Deciphering the 'Colors of Money': A Guide to Defense Department Funding
The following is an excerpt from the NEW textbook Hacking for Defense, a graduate-level course taught at more than 70 colleges and universities worldwide and on three continents. More than 2,000 students have successfully completed the program.
Government funding can become the lifeblood of freshly minted products. Yet, defense funding, occasionally termed 'Appropriations from Congress,’ is difficult to understand because it is broken down into specific categories in the Department of Defense Financial Management Regulation (DoD FMR). Here's a simplified breakdown:
Research, Development, Test & Evaluation (RDT&E): Aimed at early stage solutions with low maturity, this 2-year obligation funds the research, development, testing, and evaluation of equipment, software, and other technological advancements.
Procurement: Appropriate for more mature solutions, this 3-year obligation covers purchases exceeding $250,000, such as aircraft, missiles, and more. It's an investment in system acquisition and modifications.
Operations & Maintenance (O&M): A 1-year obligation covering operational and maintenance costs.
Military Personnel (MILPERS): Also a 1-year obligation, dedicated to funding military personnel.
Military Construction (MILCON): Serving a 5-year obligation, this funds the construction of military infrastructures.
A solution's technological maturity often dictates its funding category. For instance, an innovative solution might start with RDT&E funds, and as it matures, move towards Procurement or O&M funds. Furthermore, some solutions fit specific categories by virtue of their ultimate purpose, such as those aligned with military construction benefiting from MILCON funding.
Noteworthy too is the category of Revolving Funds, which finances cyclic business-type operations in various government sectors. These funds come with the advantage of being available without the need for repeated congressional approval.
Hackers should be aware that beyond these principal categories, there are subcategories tied to specific initiatives, ranging from health programs to drug interdiction efforts. They're denoted in "lines of accounting" found in funding documents and contracts.
It's also essential to realize that various defense organizations draw from multiple appropriations. For example, a DoD lab might be funded by a blend of MILPERS, O&M, RDT&E, MILCON, and even Procurement. While the allocation can get intricate, most organizations have a steady funding mix, such as 80% RDT&E and 20% MILPERS.
In conclusion, it's crucial to discern the best funding category for your solution based on its maturity and purpose. Being well-informed can help you ask potential customers the right questions to determine if they have the categories of funding you need to position your solutions for success.
Jeff Decker, PhD, is managing director of Tech Transfer for Defense at Stanford University’s Precourt Institute of Energy and is a co-instructor of the graduate-level Hacking for Defense course. Learn more at techtransferfordefense.stanford.edu or sign up for early access and more information on the new H4D Textbook at h4dtextbook.com.