Some parts of the program involve the military working on specific things, but overall, the Department of Defense is soliciting what firearm industry can provide.
Looking for a new caliber? Try using wildcat rounds available in commercial market and see if it can be adjusted to fit the need.
Looking for an upgrade? Take a look at commercially available upgrade parts and see if they can be fit to the need. It can be an AR upper setup, accessory, or something else.
Compare that to some nations's loss of small arms manufacturing capability.
- France is now adopting H&K 416 as their national arsenal has been closed for many years.
- Spain has no decent firearms manufacturing company
- United Kingdom sold off it's big manufacturers and can't expect to have a domestic manufacturer any time soon.
All these are result of downsizing. A factory cannot run unless there is a cashflow available. Large government contracts are great, but when that runs out, it becomes difficult for a company to survive.
Luckily, in US, there is a big commercial market which can help with improving designs and come up with new ideas. Magpul, BCM are some of many examples of companies that pushed the innovation leading to better issued rifles. This is possible because there is a commercial market which can sustain the innovation.
The drive for money from the commercial market keeps a lot of companies float, and that in turn gives more options for government purchasing.
Government can show which directions things can change, but there is need for commercial market to support it. Manufacturers can see what the market wants and use the data and feedback from the market. In a sense, market becomes the largest tester. If something survives in a commercial market, it has better chance of providing better value for the government as well.