Dmitri Alperovitch is chairman of the Silverado Policy Accelerator and the author, with Garrett M. Graff, of “World on the Brink.” Matt Cronin is the senior national security adviser at the venture capital firm Andreessen Horowitz.
We are fast approaching a moment when China’s expansionist ambitions may test America’s resolve. Recognizing this threat, Congress and the Pentagon are grappling with how to fix a failed defense acquisition system that rewards box-checking over breakthroughs.
This system was born in the 1960s, when the Pentagon replaced its commercially driven innovation model with Soviet-style central planning and a regulatory labyrinth that made defense work cost-prohibitive for most U.S. companies. In the past few years, fixing this decades-old mistake has taken on increased urgency. That is because, in a historic irony, Communist China embraced market dynamics and our old capitalist playbook to modernize its military.
The result has been staggering. China now boasts the world’s largest navy and is engaging in the greatest peacetime military buildup since the eve of World War II. Meanwhile, the United States decommissions ships and defense experts estimate that its forces have just a few weeks’ worth of munitions available for a Pacific conflict — munitions that would take nearly two years to reconstitute.
If “production is deterrence,” then today’s defense acquisition system invites, rather than deters, conflict. In his March confirmation hearings, Joint Chiefs Chairman Dan Caine testified, “At this critical moment, the Joint Force is contending with an acquisition process and defense industrial base that are not optimized for protracted conflict. The U.S. does not have the throughput, responsiveness, or agility needed to deter our adversaries.”
To correct course, the U.S. military needs to return to free market principles. Three reforms can open up the defense industrial base to agile new entrants. The U.S. should: Create acquisition paths that prioritize competency. Give the acquisition workforce incentives to procure the best solution rapidly. And protect procurement officers from frivolous litigation.
First, the Pentagon must select companies based on core competencies, not their ability to navigate red tape. The Federal Acquisition Regulation and its Pentagon supplement are more than 5,000 pages, a labyrinthine barrier for most companies. The result, as the Center for Strategic and International Studies put it, is a defense industrial base “isolated from the wider commercial economy,” leaving traditional defense contractors entrenched in “monopoly or near-monopoly positions.” Worse, the Pentagon’s self-imposed isolation from the broader economy has coincided with the private sector becoming the nation’s dominant source of innovation, depriving it of critical capabilities.
To expand the defense base, the Pentagon should tap into the broader economy by adopting a “commercial first” principle whenever feasible — buying proven, off-the-shelf technologies instead of reinventing them through years-long bespoke programs. It should also stop applying overwhelming cost and accounting rules to companies spending their own funds to develop defense solutions. These reforms — championed in the Senate version of the National Defense Authorization Act — would let companies compete on merit, not process.
Second, the Pentagon must realign incentives for its workforce. Today, to minimize legal challenges, procurement officers are rewarded for bureaucratic timidity and box checking. The result is a culture of risk aversion where a flawless process that takes years yet delivers nothing is valued more than bold action that delivers results. Gen. Douglas MacArthur famously quipped that “the history of failure in war can almost always be summed up in two words: Too late.” The United States cannot afford to reward delay.
Instead, contracting officers should be evaluated on speed, end-user satisfaction and cost-effectiveness. An officer who quickly equips a unit with an effective and reasonably priced counter-drone system should be promoted faster (and even rewarded with a bonus) than one who spends years perfecting a narrowly designed alternative. A team that saves taxpayers millions with off-the-shelf tech should be recognized. And if warfighters rate a system highly, that success should drive career advancement.
Finally, we must also fix the bid protest system — not because protests are too common, but because fear of them distorts procurement decisions. Legal risk increases lead times, inflates costs and discourages discretion. Even the most meritorious awards are second-guessed and, since one paperwork misstep can trigger litigation, career risk and public scrutiny. The result is an acquisition culture that favors incumbents over innovation.
This chilling effect is compounded by strategic abuse. Bid litigation can allow threatened incumbents to continue to rake in taxpayer dollars while blocking a new award, creating an almost risk-free way to stifle competition. Smart reforms can preserve accountability while deterring this misuse. These include: a “loser pays” rule for large firms, penalties for repeat frivolous protests and improved post-award debriefings so that bidders understand the basis for a decision.
The Soviet Union bet on central planning and collapsed. America bet on competition and prevailed. If we restore principles of competition and opportunity to defense acquisition, we can deter adversaries, protect American warfighters and show the world, once again, the power of a free society.
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