How might we empower prime enhancers so that national defense capabilities evolve faster than adversaries' closed systems?

Prime defense contractors — the Lockheed Martins and Raytheons of the world — aren't going away, nor should they. They excel at systems integration, managing complex programs, and delivering platforms that meet exacting military requirements. But they're not optimized for rapid innovation, especially in software, AI, and commercial technology. This creates an opportunity for 'prime enhancers': smaller, more agile companies that provide advanced subsystems, software, or services that make prime contractors' platforms more capable. Rather than competing with primes for platform contracts, prime enhancers complement them, providing innovation velocity that large organizations struggle to maintain internally.

Empowering prime enhancers requires changing both technology and business models. On the technology side, it requires modular architectures with open interfaces so that prime enhancers can integrate without requiring primes to redesign platforms. On the business side, it requires contracting approaches that allow primes to rapidly onboard new subcontractors, acquisition regulations that don't impose prime-contractor burdens on small companies, and incentive structures that reward primes for incorporating innovation rather than protecting legacy systems. Done right, this creates an ecosystem where the U.S. can leverage its entrepreneurial strength while maintaining the systems integration capabilities that adversaries lack.

The defense industrial base has historically been divided into tiers: prime contractors who win major platform contracts from the Department of Defense, and subcontractors who provide components and subsystems to primes. This model worked well during the Cold War, when defense technology was specialized and defense spending was large enough to support a dedicated industrial base. Companies like Texas Instruments, Hughes Aircraft, and RCA made both defense and commercial products, ensuring that defense systems benefited from commercial innovation while maintaining specialized capabilities when needed.

But consolidation in the 1990s changed this ecosystem. The 'Last Supper' meeting of 1993, where Deputy Defense Secretary William Perry encouraged defense mergers to survive the post-Cold War drawdown, led to waves of consolidation. By 2000, the defense industry was dominated by five major primes, and many subcontractors had either been acquired or exited defense work. The remaining subcontractors were often locked into single-prime relationships, dependent on one customer for revenue and subject to that prime's priorities and timelines.

The commercial tech boom of the 2000s-2010s created a growing gap between commercial and defense capabilities. AI, cloud computing, advanced manufacturing, and other technologies were advancing rapidly in the commercial sector, but defense adoption was slow. Primes struggled to keep pace because their business models were optimized for platform integration, not software development or commercial technology adaptation. And startups that might have become prime enhancers often found defense work unattractive: contracting was slow, regulations were burdensome, and primes were difficult partners because incorporating external innovation threatened their integration fees.

Several initiatives tried to bridge this gap. DIU (Defense Innovation Unit) created streamlined contracting vehicles to help the DoD buy from commercial companies. SBIR (Small Business Innovation Research) programs funded early-stage defense technology development. And some primes created venture arms or partnership programs to engage with startups. But fundamental tensions remained: primes were incentivized to maximize their share of program value, not to incorporate external innovation that might reduce their integration work. And startups found that even when they won DoD contracts, getting incorporated into actual programs required navigating prime contractor bureaucracies that moved at very different speeds.

The model that's emerging is 'prime enhancement': companies that provide critical capabilities — AI targeting, electronic warfare, autonomous systems, cyber defense — that enhance rather than compete with prime platforms. Companies like Palantir, Anduril, and Shield AI have succeeded by focusing on capabilities that primes acknowledge they can't build internally, by designing for integration with existing platforms, and by demonstrating operational value that military end-users demand. This creates alignment: primes benefit from incorporating capabilities that make their platforms more competitive, the DoD gets faster access to commercial innovation, and prime enhancers build sustainable businesses serving defense customers. Scaling this model requires continuing to reduce integration barriers and ensuring that contracting incentives reward incorporation of external innovation.