During a press conference on Wednesday, October 7, 2020, Undersecretary of Defense for Acquisition and Sustainment (USD-A&S) Ellen Lord announced Department of Defense’s (DoD) latest efforts to overhaul how it intends to procure weapons, goods and services—with an emphasis on speed from design to fielding and on cutting operations and maintenance costs. Additionally, on August 13, 2020, acting Undersecretary of Defense for Research and Engineering (USD-R&E) Michael Kratsios committed to “doubling“ efforts to work more closely with nontraditional commercial suppliers, most notably startup companies, to help the DoD strengthen and maintain the nation’s position as the global leader in emerging technologies.

Both developments suggest considerable pathways for commercial innovators of these new technologies to work with the DoD in furtherance of its acquisition and R&D priorities. 

New DoD Acquisition Reform Initiative—AAF

According to Undersecretary Lord, the Department of Defense’s (DoD) new approach, called the Adaptive Acquisition Framework (AAF), will be the “most transformational change to acquisition policy in years, perhaps decades.” Recognizing that the defense acquisition system (DAS) for major systems “rarely enabled speed” and had design-to-delivery take up to eight years, Lord looks to adopting under AAF “best practices” from industry that would enable the AAF to bridge gaps between design and fielding to “deliver capability to our warfighters faster” and, by making the acquisitions process “move at the speed of relevance,” ensure responsiveness to the National Defense Strategy’s (NDS) prescription that the US prepare for great power competition with Russia and China.

Lord said that the AAF would give contractors and DoD program managers more flexibility along several pathways to address urgent operational needs, acquire major capabilities, and procure defense business systems.  Lord observed that the AAF would be employed with a major emphasis on cutting long-term maintenance costs, which can constitute as much as 80% of the total life-cycle cost of a given system.

In 2009, Congress enacted the Weapon Systems Acquisition Reform Act, which helped to ensure that major weapon systems procurement programs were started with the benefit of reliable initial cost estimates and assessments of risk—important casual factors that the General Accountability Office (GAO) identified as central to program failure. And in 2010, then-Undersecretary of Defense for Acquisition, Technology and Logistics (USD-AT&L), and his successor Frank Kendall, instituted the “Better Buying Power” initiatives to improve efficiencies in the acquisition processes as defense budgets were squeezed.

During the Trump Administration, acquisition reform has largely taken the form of restructuring the DoD’s acquisition directorate, splitting it in an effort to localize and prioritize acquisition-related efforts, as distinct from those strictly related to R&D; rewriting the primary guidebook on defense acquisition, known as DoDI 5000.02; developing a mid-tier acquisition (MTA) pathway for certain procurements for which relief from the more deliberative DAS is appropriate; and begin streamlining its regulatory acquisition documents, collectively referred to as Defense Federal Acquisition Regulation Supplements (DFARs).

As to the this defense procurement reform initiative, areas of concern in Congress may include:

1. Whether speed in executing programs using the AAF will disable Congress from having the visibility it may need to exercise effective oversight of how those programs are being managed, or
2. Whether AAF is being used in procurement programs with high levels of technology, integration or manufacturing risk where its use might be unsuitable or if its use is being limited to cases where the DoD is able to rapidly develop fieldable prototypes within an acquisition program to demonstrate new capabilities and/or rapidly field production quantities of systems with proven technologies that require minimal development.

Despite that defense spending has rapidly expanded under the Trump Administration to a proposed record budget in the range of $740 billion for fiscal year 2021, under the weight of a debt and deficit that has exploded as a result of costs incurred by the federal government’s management of the COVID-19 pandemic, future defense budgets under either a second Trump Administration or a new Biden presidency can be expected to stay flat—and possible decrease considerably in the outyears.  As applied to particular procurement programs, the AAF methodology may help policymakers look with renewed focus on how the DoD’s management of its acquisition portfolio, which for years has been viewed as unaffordable and unexecutable, can in fact generate meaningful savings.

Emerging Technology and Venture-Backed Startups

Vital to the DoD‘s ability to ensure technological dominance over China and Russia is its ability to effectively access, and effectively harvest innovation from, emerging technologies developed by commercial companies, particularly venture-backed startups active in DoD R&D priority lanes, e.g., AI/ML, microelectronics, hypersonic vehicles, space-related technology, and quantum and advanced computing.  Many such companies have, of course, been severely affected by the COVID-19 economic lockdown.

On August 13, 2020, before Georgetown University’s Center for Security & Emerging Technology (CSET), the acting Undersecretary of Defense for Research and Engineering (USD-R&E) Michael Kratsios called for using the DoD’s “unique authorities“ to proceed with its innovation efforts and committed to “doubling“ efforts to work more closely with such nontraditional vendors and startup companies.

Kratsios noted, “As we have seen with the Chinese Communist Party’s aggressive effort to entrench compromised 5G infrastructure in every nation possible, adversarial powers threaten our security today just as much—if not more—through their commercial and technological powers than they do with their military capabilities.” But, Kratsios praised DoD’s “unique authorities to pursue bold innovations through sandboxing, pilot programs, and other outside-of-the-box ways of testing, developing and scaling game-changing technologie” to pursue innovation, pledging to “turbocharge this vital effort.”

Citing the work of the Defense Innovation Unit, Kratsios observed, “[I]n this digital age more and more innovation is happening in small startups and academic labs” and that “[DoD is] committed to re-doubling our efforts to break down regulatory barriers and bureaucratic hurdles, ensuring that all companies, no matter their size, have the opportunity to do business with the Department.”

Indeed, over the last few years the DoD has been very active in this regard.  We have seen a marked proliferation of alternative acquisition pathways by which the DoD can on-ramp new technologies to enhance the performance of legacy systems.  The DoD has, moreover, significantly increased the number and improved the accessibility of innovations units and offices throughout the DoD and, indeed, geographically throughout the nation’s emerging technology ecosystems to help ensure that its departments and components can more easily access and harvest commercially-developed innovation.  The defense research enterprise has likewise continued its strong collaboration with the academic community.  And, we are beginning to see non-traditional commercial companies, with SpaceX and Palantir leading the way, not merely benefitting from relatively small research grants and contracts but actually accessing programs-of-record (POR) and thriving.

While the DoD still has much work to do to achieve intended objectives, we expect these trend lines to continue, and such opportunities to expand, regardless of who is elected president, as:

1. Many of the DoD’s commercial technology innovations we see today actually began under the previous administration with individuals we expect will assume top-positions in relevant offices under a new administration;
2. The need to support a vitally important segment of the national security innovation base that has been severely disrupted by the COVID-19 economic lockdown grows increasingly pressing; and
3. The case for preparing for great power competition, as prescribed by the NDS, becomes more exigent.

This post was also writen by Pablo Carrillo.