# DoW Expands Small-Business Defense Funding

The U.S. Department of War and its service organizations use SBIR/STTR awards, challenge competitions, test-range access, and follow-on funding to bring small-business technologies into defense programs, directing more than $3 billion annually to small firms. AFWERX reported $10.37 billion across 14,232 SBIR/STTR contracts since 2019; its reported awards since the beginning of 2025 included approximately $301 million across 367 awards, with $236.27 million supporting 310 AI awards. For contractors, the central procurement challenge is moving from prototype funding to an operational customer, sustained funding, and an acquisition pathway that can support procurement at scale.

- Companies can pursue SBIR/STTR solicitations, xTech competitions, VERTEX events, and Army test-range access opportunities. The cited award limits are up to $323,090 for Phase I and $2.1 million for Phase II; Direct to Phase II awards were available up to $2 million.
- The 2025 Overwatch/xTech competition offered staged prizes for submissions and selected entries. Those figures describe a past competition, not an open deadline.
- Small businesses should engage prospective operational customers and acquisition offices early, since prototype success alone does not ensure transition into a funded program.

**Jurisdictions:** federal
**Industries:** Defense & Military
**Topics:** Grants & Funding, Artificial Intelligence
**Published:** October 16, 2026

### Government Entities
- U.S. Department of War (DoW)
- AFWERX (AFWERX)
- Army Applications Laboratory (AAL)
- Army Test and Evaluation Command (ATEC)
- U.S. Air Force Research Laboratory (AFRL)

### Key Quotes
> A successful prototype does not automatically become an operational capability. There has to be a customer who needs it, funding to continue development, and an acquisition pathway that allows the government to procure it at scale.
> — Arthur Grijalva, Director of SpaceWERX

> expanding the army’s accessible industrial base, with 91% of companies on our portfolio having limited or no prior DoW experience.
> — Russ Cummings, Executive Director of the Army Applications Laboratory

### Sources
- [Innovative investments: The Department Of War And Small Businesses | DSEI Gateway](https://dsei-gateway.com/en/news/features/innovative-investments-the-department-of-war-and-small-businesses) - DSEI Gateway