A Call to Duty: Why America Must Support Its Defense Industrial Base

COMMENTARY Defense

A Call to Duty: Why America Must Support Its Defense Industrial Base

Sep 15th, 2020 3 min read
COMMENTARY BY
Klon Kitchen

Director, Center for Technology Policy

Klon is Director of The Heritage Foundation's Center for Technology Policy.
An F-35 flies past the U.S. Capitol dome during a flyover in Washington on June 12, 2019. Bill Clark / Contributor / Getty Images

Key Takeaways

Earlier this year, the National Defense Industrial Association gave the defense industrial base a “C” grade and warned that things are getting worse.

Harnessing technological innovations for application in warfare will be crucial—and may prove decisive—in the battle for military advantage.

The United States will not be able to secure its people or protect its interests without greatly expanding its defense innovation base.

"The road to Hell is paved with good intentions.” That well-worn adage succinctly explains how even our noblest efforts can lead to bad outcomes if we ignore obvious truths.

The wisdom of this saying is on full display in the U.S. military’s defense innovation and acquisition programs. Decades of regulations, cumbersome bureaucratic requirements, and unnecessarily burdensome auditing requirements—all of which flow from a sincere and well-intentioned desire to protect against fraud and maximize value for taxpayers—have given us a defense industrial base struggling to meet the nation’s needs.

Earlier this year, the National Defense Industrial Association gave the defense industrial base a “C” grade and warned that things are getting worse. Here is what the report says has to be done:

Harnessing technological innovations for application in warfare will be crucial—and may prove decisive—in the battle for military advantage. China and Russia continue to modernize their militaries. In response, the Department of Defense (DoD) must modernize to build a more lethal force . . . At the same time, many of the leading innovators in critical technology areas reside outside DoD’s traditional vendor base. As a result, DoD must expand the defense industrial base and employ more nimble contracting mechanisms better suited for engaging with non-traditional defense partners.

This conclusion is now commonly held among defense and national security leaders. Yet, still, the country is struggling to make the changes needed to actually expand our defense industrial base and make it agile enough to meet the demands of the emerging security environment.

Unfortunately, America no longer enjoys sufficient technological advantage over our peer competitors to allow for slow, incremental changes. China, Russia, and other challengers are markedly improving their defense posture and capabilities. The United States is well-advised to remember that our nation and our way of life is not guaranteed.

To be reliably secure, we must continually improve—and do so faster than our adversaries. This requires three adjustments to the Pentagon’s innovation and acquisition programming.

First, the Defense Department must incentivize nontraditional partners to join the defense industrial base and to invest their own resources into military-relevant research and design (R&D). The current lack of participation is not due to a lack of patriotism but to a lack of incentives that entice the industry to want to work with the department. The Pentagon is no longer the influential buyer of technology it once was. Often there are better opportunities and more attractive terms elsewhere.

Consider that, in 1965, the Defense Department accounted for more than 75 percent of U.S. semiconductor demand. Today, global government demand accounts for only 1.3 percent of the market. The growing commercial demand for cutting-edge technology—coupled with the Pentagon’s increasingly difficult business processes and lower profit margins—has led many innovative companies to simply walk away from defense-related markets.

This leads to the second adjustment: The Pentagon and Congress need to foster and encourage a well-capitalized defense technology and industrial base. This requires basing price negotiations on a technology’s value to national security, not artificially low or noncompetitive profit margins.

A well-capitalized defense technology and industrial base encourages companies to reinvest profits into research and development because the return on investment will justify such efforts. If defense-related markets remain substantially less profitable than commercial markets, then companies will rationally choose to sell their products elsewhere—slowly starving the U.S. military of cutting-edge technology and making the existing defense industrial base more susceptible to disruption as it consolidates into just a few market participants.

Third, we have to simplify and shorten the acquisition process. This is non-negotiable. While some progress is being made using “other transactional authorities,” these efforts need to be greatly expanded. Similarly, organizations like the Defense Innovation Unit and the CIA’s In-Q-Tel are good at technology scouting and at strategic investment. But we still struggle to transition these technologies from niche experimental programs into stable, long-term solutions.

Ask any technology CEO and they’ll tell you they have plenty of investment, what they need is contracts; preferably contracts that are profitable in the current fiscal year. If and when the government is regularly willing and able to give a tech innovator a contract enabling them to transition from boot-strap startup to profitable company, the United States will no longer have a defense innovation problem.

This diagnosis and prescription are widely accepted within defense and national security circles. What is missing, however, is the attendant urgency this challenge demands.

Urgency is fully warranted. The United States will not be able to secure its people or protect its interests without greatly expanding its defense innovation base—and that will require making it more profitable, more agile, and less bureaucratic.

The United States is still blessed with a private sector able to rise to the nation’s needs—all we have to do is get out of the way.

This piece originally appeared in the National Interest