When 13 technology and venture capital leaders wrote an open letter to Secretary of Defense Lloyd Austin on June 26, it was a plea to reform the Defense Department’s acquisition process. The letter lists four items it calls “actionable,” but the realities of acquisition reform may mean the status quo won’t change, at least not quickly.
The letter referenced an interim report published by the Atlantic Council in April that listed ways the Defense Department can immediately modernize acquisition. The letter sent to Austin sought to highlight the importance of those reforms. The final version of the Atlantic Council’s report is due to be completed in November.
“The goal in having an open letter with just 13 signatories was to highlight to Pentagon leadership that major defense technology companies and their major venture capital funds viewed the recommendations as mature,” said Peter Modigliani, one of the authors of the Atlantic Council report told Federal News Network. “Instead of having a letter with hundreds of emerging, new entrants in the sector, the leadership wanted to underscore that the Silicon Valley establishment backed the recommendations as worth implementing.”
Much of the ability to affect change lies with Congress, and while the proposed fiscal 2024 National Defense Authorization Act offers some paths to improved acquisition policy, it doesn’t offer the quick fixes the letter requests. The former head of the Defense Innovation Unit (DIU), Mike Brown, told Federal News Network the acquisition process was designed for a different era.
“We haven’t adjusted our process from the Cold War. The process we use today was put in place by Secretary [Robert] McNamara in the 1960s. It’s geared for buying ships, tanks and planes, not for software and other things in the digital age,” said Brown, who is a partner at venture capital firm Shield Capital and one of the signatories on the letter to the Secretary of Defense.
He said the number of line items in the DoD budget requiring Congressional oversight overwhelms the system.
“I think it’s a very welcome debate as to whether today’s way of handling the budget actually provides better oversight. There’s 3,000-to-5,000 line items in the budget for defense only. You could certainly argue that the Defense Department would have adequate oversight with a few hundred line items, where Congress would concentrate on the big ticket items and give some strategic guidance,” Brown said.
Of the four action items listed in the letter, Defense Department leaders can point to some progress. A change this year makes the DIU a direct report to the Secretary of Defense, a step that aligns with the first action item calling for “modernizing the DoD to align with the 21st century industrial base.” The letter said that changing the reporting status of the DIU was a positive step in that direction.
The letter also wants DoD to “strengthen the alignment of capital markets to DoD outcomes,” a change it suggests can be accomplished through the Small Business Innovation Research (SBIR) grants program. It wants the Pentagon to “generate direct-to-Phase III SBIR grants, enable flexible contract vehicles and remove existing barriers for small businesses with backing by venture capitalists or publicly traded companies to compete for SBIR grants.”
The phase three SBIR grants are intended for commercial product development that allows for outside funding providing the money doesn’t come from a publicly traded company. It gives the company its data rights under SBIR regulations.
Making it more attractive for industry to do business with DoD is another action point in the letter, and it targets a popular complaint among government contractors — the System for Award Management (SAM.gov). The letter calls for “investing in modernizing SAM.gov and improving user design, streamlining security clearance processes and establishing a team to map and improve processes to scale successful research and prototypes into new or existing acquisition programs.”
The fourth initiative the letter promoted was to “establish a bridge fund for demonstrated technologies.” It said funding should be provided to develop needed products after testing proved them to be workable.
Brown said his work at DIU really highlighted the need to get innovative technology into production faster.
“There’s no opportunity for senior level department officials to say, ‘that is a very cool technology, and I could use it in this application.’ Instead, very senior level officials, for example if four-star General [C.Q.] Brown, head of the Air Force, wants something, he says ‘put that in the budget.’ But that means in three years, we can start spending the first dollar. So that’s completely inconsistent with competition that we’re facing with an adversary like China,” he said.