Tear Down the Barriers: Expanding NDC Status to Unleash Innovation

America has no shortage of innovators ready to build for national security. What we lack is a system that lets them in.

At CX2, we design counter-drone and electronic warfare systems alongside operators. The threat is accelerating: China produces drones by the millions and iterates capabilities in months. Yet our procurement rules, designed for a slower era, have not kept pace.

The Non-Traditional Defense Contractor (NDC) designation was meant to lower barriers for startups and smaller companies. It created a path to bring new entrants into the defense market without forcing them to build time and capital intensive compliance systems before fielding their first product. But the current definition of “non-traditional” is narrow, and companies lose NDC status just as they begin scaling solutions the Pentagon urgently needs. This leaves promising technologies stranded and narrows our industrial base at a time when diversity of suppliers is critical.

If we want a competitive, resilient defense ecosystem, we need to expand NDC status to bring more companies into the fight.

A System Designed for Primes, Not Startups

Today’s acquisition environment assumes that every company engaging with the Department of Defense has the resources of a billion-dollar prime contractor. Requirements for reporting, auditing, and compliance are imposed early, long before most startups have the revenue or contracts to justify the cost.

For small companies, these barriers slow down innovation and discourage participation. The result is fewer entrants, reduced competition, and slower technology adoption. Expanding NDC status would allow compliance expectations to scale with company maturity, enabling innovators to focus resources on building, testing, and fielding capabilities first.

Evidence From the Field

In Ukraine, counter-UAS companies can rapidly access test ranges, iterate on prototypes, and deliver new capabilities to the front lines in weeks. Their survival depends on agility. In contrast, the U.S. testing and acquisition environment can take months just to grant approval for a single demonstration.

This is not a question of talent or technology; it is a process challenge. A broader NDC designation would reduce unnecessary friction, sending a clear signal that innovation and speed are national security priorities.

Why Expanding NDC Status Matters

This reform is not a favor to startups. It’s a strategic decision to strengthen the defense industrial base.

• More competitors, greater resilience. Expanding NDC status would reduce overreliance on a handful of primes and ensure a deeper vendor pool.
• Faster delivery to warfighters. Companies would be able to iterate and deploy tools quickly, rather than waiting for lengthy compliance cycles.
• Smarter oversight. Scaling compliance with company size ensures accountability while focusing resources on R&D and production.

This is not deregulation; it is better regulation, designed to encourage participation while maintaining transparency and accountability.

A Critical Complement to Organizational Reform

The Department of Defense’s creation of the Joint Interagency Task Force 401 (JIATF 401) is a bold move toward consolidating authority and speeding up counter-drone acquisition. But centralizing decision-making is only effective if there is a broad, innovative vendor pipeline feeding that system.

Today, that pipeline is shrinking under the weight of outdated contracting rules. Expanding NDC status would ensure that JIATF 401 and other acquisition programs have access to a wider range of capabilities at the speed the threat demands.

A Simple, Actionable Step

Every delay in modernizing procurement benefits our adversaries. America’s tech sector is unmatched in talent and investment, but many startups never get a chance to deliver because the system favors incumbents.

Expanding NDC status is a straightforward, actionable reform. It lowers barriers to entry, rewards innovation, and ensures the best solutions reach the battlefield.

America has always excelled at turning ingenuity into strength. In today’s era of rapid competition, we can’t afford to lock out the innovators who will define the future of conflict. Expanding NDC status is how we open that door and keep it open.