Tag Archives: Innovation and the Pentagon

Army Futures Command Is Leading A Small Business Cultural Shift

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DEFENSE NEWS”The Army launched Army Futures Command, or AFC, roughly a year and a half ago to reform how the service develops requirements and transitions research and development efforts into programs of record. The command was also tasked to do a better job working with nontraditional companies, small businesses, startups and academia to advance modernization efforts.

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Army leadership tours Cockrell Engineering School at the University of Texas in Austin. (Sgt. Brandon Banzhaf/U.S. Army)

AUSTIN, Texas — Decked out in a dark blazer, jeans and black cowboy boots, and foregoing his four stars for an understated U.S. Army lapel pin, Gen. Mike Murray, the head of Army Futures Command, asked a packed room of small business owners and entrepreneurs how many have seen a four-star general before.

About a third of the audience at the Austin Startup Week in September shot up their hands. Murray turned to a man in the front row and asked who he’d met. The man replied, “Dick Cody,” a general who retired as vice chief of staff in 2008.

“What about a serving four-star general,” Murray asked.

Just a few hands went up in the audience at the Capital Factory, an entrepreneurial hub in the heart of downtown Austin, Texas, which hosted the event.

For startups and companies categorized as small, doing business with the military has been daunting and seemingly impossible to navigate without a staff full of business development experts. And historically, getting access to and communicating with senior decision-makers at the Pentagon hasn’t been easy.

But as the Army tries to rapidly modernize its force following years of failures with major acquisition programs, it knows it can’t conduct business as usual with big defense firms and still get the disruptive technology or out-of-the box ideas it needs for its six modernization priorities: long-range precision fires, next-generation combat vehicle, future vertical lift, the network, air and missile defense, and soldier lethality.

The Army’s billions of dollars in science and technology development funding is a big draw for startups that consider readily available cash to be their oxygen.

U.S. Army Lt. Gen. Eric Wesley, right, deputy chief of Army Futures Command, talks with Josh Baer, founder of the Capital Factory. (Anthony Small/U.S. Army)

U.S. Army Lt. Gen. Eric Wesley, right, deputy chief of Army Futures Command, talks with Josh Baer, founder of the Capital Factory. (Anthony Small/U.S. Army)

The Army launched Army Futures Command, or AFC, roughly a year and a half ago to reform how the service develops requirements and transitions research and development efforts into programs of record. The command was also tasked to do a better job working with nontraditional companies, small businesses, startups and academia to advance modernization efforts.

To improve relations with those communities and breakdown some of the traditional barriers, the new four-star command wasn’t set up on base, but rather in the heart of a city. The Army chose Austin for its vibrant startup community, creativity and close connection to the military community.

AFC minted relationships with the University of Texas, which agreed to give it the 15th and part of the 19th floor in one of its buildings in downtown Austin as well as access to other campus space.

A year ago, when the service declared initial operational capability for the command, the 19th floor was just concrete and exposed pipes with a view of the state capitol building.

At the time, “the biggest challenge every day was which printer was going to work,” Murray told Defense News in an interview at AFC headquarters in September. The command had a staff of roughly 40 at the time. Now the headquarters is manned at about 75 percent strength and has just north of 26,000 people spread across 28 states in 15 countries developing concepts and working on modernization priorities.

Breaking down barriers

Establishing the command has been a heavy lift, but perhaps the heaviest has been figuring out how to reach out to the entrepreneurial community in a systematic and effective way.

“A year ago I had no idea what startups were or pitches,” Murray said to a packed crowd at Austin Startup Week. “I’ve learned a lot in the first year.”

Murray acknowledged there is still room for improvement when it comes to how the Army works with small businesses. “We’ve gotten better, but we’re nowhere near where we need to get in terms of working with small businesses and startups. And you’re dealing with a lot of culture and a lot of bureaucracy that kind of makes us move slow — a lot slower than we need to be.”

Even with 37 years under his belt as a soldier, Murray admitted: “I’m not an outside-of-the box thinker.” But taking the helm of AFC is forcing the general to change his thinking.

“Our Army has had a terrible habit: If it wasn’t invented inside the Army, it’s not worth pursuing,” he said, “I’m constantly trying to break those barriers that we’ve got to accept some ideas and really some solutions from outside of the Army if we are to take a very analog organization and move it into the digital age.”

A two-way street

Army leadership in Austin acknowledges that the startup community isn’t going to just come beating on its door, begging for a chance to work with the service, partly because government bureaucracy can act as a deterrent. Certainly there are hurdles when it comes to working with the military, but a major issue involves how funding flows during technology development efforts.

Area-I CEO Nick Alley told an audience at Austin Startup Week that one of his products — an unmanned system under evaluation by the Army’s Future Vertical Lift Cross-Functional Team for possible applications as an air-launched effect — has no commercial application. Therefore, he explained, the company must solely rely on obtaining government funding, which doesn’t come at the pace needed to continue operations.

Gen. John Murray, right, the head of Army Futures Command, listens to innovators during a visit to Capital Factory in Austin, Texas, on Sept. 30, 2018. (Courtesy of the U.S. Army)

Gen. John Murray, right, the head of Army Futures Command, listens to innovators during a visit to Capital Factory in Austin, Texas, on Sept. 30, 2018. (Courtesy of the U.S. Army)

At one point he had to borrow $10,000 from his parents to cover employee salaries.

The Army also doesn’t buy things very quickly, and that has to change, Murray said, joking that if he followed the traditional defense acquisition timeline to get his daughters cellphones in 2011, they’d receive them this coming Christmas, and they’d be flip phones.

The garage door is always open

If you stood outside of AFC headquarters, you wouldn’t see evidence of the Army’s presence, but a plan is in the works to set up a storefront welcoming visitors to come in and learn about the command on the first floor.

But the main gateway for startups to interface with the Army is the Army Applications Lab, or AAL, established over the past year.

The AAL has become the face of doing business with the Army in the startup community, and it has set up shop on a floor inside the Capital Factory, only blocks away from the University of Texas.

While the command headquarters looks like a typical government office, aside from an abundance of standing desks and a complete lack of ties, the AAL speaks more to the startup world.

There’s no security. Anyone can walk in through an open garage door and pitch ideas to the Army while sitting on comfortable, brown leather sofas. Nobody really has their own office, save the colonel in charge of the outfit, but even he shares his space. And jeans and T-shirts are the uniform of choice.

“We act as a translator and concierge service across the Army’s future force modernization enterprise and the broader commercial marketplace of ideas,” Col. Len Rosanoff, the director of the AAL, told Defense News in an interview at the factory. While he has a long career as a special operator, he could easily be confused for an enthusiastic entrepreneur.

The AAL concept wasn’t easy to establish, Murray said in his interview with Defense News. “I struggled with it for probably six, seven months. They didn’t get the best guidance from me because I was trying to figure out a niche, what I really wanted them to do, because it’s so different,” he said.

“If I’m finding technology, then searching for a problem, I’m doing it completely backwards,” he added. The AAL is meant to help with that by bringing the Army’s top issues to the startup community in search of solutions.

Speaking the same language

It’s no secret that the Army and entrepreneurs speak different languages, follow different rules and work at different paces. In fact, the Army is trying to fix that.

The issue was apparent to Capital Factory CEO Josh Baer when he printed the Army logo on T-shirts, only to have Army lawyers take away the shirts while they were being distributed at an event welcoming the AFC to the factory.

Baer ended up slapping company stickers over the logos on T-shirts people were already wearing, and then sent the shirts back to the printer so the factory’s logo could be printed over the Army’s.

“I didn’t even realize I had to get it approved,” Baer said. “There’s no hard feelings. It was really funny.”

The day Defense News spoke with Baer, he was preparing to kick off a first-ever course — a startup academy — for government officials and big companies on how to work with startups. Baer offers similar courses for startups looking to learn how to work with the government.

The AAL has taken pains to break down language and general cultural barriers with the startup world through its technology solicitation approach. AAL established an online portal in March 2018 — like a TurboTax for the Army’s broad agency announcements — where firms can submit solutions or concepts to address the service’s problems. (The Army has 15 ongoing focus areas.)

The companies AAL wants to hear from likely won’t understand how to navigate the process for answering broad agency announcements. So the organization has created a series of simple questions that legally cover the process so users can provide the necessary information. A submitted entry generates a whitepaper for the Army to analyze elements such as technical viability.

The Army averages about one submission a day through the portal.

If the portal is deemed a success for AAL, then AFC and the Army itself might adopt the approach so external entrepreneurs and problem-solvers can better navigate the gauntlet that is government red tape.

“We help expand the Army’s culture to embrace new approaches and opportunities, applying startup and innovation models to spur new capability development — faster, iterative, open,” Rosanoff said. “About 20 percent of what we’re doing at AAL is finding disruptive technology for the Army. That’s part of it, but fundamentally we’re helping the Army reimagine how it approaches problems.”

https://www.defensenews.com/digital-show-dailies/ausa/2019/10/16/army-futures-command-is-leading-a-cultural-shift-much-to-the-delight-of-industry/

Air Force Evolving To Buy Ideas Not Tech

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FEDERAL NEWS NETWORK

The Air Force is in the middle of a major acquisition reform. Part of that means trying to learn how to work with tech startups and small businesses.

Not going to need to own their product, just want to own it as a service and use the fact that they have commercial ambitions to help keep their prices down and keep their impetus to innovate up.

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“The Air Force experienced some success with that earlier this year at its first Pitch Day, where it awarded 242 contracts in two weeks. Will Roper, assistant secretary of acquisition for the Air Force, told the Federal Drive with Tom Temin that needs to become the new normal.

“Government credit cards are used to buy things that are considered pretty ordinary … buying cutting edge ideas needs to be ordinary for us today,” Roper said. “So we did our homework on the companies, we made sure that they’re U.S.-based, we made sure that we thought they were viable, that they had a good idea so that when we invited them to come pitch to us, they had already cleared our good-enough-to-get-through-the-gate criteria. But once they got in to pitching to us live, we were really scrutinizing their ideas. So the company had already passed muster. Now we want to understand about the idea.”

And to take that one step further, Roper said when you buy the idea, you’re also buying the team that supports it. Companies need to showcase their teams at a pitch day just as much as their ideas.

Another unique aspect of working with these small companies and startups is that they expect to own their intellectual property, rather than having the government own it. But that’s an aspect that can work to the Air Force’s advantage.

“Very different than if you’re a defense company that gets a hold of a unique, boutique-type capability where there’s not competition, and you expect to hold on to it for decades. In the commercial space, we expect there to be very energetic, in some cases, violent competition to try to be market-leading.

In this new acquisition paradigm, Roper said the Air Force needs to manage two things. First, there has to be a restriction process to keep certain technologies from globalizing. And second, the Air Force has to become a faster, if not the fastest, adopter of technologies open to everyone else, like with artificial intelligence.”

“It’s also important to remember that most startups and small tech companies don’t want to be defense prime contractors. But that doesn’t mean the Air Force can’t be a great first partner, Roper said. After all, the Air Force doesn’t want part ownership, equity, or IP.”

“So this is just the first step on really changing how we the Air Force work in a global ecosystem of commercial technology, and ensure that if you can buy something personally and have it on your phone today, that it’s available for our war fighters that fast,” Roper said

“Let’s take, for instance, self-flying cars. So I want to see the Jetsons happen on my watch. Those cars are awesome,” Roper said. “Where have they been? Think about the challenge of operationalizing something like that domestically, getting through all the FAA certifications, the safety certifications, versus coming into the Air Force sphere, where we can pay a higher price point than our commercial counterparts. And we can operate at a different risk profile. Now, why haven’t we put ourselves out as a bridging mechanism from someone that has commercial ambitions and wants to get there and they can walk our defense bridge as one of the paths to achieve it. So that’s an area that I’m working with our research lab right now to look for commercial partnerships, where our money’s important, but our marketplace equally is.”

Congress Scolds Pentagon For Moving Too Slow on Acquisition Reform

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“FEDERAL NEWS NETWORK”

“Over the past few years, Congress gave DoD a slew of acquisition tools to use to attract nontraditional companies, bring in small businesses and fire up innovation. 

The House Armed Services Committee’s Ranking Member Mac Thornberry (R-Texas)  says DoD is taking too long to implement those laws and it’s causing national security issues. “

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“The House Armed Services Committee’s top Republican doesn’t like the speed in which the Defense Department is implementing acquisition reforms and possible cuts to some defense agencies, and he’s ready to do something about it.

Committee Ranking Member Mac Thornberry (R-Texas) told reporters Tuesday he’s prepared to use legislative “sticks and carrots” to spur DoD on to abide by the law faster.

“There are some basic constitutional principles here,” Thornberry said. “If the law says you should do it; you should do it. We have tools, fencing money, and a whole variety of things that we can look at doing if a department is not implementing the law.”

Fencing money is when Congress doesn’t allow an agency to access a certain amount of funds unless the agency reaches certain benchmarks set out by Congress. Lawmakers fenced the Defense Innovation Unit’s money a couple years ago until it delivered a clear roadmap and strategy to them.

Over the past few years, Congress gave DoD a slew of acquisition tools to use to attract nontraditional companies, bring in small businesses and fire up innovation. Thornberry says DoD is taking too long to implement those laws and it’s causing national security issues.

“Part of the consequence of that is that it is still far harder and more difficult to do business with the Department of Defense than it should be and a fair number of innovative companies are saying it’s just not worth it,” Thornberry said. “Even if all of that were being implemented perfectly, there are still challenges for some small company that has technology X and says ‘I can go to the commercial market this fast and make this amount of return or I can go through DoD’s laborious process.’”

To DoD’s credit, it has a lot of provisions to implement and it takes time to change the culture of acquisition professionals so they will use the new tools.

The 2017 defense authorization act had more than 100 acquisition provisions for DoD, including expanded use of other transaction authorities and mid-tier acquisition.

Last March, the military secretaries told Congress to hold off on some reforms so they could focus on the ones they were already in charge of putting into place.

“There’s some fascinating and interesting tools that we’re using and we are going to use and look forward to using, so thank you for those,” Navy Secretary Richard Spencer said. “I would ask for a stabilization period so that we can digest what we have and have the ability to come back to you if we need more, but right now the knife drawer looks full.”

DoD is also wrestling with recommendations from the Section 809 Panel, which gave the department a whole swath of ways to reduce duplicity and waste in acquisition.

Fourth Estate

Thornberry is also frustrated with DoD over a provision to cut back on defense agencies not aligned with military services, like the Defense Information Systems Agency.

The DoD Chief Management Officer was supposed to submit a report on cutting the fourth estate by 25 percent under the 2019 defense authorization act. Thornberry says the report is still not submitted.

“The plan was supposed to be to us by Feb. 15,” Thornberry said. “Then they said ‘Oh, we are going to be late. It’s going to be, I don’t know, March 15. Well, we still haven’t gotten it. I’m having a meeting this week on this topic.”

One reason DoD may not have provided the report is it hasn’t had a CMO since last November. Lisa Hershman is currently serving in the acting capacity.

Other concerns

It’s not just Congress that’s noticing DoD dragging its feet, and there are other areas DoD is slow to implement the law.

“The process for updating and refining the acquisition regulation to keep pace with Congress has slowed to a glacial pace,” Scott Freling, a partner at Covington & Burling LLP told Federal News Network. “That causes quite a bit of consternation for contractors we work with where there’s changes that Congress has made to the procurement rules that aren’t yet reflected in the Federal Acquisition Regulation (FAR) or in the Defense FAR supplement. That uncertainty has been a source of concern by many clients where they are left in a state of wondering where they can avail themselves of the new rules or whether they have to wait until the FAR Council acts.”

It becomes even more of a concern when regulations are put on companies and they aren’t sure whether they need to comply now or after the rule is put into effect.

As an example, the Professional Services Council sent a letter in November to the assistant defense secretary for acquisition asking DoD to issue overdue regulations on the appropriate use of lowest-price technically acceptable criteria for DoD services contracts. The rules would implement a legislative provision Congress enacted three years ago, in the 2016 NDAA.

The Government Accountability Office also scolded DoD for its snail pace.

The House Armed Services Committee took note of the issue in its 2019 defense authorization committee report too.

These types of delays often do not allow “the acquisition and contracting communities within and outside the government” to “take full advantage of recent reforms and improvements to acquisition and contracting procedures,” the report stated.

There are several provisions from the 2016 NDAA that are still in the promulgation phase or have yet to break into the culture of DoD employees.

“It’s definitely taken a few years for the department to get its arms around these authorities,” Bill Greenwalt, senior fellow at the Atlantic Council told Federal News Network. “I’m optimistic now, seeing they are starting to use these authorities. There were so many that were put in place in 2015 and 2016 that we don’t even have regulations for it yet. We are going to have to see how the department gets its arms around that and starts executing.”

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Are Pentagon Small Business Innovative Research Programs Economically Bold Enough?

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“DEFENSE NEWS”

Image: DOD

“DEFENSE NEWS”

“Participants at a Defense News-hosted roundtable in December said no.

The investment research program, which is run by the Small Business Administration, requires federal agencies set aside a certain percentage of their of research and development funds for outside researchers with small firms.”

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“SBIR offers three tiers of R&D funding for new technologies, of $150,000 or less at Phase I, which lasts about six months; up to $1 million at Phase II, or about two years; Phase III funding tests the commerciality of the technology and solicits funding from the private sector.

To Trae Stephens, a partner at the Silicon Valley venture capital firm Founders Fund and the chairman of tech company Anduril Industries, the Pentagon would be better off making a few big bets instead of many smaller investments. He likened it to his experience at a venture capital firm.

“You cannot make money writing $250,000 checks. You cannot build successful companies with tiny bits of revenue. You have to concentrate your investments,” Stephens said. “One recommendation that I’ve been trying to push people on is if you think a company is really good, give them $10 million, give them $20 million.”

Investments in SBIR’s range would be “viewed as a distraction” to an innovative startup, said Steve Bowsher, an executive with venture capital firm In-Q-Tel. Without “recurring funding in the double-digit millions of dollars, it’s not a market.”

Since 2011, the law has allowed participation by some businesses that are majority owned by investment companies. But a Dec. 21 Government Accountability Office report found that in past three fiscal years, fewer than 3 percent of grants went to such companies.

“We’ve eliminated companies with the smartest $80 billion of funding, and instead we’ll work with all of the other companies,” Bowsher said of the government.

Defense Innovation Unit’s director of strategic engagement, Mike Madsen, seemed to agree with Stephens that the Defense Department needs a “strategic fund of that magnitude to make those bets pay off.”

“If we could tell ourselves we have a strategy to create one General Atomics a year, can you imagine?” Stephens replied.

A veteran of the firm Palantir, which has jousted with the Pentagon, left Stephens with the perception the government is afraid to play such a major role.

“We’d run into these blockers where decision-makers kind of detested where someone was getting rich doing business with the government,” Stephens said. “Our best capabilities have come from people who have gotten rich doing business with the government.”

https://www.defensenews.com/newsletters/daily-news-roundup/2019/01/28/to-tech-startups-small-biz-grants-are-small-potatoes/

DOD Is Taking Applications for 2019’s Rapid Innovation Fund

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“FEDSCOOP”

“The Department of Defense has opened applications for the 2019 edition of its Rapid Innovation Fund (RIF) — a program that offers up to $3 million in funding for “innovative technologies” that “meet critical national security needs.”

“The defense agency posted its broad agency announcement on FedBizOpps on Friday and will be taking white paper submissions until March 8.”

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“What’s the DOD looking for?

Per the announcement, the agency is seeking tech solutions to support the ambitions of the National Defense Strategy. The technologies proposed should be innovative but “mature” — ready for final testing and deployment. The required white paper describing a vendor’s tech solution should address how it can contribute to one or more of five key goals: enhancing military capability; accelerating DOD system development capability; reducing costs; reducing technical risks; or improving the timeliness of testing and evaluation.

The white paper should also include a description of the technical approach, timeframe and costs. White papers, once submitted, will be reviewed and select teams will be invited to stage two of the RIF process — the proposal.

Respondents from across industry and academia are invited to send in white papers, but the DOD places a special emphasis on working with small businesses.

The RIF process was first created in 2011 to support “rapid” procurement of innovative technologies. The program was made permanent by the 2017 edition of the National Defense Authorization Act. Examples of technology funded through the RIF in the past include a pocket-sized electroencephalogram to test for brain injury while in the field, a handheld device that records aircraft vibration data to help quickly identify component failure and more.”

How Badly Does the Pentagon Need Innovative Technology?

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one thin dime“NATIONAL DEFENSE MAGAZINE”

“Pentagon officials went to the cradle of innovation this week to recruit tech gurus and entrepreneurs who may not be familiar with the opportunities available in the defense contracting market.

The good news for the Pentagon’s innovation champions is that Congress seems to get the message. Both the House and the Senate are proposing a slew of new procurement rules that would encourage the use of commercial contracting practices.

A recent Silicon Valley tour by Deputy Defense Secretary Robert Work and weapons procurement chief Frank Kendall will be followed later this month by a visit from Defense Secretary Ashton Carter. They are sending a loud and clear message that the Pentagon leadership is not just parachuting into the valley for a quick mission but is there to become a permanent resident of the tech community.

One of the Pentagon’s talking points in its outreach to Silicon Valley is that the Defense Department wants to be a “smart customer of commercial technology.” If the rhetoric is matched by action, the Pentagon would have to act more like a commercial buyer, which means casting aside the usual red tape and compressing purchasing cycles that usually takes years down to months or weeks.

The Pentagon recently stood up a Silicon Valley office, called Defense Innovation Unit Experimental, or DIUx, at Moffett Field in Mountain View, California. Work and Kendall during a recent visit there declared that DIUx will serve as a mediator for companies that have not traditionally worked with the Defense Department and need help navigating the defense system. The motivator for this outreach is worry that the Pentagon’s weapons and information systems are not keeping up with a rampant tech boom in the United States and around the world.

In Washington, meanwhile, there is much chatter about the potential ramifications of Carter’s initiative on defense contracting as we know it. Observers wonder how far the Pentagon will go in order to do business with commercial firms that have little tolerance for intrusive bureaucracy, auditing, intellectual property sharing and other requirements that are facts of life for defense contractors.

There are pockets of buyers in the defense world — such as the Pentagon’s research arm DARPA and the Special Operations Command — that have perfected commercial-style procurement and have shown they can insert new technology into their products rather quickly. But innovation for the larger Defense Department will not come easy because it is by nature a big battleship that cannot turn on a dime, analysts and defense officials point out.

“There are structural impediments within the procurement process, within the funding process, that really keep us from the speed and scope of innovation whose potential is there,” said Jim Joyce, manufacturing specialist at Deloitte Consulting.

The Pentagon’s procurement system is made for large capital expenditures, Joyce said at a Brookings Institution panel discussion. “It’s not driven by innovation or adaptability.”

A democratization of ideas that has led to explosive innovation in the commercial economy creates a major concern for the Pentagon and for traditional defense contractors that develop technology with government funding, he noted. “And the revolution will come, I believe, on the defense side when they start to tap into that,” he said. “The best ideas, the innovation, the adaptability, are not coming through traditional hierarchical organizational structures.” The innovation the Pentagon wants will happen “when we start to relook at the fairly hierarchical and rigid way that we innovate and procure. And that needs to change if we’re to really take advantage of the potential of the country’s economy and innovative people.”

Another huge impediment to a commercial buying approach is that the Defense Department fears being fleeced by contractors. That creates a risk-averse culture that emphasizes process and has little tolerance for failure, said James Kenyon, director of advanced programs and technology at engine manufacturer Pratt & Whitney. “This makes it very hard to introduce some of these more complex but much more revolutionary capabilities very rapidly,” he said. “We have a system that is more willing to tolerate a budget increase than a performance shortfall. And we just keep adding this and adding this, and so things take longer, they cost more.”

It is not realistic to expect regulations to go away, Kenyon said. “I think if you deregulate too much, you do run the risk of the taxpayer getting ripped off.” The question is how to find a balance between protecting taxpayer dollars and at the same time giving industry the flexibility to innovate. “I don’t know that there’s a good answer, which is why acquisition reform has been a buzzword for decades, and continues to be something that we continue to strive for and continue to struggle with.”


Tapping into commercial innovations will be an uphill climb for the Pentagon, said Brennan Hogan, program manager at LMI Research Institute. “You’re trying to apply old regulations and old acquisition policies to new solutions. And there is also sometimes a fear of the unknown. If you don’t have all of the answers at the beginning or if the evaluators that are part of the acquisition process don’t understand it, instead of asking questions again and again to better educate the acquisition policy process, there is a fear and just a shutdown of the process,” she said. “The amount of complexity in the actual acquisition process prevents these new solutions from being applied.”

As one industry insider put it, “A tour of Silicon Valley isn’t going to get it done. You have to do business in some way that the Silicon Valley companies can recognize and respect.”

In both the House and Senate versions of the 2016 National Defense Authorization Act, there are provisions that would allow the Defense Department to act more like a commercial customer.

“If we want to get nontraditional suppliers, we have to be willing to change the way we do business in DoD,” said retired Air Force Lt. Gen. Charles R. Davis, who served as the top military acquisition adviser to the secretary of the Air Force. “We also have to be willing to accept commercial products, commercial pricing and treat intellectual property in a totally different way than we do now,” he said. “If DoD doesn’t change its approach to commercial pricing, it will never be able to take advantage of the innovation.”

Another piece of the puzzle that analysts are watching is how the influx of new suppliers might disrupt the small but entrenched industry that currently dominates the defense technology sector.

One of the industry’s most prominent analysts, Byron K. Callan, managing director of Capital Alpha Partners, has warned investors that the erosion of U.S. defense technology superiority is a “disruptive theme” for traditional suppliers. It’s unlikely that commercial firms have all the answers to vexing national security issues, he wrote in a research note. “As one would expect, some heritage defense firms may initially strive to oppose change as they are quite content with the current system, but others can and will adapt.”


There are many defense sectors where demands are unique and where there will be no commercial competitors. Regardless, Callan said, the “institutionalization of efforts aimed at accessing commercial technologies and achieving faster innovation is an under-appreciated theme within the defense sector.”

A greater push for reform by the Pentagon and Congress, he noted, “may result in new challenges to programs of record, and in some defense segments, commercial technology firms could potentially upend traditional defense contractor market positions and strategies.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=1918