Election Results...?

by Wendy Hall

November 25, 2002

Although government R&D funding is often argued as a bipartisan issue, the recent GOP electoral victories may prove to benefit technology development for one central reason--the swift establishment of the Department of Homeland Security.

After the GOP had its historic victory by obtaining majorities in both the House and Senate earlier this month, it wasn't long before the Department of Homeland Security, which had been developing at a slowed pace due to Congressional debate over legislation that would ultimately create the department, was set into motion. The formation of The Department of Homeland Security, for which President Bush signed legislation today, will consist of 22 various government agencies and employ over 175,000. Yet is also poised to have a deep impact on many technology industries that specialize in areas that serve its goals. The new Department should provide a focal point for the thousands of entrepreneurs and companies to interface with the federal government and demonstrate their technologies.

"The biggest legislative impact of the elections is likely in the area of homeland security," says Bruce Mehlman, Assistant Secretary for Technology Policy at the
U.S. Department of Commerce. "The new Homeland Defense Department will include an Undersecretary for Science & Technology, and should be the focal point for significant new investments in R&D. The legislation itself includes several billion dollars in new funding, and the Undersecretary is likely to guide significant future investments in technologies relating to homeland security."

One of the agencies within the Homeland Security umbrella is the Advanced Research Project's agency (modeled after DARPA), which will fund research and development in security. The same bill that created the Department also requires the agencies to identify small businesses and new companies to fulfill homeland defense-related contracts. Of equal significance to the industry is President Bush's promise to raise federal spending for information technology. The federal government spent about $47 billion on information technology products in fiscal year 2002, and an estimated $10 billion to $15 billion off-the-books for national intelligence efforts. More than $2.1 billion will be spent this fiscal year on IT for the new Homeland Security Department, according to an analysis by market-research firm Input.

Already, many technology companies are planning to take advantage of this increased interest in security. Despite the fact that this will be a breeding ground for new technologies and lucrative business opportunities, it is also likely that this will lead to a fiercely competitive landscape and market saturation, thus causing a possible shakeout within the various industries that work within the security space. Also, while the business opportunities are still at a considerable peak, working with the government is as challenging as ever, and is likely to be a significant obstacle for many companies unacquainted with the various processes. This could possibly lead to many smaller, inexperienced companies forming alliances with larger ones that are familiarized with working with the government. Despite these sobering possibilities for hopeful companies, the Department's formation inherently ushers in a new focus for R&D in this area, a commitment that is likely to benefit from sustained support amidst varying political climates and interests.

"Specific programs are always subject to competing priorities and alternative investments in a very tight budget cycle, but overall R&D should continue to grow," says Mehlman. "Partnership remains the watchword, and progress is only possible via bipartisan cooperation. Here again we are fortunate for the long-standing and continuing bipartisan consensus that R&D is essential."