The U.S. War Department has surpassed a significant milestone, awarding more than $1 billion to small businesses and non-traditional defense contractors in its latest round of technology development funding. The announcement, part of the first batch of Fiscal Year 2026 projects under the Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) program, marks a substantial expansion of the Pentagon’s efforts to fast-track emerging defense capabilities.
“Crossing the billion-dollar threshold underscores APFIT’s commitment to America’s small business innovators,” said Emil Michael, Under Secretary of War for Research and Engineering, “and we are proud to accelerate the delivery of these critical capabilities to our warfighters,” the department announced in a statement.
Record-Breaking Investments
The latest funding round received 76 viable submissions with requests totaling $2.36 billion, according to program data. The department ultimately awarded over $1.4 billion to more than 75 companies, with the average award exceeding $30 million per project—significantly larger than in previous years.
Five companies will receive up to $42 million each, representing the largest single awards since APFIT launched in 2022, when typical contracts ranged between $10-20 million. The dramatic increase signals the Pentagon’s growing confidence in the program’s ability to deliver battlefield-ready technology.
“APFIT empowers small and non-traditional companies to play a pivotal role in countering emerging threats,” Michael explained. “The investments allow them to scale, hire talent, and deliver solutions that directly enhance warfighter capabilities.”
Breaking the “Valley of Death”
What exactly is APFIT trying to solve? For decades, promising defense technologies have languished in what industry insiders call the “valley of death”—the gap between successful prototypes and full-scale production. The program, overseen initially by Heidi Shyu, aims to bridge this critical divide.
“With the backing of APFIT, these companies have an opportunity to push their innovations over the finish line,” Shyu stated during an earlier funding announcement. “We look forward to supporting additional projects important to warfighters as more funding is appropriated.”
The initiative has gained significant momentum. In June, the Department of Defense Research & Engineering office announced 17 APFIT awards totaling $377.2 million—a record amount at that time—including five from the initial FY 2025 tranche, according to defense industry publications.
Domestic Battery Production Takes Flight
Among the most significant awards is up to $50 million granted to Packet Digital for high-performance unmanned aircraft system (UAS) batteries, addressing a critical vulnerability in America’s defense supply chain. The company will begin production in 2026 at Badland Batteries in Fargo, North Dakota, creating a domestic source for lithium-ion batteries that currently depend heavily on foreign suppliers.
“Our advanced high-power, high-energy density lithium-ion cell technology is a mission-critical enabler for extended-range UAS operations, space-based platforms, and submersible assets,” said Terri Zimmerman, CEO of Packet Digital, in a company release. “This capability directly enhances warfighter readiness by improving endurance, agility and energy resilience in contested environments.”
The batteries will support drones used across multiple service branches, including the Navy, Army, Air Force, and Special Operations Command, according to industry reports.
“The U.S. currently lacks the manufacturing base for high-energy battery cells at the scale required for defense platforms,” Zimmerman added. “We are working every day to close that gap and ensure our warfighters have the tools they need.”
Congressional Support Growing
The expansion of APFIT funding reflects growing bipartisan support in Congress for defense innovation pathways that bypass traditional procurement bottlenecks. Small businesses—often more agile than defense giants—are increasingly seen as critical to maintaining technological superiority against near-peer competitors.
“The APFIT program is developing into a key initiative to reform the acquisition process and modernize defense technology,” Michael noted. “By increasing APFIT funding, Congress is creating more paths for innovation through small-and-non-traditional companies dispersed around the country.”
That geographic diversification may prove as strategically valuable as the technologies themselves—spreading critical defense industrial capacity beyond traditional hubs and potentially creating more resilient supply chains in an era of increasingly complex global threats.
