In a recent interview with Australian media, United States (US) National Security Advisor, Jake Sullivan remarked that he wanted to see 2-3 signature AUKUS Pillar II advanced capability projects “launched and underway by the time the administration finishes” on January 20.
The urgency of Sullivan’s remarks was likely good news for start-ups, small-to-medium enterprises, research communities, and private capital funders in the broader commercial technology innovation ecosystem, who almost three years since the establishment of Pillar II are patiently waiting for a sign that their investments in advanced capability workstreams will prove worthwhile.
Aligning the culturally divergent worlds of commercial technology innovation and government procurement is not a new problem. To the contrary, it is so vexing that the path start-ups in the innovation ecosystem tread from the development of a prototype to the award of a government contract is often referred to as the ‘valley of death’. What is new, however, is the Australian, US and United Kingdom (UK) Governments attempting to do this in coordination with one another.
Commercial technology and national security
The utility of commercial technology to national security has recently been demonstrated by the Ukraine crisis and collaborations between the US Government and companies like NVIDIA and SpaceX.
Moreover, officials in both Australia and the United States have increasingly highlighted the importance of the broader innovation ecosystem – encompassing commercial technology entities such as start-ups, small-to-medium enterprises (SMEs), research institutions, private capital funders, and other non-traditional defence suppliers – to initiatives like AUKUS Pillar II.
Notwithstanding this cooperation imperative and plenty of goodwill between the government and the innovation ecosystems in all three AUKUS countries, a cavernous cultural divide and mismatched incentives often deter collaboration between the two.
For AUKUS Pillar II to reach its full potential, there is an urgent need to align incentives between the innovation ecosystem and government. One issue that has historically prevented collaboration is the poor ‘market’ thesis; in other words, the weak economic incentive for commercial technology firms to engage with government markets.
Unpacking collaboration challenges
A recent report for the United States Studies Centre by this author assesses (among other things) how this challenge affects the national security innovation base in Australia and the United States. This refers to the collective of traditional defence and commercial technology firms who sell products to the government for national security purposes.
The report attributes the poor ‘market thesis’ to confusing government demand signals; complicated pathways to scalability; restrictive export controls that complicate selling commercial versions of a product; and limited market size which prevents economies of scale.
Add to this problems identifying opportunities in the defence market in the first instance, and it isn’t difficult to see why many commercial technology companies might be deterred from working with the Australian and US Governments altogether.
Aligning incentives for AUKUS Pillar II
To leverage cutting-edge technology from the commercial technology sector for AUKUS Pillar II, the Australian and US Governments must focus on becoming more attractive customers to industry by strengthening the economic incentives for the defence market.
Fortunately, both governments have taken steps to address this challenge, which the AUKUS partners could progress at the trilateral level. For example, the Australian Government has introduced initiatives like Defence Trailblazer, a $240 million program to cultivate innovative sovereign capability by encouraging greater collaboration between research communities, defence industry and the Australian Department of Defence (AU DoD). It seeks to promote and shorten the commercialisation pipeline for promising initiatives.
Meanwhile, the US Government has pioneered initiatives like the Blue Unmanned Aerial System program (Blue sUAS), which aggregates the US Government’s purchasing power to increase commercial drone supply for the US Department of Defense (US DoD). Importantly, this program has emphasised developing “friendly-nation industrial base(s) to produce best-in-class capabilities and achieve scale economies for vendors.”
To take this cooperation to the next level, the AUKUS partners should consider emulating the success of the US’ Blue sUAS program – which has seen participating drone companies sell their products to the US DoD, industry and law enforcement. This would involve standardising requirements for specific technologies such as underwater drones within AUKUS Pillar II.
In effect, this would improve the collective purchasing power of AUKUS Governments and improve suppliers’ ability to produce economies of scale. While this may require parallel conversations about interoperability and interchangeability, the AUKUS partners have already demonstrated an ability to do this. For example, developing common trilateral algorithms to enhance information sharing from Boeing P-8 maritime surveillance aircraft sonobuoys.
By collaborating to improve economic incentives for the defence market, the AUKUS governments may succeed in aligning the innovation ecosystem with government aims and objectives for AUKUS Pillar II. Progressing this work in a trilateral formation will undoubtedly be more challenging at the outset, but by working together to leverage our innovation ecosystems, we will likely go further, faster.
