the marketplace. That puts companies in the position of having to spend their own money to commercialize a product. When contractors do not have the cash to do that, technologies are left to wither.

During a recent industry meeting in Arlington, Va., Deputy Assistant...