As published in The Hill's special section on the State of the Union on January 24, 2012.

President Obama’s newly released guidance for our military strategic posture is framed upon the transition from a force capable of large-scale operations in places like Iraq and Afghanistan toward a smaller force that is leaner, agile and poised for quick-response missions. This change presents important challenges and opportunities for America’s military industrial base to consider.

The American economy runs on innovation. That pioneering spirit has given us fantastic products like the iPod and hybrid cars but can only occur in a free market with businesses of all sizes responding to consumer demand or creating new markets where none had existed before. Small and medium-sized businesses across the country play a vital role in our economy, harnessing the power of innovation to bring better products at lower prices to market.

However, decades-old business acquisition practices at the Department of Defense have left small businesses with scarce opportunities to compete for contracts with the department. DOD has configured itself to do business almost exclusively with massive multinational corporations that offer a wide array of products and services to the American warfighter. All of the department’s acquisition and auditing procedures have grown in turn to match the size and scale of the companies vying for work in the competitive defense contracting market.

As steep defense cuts are enacted, and the president’s strategy is implemented, small businesses will struggle further as the defense industrial base responds to market pressure to consolidate.

History has demonstrated that innovation has been one of our greatest strengths on the battlefield. That power is drawn from our ability as an American citizenry to create, invent and discover. A lean and agile force must focus on unique solutions to complex problems. New equipment must be moved from the drawing board to the battlefield quickly to ensure our war fighters have a constant, immutable advantage in combat.
 
Unfortunately, the bloat of bureaucracy has slowed the path of innovation. Red tape and a convoluted acquisitions process have led to the opposite of a free market mindset and hindered the move toward an agile and innovative industrial base. Worse still, that same bureaucracy has led to an inflation of the cost of wartime goods. It is taking us too long to build weapons that are too expensive.

Though our defense industry has some housecleaning to do, it have also had some admirable triumphs. The aerospace industry responded quickly to test and field drones that now protect U.S. forces in Afghanistan and provide critical standoff offensive capability. The same can be said for the quick fielding of the MC-12 surveillance platform and the family of mine-resistant vehicles that safely transport troops on dangerous roads.

Unfortunately, cost and time overruns seem to have become the standard rather than the exception.

Six months ago, the House Armed Services Committee established a special panel to investigate the challenges small and medium-sized businesses encounter when trying to do work with the Department of Defense. That panel is tasked with identifying the obstacles that prevent many of America’s innovators from applying their cutting-edge ideas and processes to the existing industrial base.

The panel has held five hearings and seven roundtable discussions across the country with companies who are either involved or looking to enter the defense market. It is our hope that the panel’s findings will help the Armed Services Committee write legislation that dismantles obstructions to innovation and progress in the defensive industry.

The U.S. defense industry has been critical to maintaining our security and prevailing in conflict. As America confronts a complex and dangerous strategic landscape in the 21st century, small- and medium-sized business will play a critical role in ensuring that our defense industrial base is a source of strategic advantage for decades to come. We must do what we can to encourage and protect the innovation that keeps America prosperous and keeps America free.

Shuster is a member of the House Armed Services Committee and the chairman of the House Armed Services Committee special panel on Business Challenges within the Defense Industry.