II
118THCONGRESS
1
STSESSION S. 1463
To establish a defense industrial base advanced capabilities pilot program.
IN THE SENATE OF THE UNITED STATES
MAY4, 2023
Ms. R
OSEN(for herself and Mrs. BLACKBURN) introduced the following bill;
which was read twice and referred to the Committee on Armed Services
A BILL
To establish a defense industrial base advanced capabilities
pilot program.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. DEFENSE INDUSTRIAL BASE ADVANCED CAPA-3
BILITIES PILOT PROGRAM. 4
(a) E
STABLISHMENT.— 5
(1) I
N GENERAL.—The Under Secretary of De-6
fense for Acquisition and Sustainment shall carry 7
out a public-private partnership pilot program to ac-8
celerate the scaling, production, and acquisition of 9
advanced capabilities for national security by cre-10
ating incentives for investment in domestic small 11
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businesses or nontraditional businesses to create a 1
robust and resilient defense industrial base. 2
(2) G
OALS.—The goals of the public-private 3
partnership pilot program are as follows: 4
(A) To bolster the defense industrial base 5
through acquisition and deployment of ad-6
vanced capabilities necessary to field Depart-7
ment of Defense modernization programs and 8
priorities. 9
(B) To strengthen domestic defense supply 10
chain resilience and capacity by investing in in-11
novative defense companies. 12
(C) To leverage private equity capital to 13
accelerate domestic defense scaling, production, 14
and manufacturing. 15
(b) P
UBLIC-PRIVATEPARTNERSHIPS.— 16
(1) I
N GENERAL.—In carrying out subsection 17
(a), the Under Secretary shall enter into public-pri-18
vate partnerships, consistent with the phased imple-19
mentation provided for in subsection (e), with for- 20
profit persons using the criteria set forth in para-21
graph (2). 22
(2) C
RITERIA.—The criteria referred to in 23
paragraph (1) shall include the following: 24
(A) The person shall be independent. 25
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(B) The person shall be free from foreign 1
oversight, control, influence, or beneficial own-2
ership. 3
(C) The person shall have commercial pri-4
vate equity fund experience in the defense and 5
commercial sectors. 6
(D) The person shall be eligible for access 7
to classified information (as defined in the pro-8
cedures established pursuant to section 801(a) 9
of the National Security Act of 1947 (50 10
U.S.C. 3161(a))). 11
(3) O
PERATING AGREEMENT .—The Under Sec-12
retary and a person or persons with whom the 13
Under Secretary enters a partnership under para-14
graph (1) shall enter into an operating agreement 15
that sets forth the roles, responsibilities, authorities, 16
reporting requirements, and governance framework 17
for the partnership and its operations. 18
(c) I
NVESTMENT OFEQUITY.— 19
(1) I
N GENERAL.—Pursuant to public-private 20
partnerships entered into under subsection (b), a 21
person or persons with whom the Under Secretary 22
has entered into a partnership shall invest equity in 23
domestic small businesses or nontraditional busi-24
nesses consistent with subsection (a), with invest-25
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ments selected based on technical merit, economic 1
value, and the Department’s modernization prior-2
ities. 3
(2) A
UTHORITIES.—A person or persons de-4
scribed in paragraph (1) shall have sole authority to 5
operate, manage, and invest. 6
(d) L
OANGUARANTEE.— 7
(1) I
N GENERAL.—The Under Secretary shall 8
provide an up to 80 percent loan guarantee, pursu-9
ant to the public-private partnerships entered into 10
under subsection (b), with investment of equity that 11
qualifies under subsection (c) and consistent with 12
the goals set forth under subsection (a)(2). 13
(2) P
ILOT PROGRAM AUTHORITY .—The tem-14
porary loan guarantee authority described under 15
paragraph (1) is exclusively for the public-private 16
partnerships authorized under this section and may 17
not be utilized for other programs or purposes. 18
(3) S
UBJECT TO OPERATING AGREEMENT .— 19
The loan guarantee under paragraph (1) shall be 20
subject to the operating agreement entered into 21
under subsection (b)(3). 22
(4) U
SE OF FUNDS.—Obligations incurred by 23
the Under Secretary under this paragraph shall be 24
subject to the availability of funds provided in ad-25
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vance specifically for the purpose of such loan guar-1
antees. 2
(e) P
HASEDIMPLEMENTATION SCHEDULE AND RE-3
QUIREDREPORTS ANDBRIEFINGS.—The program estab-4
lished under subsection (a) shall be carried out in two 5
phases as follows: 6
(1) P
HASE 1.— 7
(A) I
N GENERAL.—Phase 1 shall consist of 8
an initial pilot program with one public-private 9
partnership, consistent with subsection (b), to 10
assess the feasibility and advisability of expand-11
ing the scope of the program. The Under Sec-12
retary shall begin implementation of phase 1 13
not later than 180 days after the date of the 14
enactment of this Act. 15
(B) I
MPLEMENTATION SCHEDULE AND 16
FRAMEWORK.—Not later than 90 days after the 17
date of the enactment of this Act, the Secretary 18
shall submit an implementation plan to the con-19
gressional defense committees on the design of 20
phase 1. The plan shall include— 21
(i) an overview of, and the activities 22
undertaken, to execute the public-private 23
partnership; 24
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(ii) a description of the advanced ca-1
pabilities and defense industrial base areas 2
under consideration for investment; and 3
(iii) implementation milestones and 4
metrics. 5
(C) R
EPORT AND BRIEFING REQUIRED .— 6
Not later than 27 months after the date of the 7
enactment of this Act, the Secretary shall pro-8
vide to the congressional defense committees a 9
report and briefing on the implementation of 10
this section and the feasibility and advisability 11
of expanding the scope of the pilot program. 12
The report and briefing shall include, at min-13
imum— 14
(i) an overview of program perform-15
ance, and implementation and execution 16
milestones and outcomes; 17
(ii) an overview of progress in— 18
(I) achieving new products in 19
production aligned with Department 20
of Defense needs; 21
(II) scaling businesses aligned to 22
targeted industrial base and capability 23
areas; 24
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(III) generating defense indus-1
trial base job growth; 2
(IV) increasing supply chain re-3
silience and capacity; and 4
(V) enhancing competition on ad-5
vanced capability programs; and 6
(iii) an accounting of activities under-7
taken and outline of the opportunities and 8
benefits of expanding the scope of the pilot 9
program. 10
(2) P
HASE 2.— 11
(A) I
N GENERAL.—Not later than 30 12
months after the date of the enactment of this 13
Act, the Secretary may expand the scope of the 14
phase 1 pilot program with the ability to in-15
crease to not more than three public-private 16
partnerships, consistent with subsection (b). 17
(B) R
EPORT AND BRIEFING REQUIRED .— 18
Not later than five years after the date of the 19
enactment of this Act, the Secretary shall pro-20
vide to the congressional defense committees a 21
report and briefing on the outcomes of the pilot 22
program under subsection (a), including the ele-23
ments described in paragraph (1)(C), and the 24
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feasibility and advisability of making the pro-1
gram permanent. 2
(f) T
ERMINATION.—The authority to enter into an 3
agreement to carry out the pilot program under subsection 4
(a) shall terminate on the date that is five years after the 5
date of the enactment of this Act. 6
(g) D
EFINITIONS.—In this section: 7
(1) C
ONGRESSIONAL DEFENSE COMMITTEES .— 8
The term ‘‘congressional defense committees’’ has 9
the meaning given the term in section 101(a)(16) of 10
title 10, United States Code. 11
(2) D
OMESTIC BUSINESS.—The term ‘‘domestic 12
business’’ has the meaning given the term ‘‘U.S. 13
business’’ in section 800.252 of title 31, Code of 14
Federal Regulations, or successor regulation. 15
(3) D
OMESTIC SMALL BUSINESSES OR NON -16
TRADITIONAL BUSINESSES .—The term ‘‘domestic 17
small businesses or nontraditional businesses’’ 18
means— 19
(A) a small business that is a domestic 20
business; or 21
(B) a nontraditional business that is a do-22
mestic business. 23
(4) F
REE FROM FOREIGN OVERSIGHT , CON-24
TROL, INFLUENCE, OR BENEFICIAL OWNERSHIP .— 25
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The term ‘‘free from foreign oversight, control, influ-1
ence, or beneficial ownership’’, with respect to a per-2
son, means a person who has not raised and man-3
aged capital from a person or entity that is not 4
trusted and who is otherwise free from foreign over-5
sight, control, influence, or beneficial ownership. 6
(5) I
NDEPENDENT.—The term ‘‘independent’’, 7
with respect to a person, means a person who lacks 8
a conflict of interest accomplished by not having en-9
tity or manager affiliation or ownership with an ex-10
isting fund. 11
(6) N
ONTRADITIONAL BUSINESS .—The term 12
‘‘nontraditional business’’ has the meaning given the 13
term ‘‘nontraditional defense contractor’’ in section 14
3014 of title 10, United States Code. 15
(7) S
MALL BUSINESS.—The term ‘‘small busi-16
ness’’ has the meaning given the term ‘‘small busi-17
ness concern’’ in section 3 of the Small Business Act 18
(15 U.S.C. 632). 19
Æ
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