Acquisition Talk

I was please to host a webinar event with George Mason's Center for Government Contracting featuring three former Pentagon executives. We discussed my white paper on defense budget reform, which provides an overview of (1) the history of budgeting; (2) why budget reform is necessary for accelerating innovation; and (3) a proposed solution. I argue that the budget is the primary obstacle to transforming the defense force structure away from legacy platforms and toward emerging technologies. If budget line items can be consolidated, allowing more flexibility to start, ramp up, pivot, or cancel projects, it will provide mission-driven organizations the one thing they've always lacked: the ability to become true portfolio managers. I was joined by Katharina McFarland (former Assistant Secretary of Defense for Acquisition), Bill Greenwalt (former SASC staffer and Deputy Assistant Secretary for Industrial Policy), and Bob Daigle (former HASC staffer and Director of Cost Assessment and Program Evaluation). In general, they agree with the idea of budget reform I put forward, but each panelist had their own insights and perspectives to add. Katharina argued that the defense acquisition process is not agile by design, and it cannot be changed overnight. There are too many people that have equity in each and every program, slowing the entire process down and creating roadblocks to substantial change. She considers how people aspect of the problem, as well as how to create better systems of data collection and analysis to inform decisions than what we currently have in the budget. Bill considers the defense budget process as a relic of the Cold War that needs complete change. The DoD attached itself to central planning ideologies because (1) it was the best practices of 1950s firms like Ford Motor and GM; and (2) because the Soviet Union posed an existential threat. Yet as Bill argues, the waterfall planning processes the DoD installed actually led to the rapid decline of US auto-makers in the decades after. Moreover, the US didn't win the Cold War because its defense management was better than at central planning than the Soviets, but simply because the US had a market economy. With modern tech companies doing agile development and a new Chinese threat, there may be a window to complete overhaul of the defense budget like was done in 1961. Bob points to the requirements process as the root of many problems with budgeting and accelerating technology. Requirements take several years to get defined, and are detailed to an excruciating level. That detail hen gets reflected in the programs that get budgeted for, creating inflexibility. Bob argues that both requirements and budgets should be less specified -- raised up a couple levels -- but that the fundamental Planning-Programming-Budgeting-Execution process is sound. Bob argues that defense is too big and complex to change at once, and requires smaller pilot programs that carve out completely new space that can then be scaled. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

Joel Neidig joined me on the Acquisition Talk podcast to discuss how blockchain technology can support the military across a wide range of use-cases including supply chain management, financial transactions, additive manufacturing, secure communications, digital engineering, and much more. He is the co-founder and CEO of SIMBA Chain, a startup that won an early DARPA grant back in 2016 exploring blockchain's potential for secure communications. The dual-use company has branched out into the military services, providing customers with low-code tools to build a diverse set of applications on top of several blockchain protocols. For those unfamiliar, blockchain is basically a shared ledger that makes an immutable record of transactions, verified through a peer-to-peer network. The network nodes check and validate transactions for consistency, making it incredibly difficult to attack. Of course, Bitcoin and the use-case for money is a popular application. But Joel explained how SIMBA Chain is working with Boeing and other companies to create a trusted supply chain. Any digital or physical item can be given a unique identifier on the blockchain, creating a trusted record of the transfer of goods throughout the supply chain, such as from a producer to a shipping terminal, then to a ship, delivery truck, storage at another supplier, integration onto a component or subsystem, and so on until an end-item is delivered to the customer. This not only protects the supply chain from cyber risks emanating from counterfeit or tampered hardware, but also non-malicious problems due to non-conforming parts that may be the wrong version or spec. Supply chain is just one blockchain application among many that could help revolutionize the way government does business and fights a war. While the US government is only putting a million dollars here and there into blockchain, China is putting billions of dollars into their own blockchain capabilities. China is forcing US suppliers like Starbucks and Wal-Mart onto their national blockchain, which is soon be the only way they are able to do business in China. The Pentagon cannot afford to slow-roll its adoption of blockchain because it will be a crucial factor in securing and automating workflows for additive manufacturing, artificial intelligence, financial transactions, and much more. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

I was pleased to have Dan Patt and Bryan Clark join me on the Acquisition Talk podcast to discuss a range of important subjects including mosaic warfare, joint all-domain command and control, the digital century series, systems architecture, and more. Bryan Clark is the Director of the Hudson Institute's new Center for Defense Concepts and Technologies, where he is joined by a former deputy director at DARPA, Dan Patt. The two make a formidable team, and their center will focus on the application of emerging technologies to military concepts of operation. In the episode, Dan and Bryan argue that the DoD's reliance of monolithic platforms -- a relic of the Cold War era -- makes it increasingly fragile to defeat against peer adversaries. Major systems today are expected to perform numerous missions, requiring them to self-contain sensors, command and control, combat systems, and so forth. This not only increases unit costs and decreases force structure, it limits the number of different ways force packages can be composed. US commanders are thus limited in their options for effecting a result, making them much more predictable and subject to counter-measures. The alternative is to decompose monolithic platforms into a wide array of smaller systems. While each system itself has fewer capabilities and is less survivable, there will be far more of them. Their lower cost allows them to be attritable. The benefit is magnified by increases to competition and economies of scale. Importantly, commanders will have far more options to decompose and re-compose the force structure. An important element in the mosaic warfare concept is joint all-domain command and control, or JADC2. This can be described as the network that connects the relevant nodes of the disaggregated force structure, such as between sensor and shooter, and is often called the military "internet-of-things." With a rise in the need for interfaces, we discuss a path forward to create ad-hoc interoperability between unique system requirements called STITCHES. This by-passes many of the rigidities faced in the pursuit of an agreement on global standards common in today's modular open systems architectures. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

In a special webinar event of the Acquisition Talk podcast, I spoke with the excellent Ben McMartin. He is a managing partner at the Public Spend Forum, and before that was chief of the Acquisition Management Office at the Army's CCDC Ground Vehicle Systems Center. He has been at the center of the recent rise of Other Transactions contracting in the Department of Defense, founding the Acquisition Innovation Roadshow and leading the Joint Acquisition Agility Summit. In the episode, Ben argues that Other Transactions -- a method of contracting outside the Federal Acquisition Regulation -- is not simply a way to cut corners or move faster. Instead, it is a way to collaborate with industry, which is particularly important in the research and development stage. If the level of collaboration with industry starts to feel "dirty and wrong," then you're almost doing it right! This is important because R&D efforts cannot be priced like commodities. Instead, the contract terms must be flexible to updated information. What matters is how much funding is available, and what are the relevant alternative actions that could be a better use of funds. Ben provides a ton of insights on contracting, barriers to entry, and more: - Why industry buy-in will drive continued OTA growth - How OTA consortia grew up in response to researchers wanting to outsource bookkeeping - What are the two ways to OTA? - How to determine value outside of price - The lack of success stories with follow-on production Two big insights for me were: (1) prototyping must be increased at the subsystem level using OTAs and other authorities like 2373 for experimental purposes, and then rather than transition to an OTA production follow-on, should more realistically be transitioned to the large primes for integration; and (2) that there is no objective cost for real innovative products from non-traditionals, the buyer must know the technologies and relevant analogies and do a more subjective evaluation to triangular a "fair and reasonable" price. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

The sibling team that is Amanda Bresler and Alex Bresler joined me on the Acquisition Talk podcast to discuss their recent data analysis on defense contracts, the industrial base, and innovation programs. They found that between 2010 and 2019, the number of unique defense vendors had fallen from nearly 80,000 to just over 50,000 despite a 286 percent increase the the number of transactions. Even more precipitous was the decline of new entrants, falling from over 15,000 to nearly 4,000. During the episode we dive into the data and discuss: Whether DoD innovation programs are stovepiped How new entrants receive a small fraction of SBIR/STTR Phase I awards The opacity of Other Transactions data How companies market themselves to the agencies Strategies for improving new entrant transitions (Bonus) overtime section on China and great power competition One of the recommendations Amanda and Alex float is to incentivize the government and prime contractors to allocate a percentage of their funding to "proven innovators." This sounds a lot like what Steve Blank recommended to me last month. The title "proven innovator" wouldn't be given to just any firm, but new entrants that have done business with defense in the past and have tested solutions to meet military requirements. In effect, it could be managed much like the set-aside programs for women-owned, HUBzone, and so forth. The Breslers have worked to close the information gap through their own work on a SBIR Phase II contract. Called Sheldon, the information system will bring together disparate sources to aid in market research. The need is great. They found nearly 50 percent of companies received zero or one follow-on contracts after SBIR/STTR, and just 3.5 percent of companies won a startling 80 percent of all follow-on contracts by value. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

Three of the co-founders of the Air Force Ventures program at AFWERX joined me on the Acquisition Talk podcast to discuss how they transition startups and new technologies across the valley of death and into major programs of record. While AFWERX is only approaching its third birthday, they've had some tremendous success. Over the past 18 months, they've contracted with 1,000 companies -- many of which were new to doing business with the DoD. They brought in over $1 billion in matching venture capital dollars in 2019, more than the past 15 years combined. And yet, one of the often head complaints is that the DoD spreads small dollars far-and-wide rather than making big bets on non-traditional firms. The process for changing that narrative was the focus of our conversation, including: - The Strategic Finance (STRATFI) program and "pitch-bowls" - How to create a vibrant industrial base without creating new defense primes - Reducing time to first program dollar from 6 years to a matter of months - Lofty goals of repeatedly creating new dual-use unicorns - How to line up funding that isn't tied to specific solutions or vendors A lot of people perhaps imagine the people at AFWERX having coffee on Sand Hill road with VCs and startups, but in reality almost all of their time is spent refining the back end of the acquisition process. For example, AFWERX worked with organic software developers at Hill Air Force Base to automate several parts of the contract administration process, so less time is spent copying information from PDFs. As a result, AFWERX has been able to reduce time to contract to about one month, a target many contracting offices have been unable to achieve. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

Steve Blank joined me on the Acquisition Talk podcast to discuss the urgency of defense innovation in a world of authoritarian peer competitors. Steve is a serial entrepreneur, a founder of Hacking 4 Defense, a member of the Defense Business Board, a former Air Force officer, and a leader of the lean methodology movement. The conversation takes us to number of important areas, including: Why the Chinese couldn't have done more damage to national defense than the Pentagon's own requirements How agile programs like ABMS and Kessel Run are educating leadership Whether defense accelerators are merely doing "innovation theater" How no startup could afford to deal with the DoD without a fanatical billionaire How most people who think they're visionaries are actually hallucinating When Steve talks to defense staffers, they think "lean" refers to reducing headcount -- and therefore less budgets, jobs, and influence. He explains how that is exactly wrong -- lean is a completely different way of doing business that can be contrasted with the 20th century model defined by waterfall. The difference between lean or agile processes and waterfall is demarcated to some degree by a generational gap. The O-3s and E-3s and below seem to get it. The question is whether the leadership can get on-board before we reach a crisis point. Steve points to Chris Brose's new book as a wake up call that the United States might not win the next major war. While there are some hopeful signs that defense leaders are beginning to understand 21st century commercial business practices, he cautions how tacking small changes on a much larger system will not work. The entirety of defense acquisition needs to be revamped, including the industrial base. Existing prime contractors are essentially sheet-metal benders, Steve argues, and software-native firms would be able to out-compete them in hardware if given a fair chance. But many in the commercial sector think the $1 million SBIR grants given to startups where everyone's a winner without a path to transition into billion-dollar programs is deterimental. The goal isn't to show up on the field, Steve says, but to win the game. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

Alexander Canizares joined me on the Acquisition Talk podcast to discuss the legal side of the acquisition system. He is a senior counsel at Perkins-Coie, a lecturer at George Washington Law School, and a former trial attorney at the Department of Justice. Alex provides insights on a number of topics, including: Cybersecurity Maturity Model Certification (CMMC) Whether an OTA contract can be protested What's new in pricing sole source contracts Whether VC funding disqualifies businesses from SBA loans The Procurement Collusion Task Force Throughout the episode, Alex relates a fundamental tension in procurement law that I would describe as the tension between the desire to move with commercial speed and the fact that government is not just a big firm. For example, the CMMC addresses a real problem for national security but has a number of unknowns in terms of compliance issues. Bid protests help create fair procurement processes but can upset agency timelines and create risk aversion. Cost or pricing data requirements prevent abusive sole-source pricing but may deter competition from commercial firms. One of the highlights was the discussion on whether an Other Transaction Authority (OTA) contract can be protested or not. Alex explains how the Court of Federal Claims rejected SpaceX's bid protest of an OTA because they are not considered procurement contracts under the Tucker Act -- they are outside the Federal Acquisition Regulation. The caveat is that a protest can be raised over whether the contract was able to use an OTA in the first place. For example, Oracle successfully protested an OTA follow-on production award because the agency did not specify in the original prototyping solicitation that follow-on production was available, citing the DoD OTA Guide. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

Pete Newell joined me on the Acquisition Talk podcast to discuss a range of issues around problem curation and lean methodology. He is the CEO of BMNT, a firm that helps clients build problem solving teams to address significant issues. He is also on the board of Hacking 4 Defense and is a former Colonel who led the Army's Rapid Equipping Force just prior to retiring. During the episode, we discuss a range of issues including: - How to build and maintain discipline through the innovation pipeline - Advice for business leaders in the Covid-19 crisis - How Hacking 4 Defense is developing a new generation of entrepreneurs - What it means to be disciplined in an agile/iterative environment - Ways large enterprises can break away from their self-sabotaging processes The episode features a host of lessons learned from Pete's years of experience transitioning technologies. During his time leading the Rapid Equipping Force, Pete was able to take a $150 million budget and build an investment portfolio more than five times that size through partnerships and other methods. Ultimately, the REF transitioned 170 programs into production during Pete's time there. Pete explains how the Pentagon has become quite good at opening the aperture for new companies and ideas to get small projects started. More work is needed, however, on giving companies showing success multi-year/multi-million dollar programs of record. One problem he points to is in the handoff phases through the innovation pipeline. He recommends thinking about: (1) how we move people through stages; (2) how contract language should change as projects mature; and (3) what sources of funding are available. Until the government is able to demonstrate more successful transitions, it won't impact the psyche of entrepreneurs and investors who still look upon public sector with suspicion. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.

I was pleased to speak with Peter Levine on the Acquisition Talk podcast about his new book, Defense Management Reform: How to Make the Pentagon Work Better and Cost Less. He was a career professional staff member for Congress and former Deputy Chief Management Officer. During our wide-ranging conversation, we discuss: Why the DoD is more like an economy than a business The balance between experimentation and discipline Views on Middle-Tier and OTAs How budgets can be cherry-picked to meet a strategy The assertion of civilian control Peter argues that the 2009 Weapon Systems Acquisition Reform Act (WSARA) should be viewed as a huge success on its own terms. The 1990s emphasis on deregulation and commercial item contracting was extremely important for less complex procurement, but created problems for major programs. Too often major programs were initiated without buying down sufficient technical risk through experimentation and analysis. This led to a great deal of cost growth in the 2000s. By adding discipline, such as raising the status of independent cost estimates, programs started after WSARA have shown far greater stability and less cost growth. But there are no silver bullets, Peter reminds us. The valid criticism of WSARA is that it brought stability at the expense of innovation. This directly led into the 2015-present reforms re-emphasizing rapid acquisition, iterative development, and commercial procedures. These concepts are not new, and while they may apply well to software efforts, they does not obviate the need for cost, schedule, and technical baselines ahead of Milestone B. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.