The Office of Naval Research has awarded Innovative Defense Technologies LLC a contract valued at $96,269,982 under the Paladin Small Business Innovation Research Phase III program to develop and deploy Automated Test and Re-Test capabilities for evaluating emerging technologies before they are integrated into Navy programs of record. The award was announced May 20, 2026, with a base performance period running through May 2028 and options that could extend the contract through May 2031.
The Paladin SBIR Phase III contract was awarded through a competitive broad agency announcement process. Innovative Defense Technologies — commonly known as IDT — is headquartered in Arlington, Virginia, and specializes in AI-based test and evaluation systems. The Office of Naval Research, which funds the award from its Arlington, Virginia location, manages science and technology programs that bridge research and operational Navy capability.
What Paladin Does
The Paladin program is built around a specific problem that has grown more acute as the pace of technology development — particularly in artificial intelligence — has outpaced traditional defense acquisition timelines. The Navy regularly receives technology proposals and demonstrations from both established defense contractors and nontraditional vendors: startups, university spinoffs, and commercial technology companies that have not previously worked with the Department of Defense. Before any of those technologies can be integrated into a program of record, they must be tested and evaluated to verify that they perform as claimed, operate safely, and do not introduce vulnerabilities into existing systems.
Traditional test and evaluation is time-consuming, resource-intensive, and often relies on manual processes that do not scale well when the volume of candidate technologies is high. The Automated Test and Re-Test approach developed under Paladin uses AI-based methods to systematize and accelerate that evaluation process. Rather than requiring human testers to manually design test cases and interpret results for each new technology submission, ATRT frameworks can generate test scenarios, execute evaluations, and produce results at a pace that manual T&E cannot match.
The "re-test" element of ATRT is particularly significant for AI systems. Unlike traditional hardware or software with deterministic behavior, AI systems can behave differently depending on input distributions, and their performance can degrade in ways that are not immediately apparent from single-round testing. Automated re-test capability allows evaluators to run a candidate AI system through varied conditions repeatedly, building a more robust picture of its reliability and failure modes before any integration decision is made.
For the Navy, this matters because the service is actively seeking to incorporate AI into everything from logistics optimization to electronic warfare, but the consequences of fielding an AI system that fails unpredictably in an operational context are severe. Paladin is designed to provide the evaluation infrastructure that allows the Navy to move faster on technology adoption without sacrificing the rigor that military applications require.
The program also specifically targets technology from nontraditional vendors — companies that may have developed compelling AI capabilities in commercial markets but have not previously submitted systems for military evaluation. These firms often lack the institutional knowledge to navigate traditional defense T&E processes, and their technologies can go unevaluated simply because the evaluation pipeline is not designed to handle their submission volume or their unfamiliarity with military testing frameworks. Paladin's automated approach is designed to lower that barrier while maintaining evaluation standards.
What It Means for Contractors
The SBIR Phase III designation carries specific meaning in the federal contracting context. SBIR Phase I and Phase II awards are competitive, size-restricted grants that fund early research and development. Phase III is the commercialization stage, where the technology developed under prior phases is transitioned into operational use. Unlike Phase I and II, SBIR Phase III contracts can be awarded without competition to the firm that performed the prior SBIR work, but they can also be structured — as Paladin apparently was — as competitive BAA awards when the government determines that multiple sources can meet the requirement.
For small defense technology firms, the Paladin program creates two distinct opportunities. The first is direct: if a small business has developed AI-based test and evaluation technology, Paladin-adjacent programs and future ONR solicitations in this domain are worth monitoring. The second is indirect: Paladin is the evaluation pipeline that nontraditional vendors must pass through to get their technologies considered for Navy program integration. Understanding how ATRT evaluation works — what test scenarios it generates, what performance thresholds it applies, what documentation it requires — is valuable preparation for any firm hoping to have its technology evaluated and ultimately adopted.
The cost-plus structure typical of research and development contracts of this nature means that IDT will be reimbursed for allowable costs plus a fixed fee, rather than bearing the financial risk of a firm-fixed-price arrangement. That structure is appropriate for a program that involves developing and refining novel AI evaluation methodologies, where the scope of work may evolve as the Navy's technology intake pipeline grows and as new categories of AI systems require new evaluation approaches.
For established defense contractors with AI portfolios, Paladin also signals that the Navy is building institutional capacity to evaluate and compare AI systems more rigorously than it has in the past. Firms that have marketed AI capabilities to the Navy based on demonstration performance rather than systematic test results should expect the evaluation environment to become more demanding as ATRT infrastructure matures. That is not a negative development for firms with genuinely capable systems — it levels the field against vendors who oversell performance — but it does mean that preparing for rigorous, automated evaluation should be part of any AI system development roadmap targeting Navy programs.
The base period through May 2028 gives IDT roughly two years to build out the core ATRT infrastructure before the option periods come into play. During that base period, the Navy will begin piloting the evaluation pipeline against candidate technologies, using results to refine the automated test frameworks and validate that ATRT outputs correlate with real-world system performance. Firms watching the Paladin program should monitor ONR's public communications for information on how nontraditional vendors can submit technologies for evaluation once the pipeline reaches operational status — that pathway, once established, is the most direct route for commercial AI firms to get their systems in front of Navy program managers in a structured, credentialed way rather than through ad hoc demonstrations.
