The DoD and specific branches of the armed forces just hand out money. It is those labs and the companies that staff them that are ahead of the current state of the art, but they're unable to commercialize them until after other applications are evaluated.
There is an increasing trend for the military to rely on CoTS hardware, but I know with some certainty there are still fields, like metallurgy (for jet engines), that are still leading anything else by a wide margin.