To lower costs, Pentagon could turn milsat procurement on its head.

North Korea's successful launch of a satellite in December after 14 years of attempts put the hermit kingdom one step closer toward deploying an intercontinental ballistic missile. And Iran's nuclear weapons program—and the threat of an Israeli attack to cripple it—will keep tensions simmering in the Middle East.

When I began writing this column eight years ago, airlines were reeling as oil prices soared above $50 a barrel. Lockheed Martin was hoping to ramp up production of the Joint Strike Fighter in 2009, and Wall Street analysts were beginning to question whether a run-up in defense stocks had much steam left. Airbus was preparing to launch development of the A350 in response to Boeing's 7E7 (now 787), and the business jet market was embarking on a sales surge that would end in a spectacular crash.

The bifurcation of the business jet market is expected to continue in 2013, with strong demand for larger and pricier jets and sluggish sales of small and mid-sized aircraft. A Chinese company's failed bid in 2012 to acquire bankrupt Hawker Beechcraft is unlikely to slow Beijing's bid to become a significant player in the market.

Can ad hoc design teams collaborating via the Internet produce a better infantry fighting vehicle quicker than traditional industry engineering organizations? Darpa aims to find out when it launches the first of three Fast, Adaptable Next-Generation (FANG) ground-vehicle design challenges in January 2013. Using new model-based design tools, virtual collaboration and foundry-style manufacturing, FANG aims to produce an amphibious combat vehicle in one-fifth the time of a conventional program.

The FAA's NextGen air traffic control modernization effort is a top priority, and 2013 will be a crucial year for its en-route automation modernization and automatic dependent surveillance-broadcast programs. Deployment of both is to be largely completed by the end of the year. If that does not occur, there could be serious headaches for other NextGen initiatives.

Primes find they must share intellectual property with suppliers.

It's a classic chicken or egg dilemma. Small satellites are not being built because there is no cheap way to launch them, and small launchers are not being built because there are no satellites to launch on them. So the U.S. Defense Advanced Research Projects Agency (Darpa) is attacking the problem from both directions simultaneously, with dual programs to develop $500,000 imaging satellites of less than 100 lb. and air-launched boosters to place them in low Earth orbit for $1 million a flight.