Chuck Blanchard Ramon Marks
There is growing discussion that Department of Defense (DoD) procurement programs are not nimble enough to meet emerging threats from peer competitors such as China. The timeline for the development of new defense capabilities is lengthy, impeding the nation’s ability to offset swiftly and efficiently growing capabilities of potential adversaries. Critics say that the Department is not adequately accelerating the development of game-changing technologies and not effectively leveraging commercial technology. They have called for comprehensive procurement reform as the solution to these problems.In fairness, the Pentagon has often proven itself more than able to use existing procurement authorities rapidly and effectively when urgency demands quick action. For example, in 2008, in response to warfighter needs in Afghanistan and Iraq for enhanced intelligence, surveillance, and reconnaissance capabilities, the Air Force successfully developed and deployed the MC-12 Liberty aircraft in less than eight months following congressional funding approval. Similarly, in order to protect soldiers and Marines from improvised explosive devices, the Department of Defense rapidly acquired a new armored vehicle, the Mine Resistant Ambush Protect (MRAP). The decision to buy, followed by the actual commencement of production, took less than a year. More recently, the Air Force used its Rapid Capabilities Office to develop the new B-21 Raider bomber on time and on budget (so far!).
The challenge that remains is fostering an even greater collective effort to expedite weapons development. How can the nation better accelerate the DoD acquisitions process? What can be learned from the experience of the private sector to help? How might DoD adapt the intelligence community’s successful experiment, establishing In-Q-Tel, for military procurement? What can be done to harness private capital markets to help fund and speed Pentagon building programs, such as the renovation of our Navy’s shipyards?
When Aversion to Risk is a Negative
Complicating the challenge of improving the procurement process is the natural tendency toward risk aversion within any large government organization such as DoD, governed by a complex regulatory structure. Innovation carries risk. The safer approach, one surmises, is to follow the careful procurement system that has been developed incrementally by thousands of Pentagon regulations over the course of decades. Moving fast can mean less review, and hence carry greater risk for failure. Only when the need for speed is urgent and clearly demanded by top leadership, such as was the case with MRAP’s or Operation Warp Speed, does the bureaucracy turn to quicker procurement techniques available in the legal toolbox. Much as no one was ever fired at DoD for buying IBM computers in the 1960s, no one in the building is fired today for taking a careful, safe approach to procurement under the guidelines of a manifold regulatory system.
Another aspect of the challenge requiring consideration is congressional authority. Procurement laws and rules only address “how” the contracting process is pursued for the development and purchase of a weapons system. They do not address the issue of authorization—i.e., “what” Congress has empowered the Pentagon to do on a specific weapons system or program, including the expenditure of funds. The Air Force developed and deployed the MC-12 aircraft only after receiving congressional permission. The plane’s development was specifically authorized and funded by Congress, as was the Space Development Agency’s satellite constellation. Unless funding is first approved by Congress, DoD cannot lawfully commence the contracting process for the development of any new system.
This approach of detailed congressional authorization tends to be somewhat more pronounced for the DoD than for other government entities. Most federal agencies are governed by broadly worded authorizations that give them latitude for innovative purchasing and, in many cases, the ability to guarantee credit. The Department of Defense, on the other hand, tends to be controlled by a more detailed, annual National Defense Authorization Act (NDAA) process that delimits exactly what it can and cannot develop and buy over specific time periods. The end result is an awkward system of annual funding for complex, long-term programs and institutionalized, cultural reluctance by the Pentagon to move innovatively unless specifically authorized by Congress.
An Alternative Approach?
A good illustration of the problem is DoD’s approach to experimenting with venture capital compared to other agencies. The CIA, in collaboration with other members of the intelligence community, created its own venture capital fund, In-Q-Tel, almost a quarter century ago. NASA followed suit a few years later with the creation of the Mercury Fund. In both instances, the CIA and NASA relied on their general statutory authority to set up these programs.
In 2002, Congress created the Army Venture Capital Corporation to invest in startups relating to power technology, but its funding robustness has so far been largely limited to its original appropriation. More recently, in December 2022, Secretary of Defense Austin established an Office of Strategic Capital whose mission will include partnering the Pentagon with public and private capital markets However, at this point, its ability to raise capital funding in the markets remains an open question as it continues to await specific congressional authorization to operate and guarantee credit, as well as an appropriation that can be used to support program funding, corporate investments, and reserves against lending or guarantees. Language contained in the Senate Report for NDAA 2023 contained wording that would have done much of that, but it was not incorporated into the final congressional conference report for the bill.
Change and innovation are hard. With rising strategic challenges in the Pacific and around the world, the Pentagon and the Hill must continue to work together to find more ways to speed the acquisition process. The Pentagon should continue, whenever possible, to use alternative approaches provided by existing procurement regulations to accelerate strategic weapons development. The regulatory success of such initiatives as Operation Warp Speed, MRAP, or the MC-12W aircraft might serve more often as an approach to speed up other programs. At the same time, Congress could consider providing the Pentagon with broader empowerment language for specific programs under the annual NDAA and appropriations process, as Capitol Hill has long done with other agencies. For example, Congress, if willing, could give DoD’s new Office of Strategic Capital just a few lines of NDAA wording to empower more open, Pentagon access to capital markets to support the application of commercial technology and major recapitalization projects.
The bottom-line reality is that practical approaches and solutions are available, both through the regulatory and legislative processes. More red tape can be cut, better enabling faster production of weapons systems to meet growing challenges in a multi-polar world.
Chuck Blanchard, a former general counsel of the Army and Air Force, is an Arnold & Porter partner specializing in government contracts law.
Ramon Marks, a retired Arnold & Porter partner, is Vice Chair of Business Executives for National Security (BENS).
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