As the US Department of Defense (DoD) attempts to keep pace with China and other adversaries, it has become an increasingly motivated buyer of advanced technologies and systems. This is welcome news for innovative startups interested in contributing to the national defense while getting a foothold in a potentially lucrative, low-risk market.

There are challenges, however, not the least of which is the DoD’s notoriously byzantine and lengthy contracting process. Even with recent improvements, understanding the rules of the game and working through the Pentagon bureaucracy can be challenging. To be successful, novices to the process need all the help they can get.

One thing would-be DoD contractors must get used to is acronyms. The Pentagon runs on them. And one of the more important of these is UFR (pronounced YOU-Fer).

UFR stands for Unfunded Requirements. They are also referred to as Unfunded Priorities and and together comprise Unfunded Priority Lists (UPLs). Under current law, chiefs of staff of the Army, Navy, and Air Force, the National Nuclear Security Administration, the Missile Defense Agency, the Coast Guard, the Undersecretary of Defense for Acquisition and Sustainment, and the Chief of Space Operations all are required to submit annually a list of “unfunded priorities” to Congress. These are essentially wish lists for services not included in the President’s regular budget for the military that are deemed “necessary to fulfill a requirement of an operational or contingency plan that would have been recommended if additional resources had been available.” (2017 National Defense Authorization Act)

In other words, UFRs represent potential opportunities for contractors to sidestep much of the red tape associated with the normal DoD budgetary process.

While dwarfed by the mammoth Presidential budget for the military, the dollar value of UFRs by any other measure is substantial. In FY’s 2022 and 2023, UFRs averaged over $20 billion a year. UFR requests are spread across the military branches and the various regional command centers. They reflect a wide range of needs from mundane facilities maintenance to highly advanced technologies associated with such areas as space, cybersecurity, unmanned warfare, reconnaissance, and command and control. Typically, UFR lists do not include major weapons systems or manpower that would imply a warfighting gap that the DoD did not recognize and include in their regular budget. Rather they include “ancillary” needs that might generally be more in the wheelhouse of smaller contractors including startups.

Now considered by many in the military contracting ecosystem as an annual “Rite of Spring,” UFR (UPL) lists tend to be submitted for consideration in the latter half of the DoD’s fiscal year, which ends in September. Vendors interested in being considered for DoD contracts are advised to follow closely relevant government databases and information sources at mid-year and beyond to identify and potentially bid for UFR contracts.

Since they sidestep the normal budgetary process and open the door to additional military spending beyond that determined as necessary by the White House and Pentagon civilian leadership, UFRs have come under significant criticism by certain members of Congress. Senators from both sides of the aisle have sponsored bills to curb the practice.

For now, however, UFRs are the law of the land. Companies including start-ups, especially those looking for a relatively less onerous entry point into the DoD, would be well-served to explore UFRs’ potential toward their market growth strategies.