Key Points
- Department of Defense (DoD) acquisition policies need to be aligned with twenty-first century realities.
- DoD needs to be a better customer to reap the advantages of the US technology base.
- Absent reform, the US risks falling behind the integrated defense-industrial bases of great-power rivals Russia and China.
Speaking at the
Center for Strategic and International Studies on January 17, Vice Chairman of
the Joint Chiefs of Staff General John Hyten expressed concern about the
outmoded Department of Defense (DoD) acquisition process, one largely built for
the industrial rather than the digital age.
He
characterized current DoD processes as being overly risk-averse and “very, very deliberate, very, very
structured, [and] very bureaucratic,”
and pressed for an injection of urgency, speed, and processes that effectively
engage companies that “can actually move fast.”
Of course, General
Hyten is not the first to highlight the need to align DoD’s acquisition process
with the realities of technology development and geopolitics in the early 21st
century. Procurement reform has been a growing preoccupation of Pentagon
leaders, the defense and high-tech industries, and defense analysts as the DoD seeks
to leverage the considerable strength of US innovation capacity to maintain
advantage in intensifying military-technological competitions with Russia and,
especially, China.
Indeed, in the
December 2019 Atlantic Council Strategy Paper A Candle in the Dark: US National
Security Strategy for Artificial Intelligence,my co-author Stephen Rodriguez
and I emphasize that the US high-tech industry and innovation ecosystem are
among the “country’s most important assets—not to mention competitive
advantages.” But we also note that significant portions of this high-tech
community are reticent to engage with DoD, referencing what Stanford
University’s Amy Zegart calls a “silent divide” between the Pentagon and high-tech
and commercial companies. In a world in which military and security
requirements and technology development priorities are fusing with those of the
commercial sector, the inability to effectively engage non-traditional defense
industry companies undermines US national security.
Some of this
resistance is due to ethical concerns associated with working with the military
and therefore may be difficult to address immediately—though DoD should still
try. The more widespread objection, though, is to the deliberate, structured, and
bureaucratic acquisition process. And this problem is within DoD’s capacity to
address in the short term by eschewing the temptation for additional regulation
or doubling down on risk-averse processes that disincentivize collaboration
with DoD. To be sure, protecting the government’s interest should remain a DoD
priority, but there are ways of doing so using the core of current federal acquisition
regulations while also incorporating ways of taking on more risk and engaging
those companies that can help the Pentagon move fast.
As an example, one
of the recommendations on industry engagement made in our AI strategy paper is to
expand use of forward-leaning tools such as Other Transactional Authorities
(OTAs), which the Pentagon has already incorporated to speed up procurement. OTAs
have been useful in the purchase of commercial-off-the-shelf technology under
some circumstances and they are now being employed to expedite the early stages
of more traditional competitions. The US Army’s Future Attack Reconnaissance
Aircraft (FARA) procurement has made use of OTAs and the Middle Tier
Acquisition for Rapid Prototyping and Rapid Fielding process. The selection
last April of five companies to develop prototypes was reportedly two months ahead of schedule.
Reform should
also consider new approaches to cost, pricing, and profit margins. DoD’s compulsion
to protect itself (and the taxpayer) from runaway project and program costs is
correct. These efforts should be balanced with a nuanced approach to pricing
that incorporates considerations of lifecycle value and order quantities and
frequency in order to offer additional incentivizes for fast-moving, innovative
companies to become consistent and reliable DoD suppliers.
As pointed out
in a January 2020 op-ed by Bryan Smith A Call to Inaction on Defense
Acquisition Law, fair pricing in the commercial supplier
industry should extend beyond the cost of the raw materials used to produce
military parts. Pricing should also consider the cost that commercial suppliers
foot when running entire supply chain operations in order to produce small and
irregular orders for DoD—including sometimes building new production lines and
providing new training for workers to operate them. DoD should also consider
the opportunity cost that may be forfeited if doing business with government.
In other words, can the government count on consistent commercial supplier
support if the trade-offs in profit and other areas associated with working
with the government remain so high?
Procurement reform
will make DoD more efficient and increase capability, making it a benefit in
and of itself. However, the urgency associated with reforms is amplified by the
context of great-power competition, and particularly the military-technological
competition between the United States and China and Russia.
Both competitors
have invested heavily in the development of several advanced technologies and
the novel military capabilities these technologies enable. China is arguably
the global leader in quantum computing and encryption and has made undeniably impressive
strides in the development of artificial intelligence for a wide-range of military
and internal security purposes, including drone swarms, facial recognition, training and simulation, and human performance enhancement.
Russia and
China have also claimed recent successes in the development of hypersonic
missiles. China displayed the DF-17 during the
October 1, 2019 military parade
honoring the 70th anniversary of the founding of the People’s
Republic of China, while Russia announced in December 2019 that the Avangard hypersonic missile was in-service. One can certainly question the current
actual military efficacy of these weapons systems, but the DoD has been wrestling
with the possibility of parity in hypersonic missile technology for at least
two years. In January 2018, then-Vice Chairman of the Joint Chiefs of Staff
Paul Selva assessed that “we have lost our technical advantage in
hypersonics.”
These countries’
centralized industrial bases and innovation systems, while flawed, have enabled
them to focus national resources and move quickly in critical technology areas.
China has also been increasingly effective at leveraging commercially developed
and acquired technology and know-how for military gain. Again, according to
Hyten, “they’re moving very, very fast . . .
And we are not.”
Meeting this
great-power competition challenge from an industry perspective starts with
procurement reform, but it also must include a focus on strengthening domestic
industrial manufacturing capabilities, especially in key Pentagon priority
areas. Engagement with allies and partners, to include defense industry
engagement, should be a foundational component of any approach to the
military-technological competition with China and Russia. However, maintaining domestic
manufacturing capability and technological capacity in strategically important supporting
technologies is crucial to avoiding the supply chain risk that comes with great-power
competition in an entangled global economy.
DoD is currently in a moment of transition to great-power competition and adaptation to the Fourth Industrial Revolution. The shifting geopolitical and technology landscapes are placing pressure on the Pentagon not just to refocus its investments, but also to reform its acquisition process and industry engagement approach. Instincts toward deliberation, structure, and bureaucracy must be at least balanced and, in some cases, overcome by the pressing need for speed, agility, risk-tolerance, and to achieve the strategic gains that accompany becoming a better customer.
Tate Nurkin is a nonresident senior fellow in the Atlantic Council’s Scowcroft Center for Strategy and Security.
