March 20, 2024

Podcast: Emerging Technology in the FY24 NDAA

The Eyes on Washington Podcast Special Miniseries: The NDAA

In this episode of our Eyes on Washington Podcast Special Miniseries about the National Defense Authorization Act (NDAA), national security attorney Dan Sennott sits down with corporate and securities attorney David Cole and public policy attorney Paul Stimers. Their discussion centers around general themes in the fiscal year 2024 (FY 2024) NDAA related to emerging technology.

This Eyes on Washington Podcast Special Miniseries breaks down the National Defense Authorization Act, which is the yearly authorization of funding and policy for the entire U.S. Department of Defense (DoD). Hosted by attorney Dan Sennott, this miniseries delves deep into the FY 2024 NDAA, its wide-reaching provisions, policy initiatives and the associated laws being passed in Congress. In each episode of this miniseries, Holland & Knight attorneys will tackle specific topics and themes in the FY 2024 NDAA.

Dan Sennott: Hello I'm Dan Sennott, lead for the defense and national security team here at Holland & Knight. This is one in a series of podcasts in which we break down the fiscal year 2024 National Defense Authorization Act. Over the next several podcasts, I'll be joined by partners from throughout the firm that specialize in many different areas of law and policy that the NDAA covers. This week, we will focus on general themes in the FY24 NDAA related to emerging technology, and what we see in this year's NDAA that signals where DoD will be making substantial investments in the coming years. I'm joined today by two of my esteemed colleagues here at the firm. First, Paul Stimers, member of the Public Policy & Regulatory Group, and David Cole, a partner with the Holland & Knight Corporate M&A and Securities Group. Paul, why don't you give listeners a little bit of an overview of your background?

Paul Stimers: Thanks, Dan. I've been lobbying on emerging and disruptive technology matters before Congress and the administration for about 20 years. Much of that time focused on commercial spaceflight. I also am the founder and executive director of the Quantum Industry Coalition, the voice of the U.S. quantum industry before Congress and the administration, and I've done a fair amount of work on AI and internet politics as well.

Dan Sennott: Thanks, Paul. And, David Cole, can you give us a little bit of a thumbnail sketch of what you do here at the firm and your background?

David Cole: Sure. Thank you so much, Dan. Again, my name is David Cole. I'm a partner at Holland & Knight in our Corporate and Securities Group. My practice involves mergers and acquisitions and finance. The finance side of my practice involves early stage financing all the way through to mature stage financing, including debt, both commercial loans, as well as public offerings of bonds and notes, and I'm a federal securities lawyer, so I help companies with respect to capital markets transactions, including IPOs, other registered offerings of securities, tender offers, take private transactions, you name it. So it's, it's a corporate practice focused on M&A and finance.

Dan Sennott: Thanks so much. Let me start off with Paul. Paul, can you tell us a little bit about the NDAA, thousands of pages. Emerging technology is kind of what we've advertised in our discussion for today, which is a rather broad area. Can you break down for us, kind of the top three areas in emerging technology that kind of stood out for you in the FY24 NDAA?

Paul Stimers: For me, there were a couple of themes that ran through. Number one, we're trying to learn lessons from current conflicts about what the future of war is going to look like. And based on what we're seeing in Ukraine, for example, the future of war is going to look a lot more like unmanned vehicles, drones for targeting support, intelligence for munitions delivery, things like that. So the NDAA has a lot of provisions related to and funding authorization related to unmanned vehicles, both aerial and on the surface and under sea. The second thing I'd say is that there's efforts related to modernization of some of the back end of the Defense Department, the tail, if you will, and that looks like procurement and logistics efforts. And then the third thing is that we're seeing some investments in advanced and emerging technologies. And in particular, we're looking at things like quantum computing and quantum technologies assured of positioning, navigation and timing, things like that. So those three areas, I think, are what stood out to me in this bill.

So the NDAA has a lot of provisions related to and funding authorization related to unmanned vehicles, both aerial and on the surface and under sea. 

Dan Sennott: Great. And could we do a little bit more of a deep dive on unmanned systems? They're kind of two different components, I think, that are focused on in that in this year's NDAA. There is the acquisition of emerging technologies related to unmanned systems, but then there's also how are we managing proliferation of Chinese unmanned systems as well. Anything stand out there that our listeners need to know about regarding acquisition of Chinese or foreign technology?

Paul Stimers: Well, the NDAA thinks you should not do that. It's a little sterner than that, as it turns out. There are provisions limiting specifically the acquisition of Chinese-made drones. There's also provisions limiting Chinese logistical support software as well. Those are among the two big callouts in the NDAA. There are opportunities for companies to sell into the unmanned aerial vehicle space. There's also a lot in the NDAA for counter unmanned aerial vehicle activity, so base defense and things like that. Whether that's watching for incoming drones or countering them with munitions and so forth, that's a big part of the NDAA. And part of what we're seeing, both in the NDAA and the associated defense appropriations bill, is a desire to be able to acquire large numbers of relatively inexpensive drones that can be deployed, coordinated and expended as needed in an upcoming conflict.

Dan Sennott: And so that is similar to the DoD replicator program that was announced?

Paul Stimers: That is what the replicator program is designed to do, is in the drone context and others, is to be able to field large numbers of relatively inexpensive, relatively painless to lose vehicles, unmanned systems that can be used in a future conflict.

Dan Sennott: And do you see that as one of those lessons learned from Ukraine?

Paul Stimers: Absolutely. I think we're moving away from large, highly capable, but very vulnerable, targets. You know, in all ways. We've seen this on, the battlefield in Ukraine is very small. Drones have been able to disable tanks. We're seeing that in space. It's been the case for several years now that the Space Force has wanted to move away from large, juicy targets that could be easily attacked, and that would take a long time to reconstitute. We're seeing that at sea, where we're really starting to reexamine the capital ship model and the carrier model, especially in light of vulnerability to things like hypersonic weapons.

Dan Sennott: Right. And I want to come back to you to talk a little bit more about quantum and PNT, but let me transition real quick to David. David, what are your top three insights that you see? One of the things we were talking about before the podcast started is the NDAA and the appropriations bills are really good indications of where both the Department of Defense and Congress want to make future investments. And that can be really informative to companies that are looking to invest in those areas or produce in those areas. Is that right?

David Cole: Yeah, that's absolutely right. And so at Holland & Knight, we're very fortunate to get to work side-by-side with a number of contractors, both in the aerospace and defense industry as well as in the services sector. And one of the things that we typically do year over year over year is take a look at the NDAA for signals, and it's important to pick up on these signals if you're a government contractor, because they help you to figure out where you should spend your time and your energy and your efforts on human capital acquisition and on bidding and procurement opportunities. And looking at the NDAA this year, I think that government contractors should look at a few things. Number one is the fact that the DoD is also going to play a role in the intelligence community and intelligence gathering as well from space. The intelligence community has for many years relied on space-based assets for intelligence gathering, and the NDAA makes it clear that the Air Force is going to also play an important role in intelligence gathering from space. The other things that I think that government contractors can pick up on is that the United States is going to, again, continue to commit to creating some sort of launch capability, whether it's government launch capabilities or commercial launch capabilities. And the NDAA has opportunities for launch companies replete through it. And then finally, I think there's going to be a continued emphasis on communications, and that's communications between satellites and ground operations, whether in country or on the battlefield. And a number of government contractors will find opportunities in the NDAA to use artificial intelligence and other newly developing technologies to help them complete their missions for all of the services under the DoD.

And so at Holland & Knight, we're very fortunate to get to work side-by-side with a number of contractors, both in the aerospace and defense industry as well as in the services sector. 

Dan Sennott: Do you think that this year's NDAA has addressed many of the challenges, or at least some of the challenges, that companies and contractors that are working for the Department of Defense are facing related to foreign competition? Do you think that the NDAA, any particular provisions that you would call out to kind of help companies in that space?

David Cole: As Paul was saying earlier, there certainly are strong warnings not to use Chinese-based technologies. Certainly when it comes to drones, but also with respect to communications technologies, that's really nothing new. I mean, that's been going on for years. But, there will be opportunities for U.S. firms to redouble their efforts in communications because, frankly, the government has been focused for quite some time on developing U.S.-based communications technologies.

Dan Sennott: What are you telling your clients today about the uncertainty with regard to appropriations? With the NDAA, we know it passed every year for the last 63 years, the appropriations process is a little bit less certain. How are you advising your clients that are looking to invest in the sector?

David Cole: Yeah, that's a great question. Thank you, Dan. I mean, the one thing that many of our GovCon clients take solace in is the fact that we annually, for quite some time now, have passed Defense Authorization Act legislation significantly before we have a budget. And just this week, it was announced again that we'll have yet another continuing resolution. So as our friends on Capitol Hill continue to discuss somewhat adamantly the budget for FY24, the government contracting community, especially those that are focused on the DoD, have a much more clear insight into what's going to be available for them from an appropriations perspective.

Dan Sennott: And I know you do a lot of work, David, and Paul definitely does as well, with space companies in the space economy. Anything that really jumped out at you in the NDAA — you mentioned launch capabilities as an example and also intel gathering from space. Any policy changes that you saw or anything that jumped out at you that may make it easier to do business with the federal government in this area?

David Cole: So I'll let Paul sort of talk more about the policy angle, because from my perspective, I think it's sort of a continuation of U.S. policy to ensure that we have sufficient domestic capabilities to launch and to operate and maintain communications with through assets that are based in space. So I'm not sure that there's a change in policy, but I would let Paul comment on that. I think from a business and government contracting commercial perspective, I think it's clear that those contractors who are focused on intelligence gathering have new opportunities, not just working with three letter agencies, but now working also with a number of services within the DoD and programs within the DoD for intelligence gathering opportunities, and the tools that will be used for that intelligence gathering will be space-based tools, including communications tools and artificial intelligence tools, to help those contractors sift through masses and masses and masses of data in order to be able to find those needles in the haystack that allow companies to provide actionable intelligence to their government customers.

Dan Sennott: That's great. And that's a great segue to Paul. Paul, why don't you tell us a little bit about your observations regarding some of the space-related provisions in this year's NDAA?

Paul Stimers: I think you're absolutely right. This is a continuation of prior policy there. It's vitally important to the United States, from a national security perspective, to have assured access to space. It's vitally important to the United States to have assured positioning, navigation and timing to have assured intelligence gathering and dissemination capabilities. And so the NDAA really strives to make that happen and continue what's been a priority for several years in that regard. We are seeing the continued standing up of the Space Force from Space Command, Space Development Agency and all that, and there is a fair amount within the NDAA that focuses on how all of that is supposed to work and the commercial contracts that are involved there. And also on integrating space operations with allies and partners to make sure that we're working hand in glove with our allies across the globe. The primary focus of treating space as a warfighting domain, treating space as a contested and congested environment, which is an increasingly different way of viewing space than we previously have had. Previously, we could put exquisite, expensive platforms up in space and trust that they wouldn't be damaged or destroyed or otherwise interfered with. That is no longer the case at all. And so our focus is turning to resilience, turning to rapid reconstitution and turning to proliferation so that we deter attack in space.

Dan Sennott: That's great. Because we're starting to run out of time, I want to give just a couple of minutes your thoughts on quantum provisions in the NDAA, but then an overall environment and the leveraging of quantum computing within the Department of Defense.

Paul Stimers: So the Defense Department sees a variety of quantum technologies as important in the next few years. Nearest term is clocks and sensors for use in positioning, navigation and timing. If GPS is taken out, we need to be able to have our various military platforms know where they are and know when they are, and be able to work with each other and report back up the chain of command. So that's something that is of extremely near-term interest to the Defense Department. The department views quantum computing is also very important, but somewhat further out, and the NDAA reflects that. There's funding and authorization within the NDAA to do some research in quantum computing and a little bit of deployment, but it's still what I would classify as early stage, and the Quantum Industry Coalition did some work on that with the Armed Services Committee. The other thing I'd point to, just briefly, is AI. And there the NDAA really is looking at how the department should engage with AI and how it should limit the potential risks of AI, whether it's misinformation or the insertion of malicious code or things like that. In both cases, I think the department is taking a forward-leaning but cautious approach, and I think we'll see more of that in the upcoming NDAA and in years to come.

Dan Sennott: That's a great summary. I appreciate it. And, David, as we are wrapping up, last-minute thoughts on what you see based on the FY24 NDAA, what you see in the coming year from a business perspective for defense clients?

David Cole: Thanks, Dan. I think that the NDAA reflects the world is a dangerous place, and our world continues to expand. And as Paul has emphasized, we have to protect ourselves and our assets not only here on Earth, but now in space. And that's going to create all new opportunities for aerospace and defense companies, service providers and other government contractors to advance the mission of being able to protect the homeland and protect our assets throughout the world and in space. And this year's NDAA is merely a beginning for that. And I think that companies that invest in technologies and human capital and in business development opportunities in these areas will reap the rewards of their investment now and into the future.

Dan Sennott: Well said, David. And Paul, any parting thoughts on what you'll be telling your clients starting defense priorities in emerging technology?

Paul Stimers: I certainly agree with David. I would say that already we're seeing that the next NDAA, the FY25 NDAA process is under way in Congress. And so for any company that thinks it may have something to contribute along these priority lines, the time is certainly now to start participating in that process, to make Congress aware and make the Defense Department aware of these capabilities, and to start working to influence that next year's bill.

Dan Sennott: Great. Thank you, Paul. Paul Stimers and David Cole, thank you so much for the conversation. Really appreciate it, and this was a really great conversation. We will be back next time with another aspect of the National Defense Authorization Act. Thanks for listening.

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