DEFENSE DEPARTMENT

NEWS FROM AUVSI DEFENSE: Wary of China, Pentagon to Launch ‘Trusted Capital Marketplace’ This Fall

8/20/2019
By Yasmin Tadjdeh
Ellen Lord

Photo: Defense Dept.

To help bolster the industrial base against potential adversaries, the Defense Department is planning to kick-start its “Trusted Capital Marketplace” project this fall, said the undersecretary of defense for acquisition and sustainment Aug. 20.

The effort, which the Pentagon announced earlier this year, is in response to growing concerns about foreign nations such as China investing in U.S. companies and how that could affect national security, said Ellen Lord. The goal is to link technology startups with trusted sources of capital. 

Last year, the Pentagon released a report — “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States" — which fulfilled President Donald Trump’s Executive Order 13806, Lord noted.

“The idea here is that we don't often look down into the fourth, fifth, sixth, seventh layer of our supply chain to understand where we're sole source or where we're dependent on a foreign entity that might not be a trusted source,” she said during remarks at the Association for Unmanned Vehicle Systems International’s Defense-Protection-Security Conference in Washington, D.C.

Particular focus areas for the Defense Department are rare earth elements as well as small unmanned aerial systems, she said. That’s an “area where China has flooded our market to the point where we do not have a resilient and secure industrial base,” she noted.

Following the release of the report last year, the Pentagon has worked to invest in areas that strengthen its supply chain, she said. However, much of this is focused on defending against undesirable foreign encroachment into the U.S. tech sector.

“A great deal of our time in acquisition and sustainment is spent on what's called CFIUS,” Lord said, referring to the Committee on Foreign Investment in the United States. “We basically have the legal right to intervene when a foreign entity wants to acquire a U.S. company that has critical technology relating to our national defense.”

But playing defense only gets one so far, Lord said. “We believe we need to play a little bit more offense.”

To that end, the Pentagon plans to roll out the Trusted Capital Marketplace in late October or early November, she said.

“Our objective is to get secure sources of capital together with typically small, innovative companies that have technology and early-stage products in the sectors that we identified in this [Executive Order] 13806, ... to try to get investment in areas that the Department of Defense thinks are critical,” she explained.

Lord noted that it would be illegal for the government take a single investor and hook them up with a company. “But I can create an environment where DoD states what our requirements are, what our needs are, and bring a number of companies together ... along with a lot of vetted sources of capital, and allow them to develop their own ecosystem and begin to invest in one another,” she said.

The initial focus will be on small drone technology, where the military faces a deficit in capability, she said.

“There has been great work done by the Army in this area,” Lord said. “We want to build on that. And we want to make sure that we brand certain companies, large groups of companies as those that the Department of Defense is interested in and would like to see mature their products.”

Topics: Defense Department

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