The entrepreneurship revolution that is needed at defense

The incoming Trump administration’s new Defense team, led by Jim Mattis, offers the greatest opportunity in a generation for revolutionary change within the Department of Defense. Indeed, a revolution is sorely needed.

It has been over 16 years since wholesale change has taken place in the political leadership and strategic thinking at the Department of Defense. In 2008, then President-elect Obama chose to retain President Bush’s secretary of Defense, and a significant number of Pentagon personnel also kept their jobs under Secretary Gates.

{mosads}During the Obama years, the Pentagon has been consumed with fighting several wars and low-level conflicts all over world, while struggling with sequestration and a rapidly changing geopolitical environment.

The Department’s operations, processes and acquisition priorities however, remained stubbornly in the past.  The manner in which the Department conducts its processes, the way it interacts with industry and how it buys weapons and services stymies innovation, prevents entrepreneurship and perverts free market principles. These systemic failures result in overpricing, higher taxpayer costs, and anachronistic products – all of which jeopardize our national security.

Instead of using private sector knowhow and entrepreneurship, the Department has instead created a system were independent companies no longer offer those benefits and instead have become quasi-governmental organizations. The Government insists it maintains controls over all aspects of research, design, and new programs and products; and as a result has allowed for public sector inefficiencies to manifest in the private sector.

It is hard for many to believe that the Federal Government, rather than fostering an institutional culture of sound regulatory requirements, industrial competitiveness, and new ideas –  it has encouraged a remarkably contrary system.  The DoD funds and exerts control over all of the aforementioned areas, yet it continues to stifle entrepreneurship via massive subsidies, as well as stifling private sector R&D and investment.

The best example of this is the way the Pentagon works with the private sector to provide access to space and launch our national security satellites. Instead of tendering a contract through an open competition to provide these vital services, the DOD has given one company – United Launch Alliance, or ULA – over $10 billion to directly subsidize the company’s bottom line plus taxpayers hard earned money to conduct government directed research & development.  It is also hard to believe that this company purchases its launch engines from Russia, taking away badly needed jobs here in America, as well as risking our national security.  This is old thinking with old solutions.

While this is happening there are several American companies who have shown willingness to invest their own time and their own considerable resources to compete for these services and develop modern unique solutions. What is more, in the process they would create a considerable number of high-end manufacturing jobs here in America, like companies such as Space X have done.

This approach by the Pentagon has proven not only to be an exorbitant waste of money that could be better spent elsewhere, but it has also shipped countless jobs out of the country. By its very nature though, the current system is a detriment to innovation and entrepreneurship –an alarming endangerment to our national security.

The same can be said of numerous projects and programs in the Department. From shipbuilding to aircraft manufacturing, from building facilities, to cyber-warfare contracting; the DOD has assumed the onus of subsidizing companies, taking on unnecessary risk (which should be on the companies, not the taxpayer), and worse still, has prevented the private sector from offering entrepreneurial, innovative solutions. 

Now is time for the Pentagon to abandon this failed approach and launch its own revolution.

The incoming Secretary of Defense will need to put in place three key policy changes as soon as possible.

First, the Department should abandon contracts and future work that waste money, subsidize corporate profits and ships jobs overseas. The subsidy contract to ULA, and others, should be immediately canceled – let them compete with free and fair competition.

Second, the incoming Secretary should work with Congress to put in place new contracting and purchasing processes. It is time for DOD to identify and develop the overall needs and requirements of its fighting forces, and let the private sector develop products and services to fulfil those needs. The government is not the place to foster innovation or entrepreneurship, it is a slow, bloated and inefficient behemoth. The private sector should be encouraged to offer cheaper, better and future leaning solutions.

Third,  DOD should designate an Enterprise Enabler for the Department to ensure the first and second steps are implemented with precision and timeliness. This person should be part of the quasi-independent Inspector General’s office and issue reports to both the secretary and Congress.

The new administration should seize on this once-in-a-generation chance to revolutionize the defense industry and manufacturing in this country, and harness the power of genuine private sector entrepreneurship to create jobs and enhance or national security.

Paul W Hamill is a national security expert and principal at Logan International Relations, neither of which receives any defense company funding.  

The views expressed by authors are their own and not the views of The Hill.