I 118TH CONGRESS 1ST SESSION H. R. 3147 To establish a defense industrial base advanced capabilities pilot program. IN THE HOUSE OF REPRESENTATIVES MAY 9, 2023 Ms. HOULAHAN (for herself, Mr. FALLON, and Mr. WITTMAN) introduced the following bill; which was 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) ESTABLISHMENT.— 5 (1) IN 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3147 IH businesses or nontraditional businesses to create a 1 robust and resilient defense industrial base. 2 (2) GOALS.—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) PUBLIC-PRIVATE PARTNERSHIPS.— 16 (1) IN 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) CRITERIA.—The criteria referred to in 23 paragraph (1) shall include the following: 24 (A) The person shall be independent. 25 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3147 IH (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) OPERATING 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) INVESTMENT OF EQUITY.— 19 (1) IN 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3147 IH ments selected based on technical merit, economic 1 value, and the Department’s modernization prior- 2 ities. 3 (2) AUTHORITIES.—A person or persons de- 4 scribed in paragraph (1) shall have sole authority to 5 operate, manage, and invest. 6 (d) LOAN GUARANTEE.— 7 (1) IN 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) PILOT 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) SUBJECT 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) USE 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3147 IH vance specifically for the purpose of such loan guar- 1 antees. 2 (e) PHASED IMPLEMENTATION SCHEDULE AND RE- 3 QUIRED REPORTS AND BRIEFINGS.—The program estab- 4 lished under subsection (a) shall be carried out in two 5 phases as follows: 6 (1) PHASE 1.— 7 (A) IN 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) IMPLEMENTATION 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3147 IH (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) REPORT 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3147 IH (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) PHASE 2.— 11 (A) IN 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) REPORT 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3147 IH feasibility and advisability of making the pro- 1 gram permanent. 2 (f) TERMINATION.—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) DEFINITIONS.—In this section: 7 (1) CONGRESSIONAL 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) DOMESTIC 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) DOMESTIC 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) FREE FROM FOREIGN OVERSIGHT, CON- 24 TROL, INFLUENCE, OR BENEFICIAL OWNERSHIP.— 25 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3147 IH 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) INDEPENDENT.—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) NONTRADITIONAL 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) SMALL 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 VerDate Sep 11 2014 00:56 May 20, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H3147.IH H3147 kjohnson on DSK79L0C42PROD with BILLS