We Need to Transform the Pentagon
For those of us in the defense tech industry, it has become painfully obvious that massive transformation is needed across the United States Department of Defense and the Pentagon.
The warning signs have been flashing for nearly two decades, but to match the moment we collectively find ourselves in, the urgency and appetite for significant change must be now.
Given the new administration and their stated policy objectives, I would assert that the United States has its best opportunity in a generation for substantial change within the Department of Defense.
If I were the newly appointed DefSec, Pete Hegseth, here are 10 of my top priorities on Day 1:
#1 Change the Culture & Incentives
The Pentagon is too risk averse. Most teams have largely the wrong incentive structure to enact change. We need to encourage, celebrate and incentivize PEOs & Procurement Officers to experiment, award contracts to non-primes and embrace failure when if happens. Before changing policy, we need to change the hearts and minds of our hard-working people.
#2 Pass an Annual Audit by 2027
The Pentagon and no major part of the Department of Defense has ever passed an annual audit since 2018. That needs to change. We cannot optimize and improve our budget, systems & technology if we do not have an orderly understanding of what we are currently spending (or perhaps wasting) money on. We need an aggressive, “break the glass” style approach to force the Pentagon to pass such an audit on all net-new spending by 2027.
#3 Remove New Cost-Plus Contracts
To non-Defense insiders, Cost-Plus contracting is a baffling concept. While there are merits to the practice in certain, limited R&D capacities, Cost-Plus should be a minimally used, exception to the rule. The DoD should not issue any significant new cost-plus contracts, and instead, prioritize defense partners that put their own capital at risk to help build solutions. This helps open the appetite for who can win a contract and helps the DoD not perpetually over-pay for capabilities.
#4 Reduce the Fiscal OODA Loop & Planning Process
Most years, the DoD produces a five-year plan, called the Future Years Defense Program (FYDP). Given the pace of innovation and the rapidly changing geopolitical landscape, many of the requirements or programs thought to be a priority in 2019 are not only out-dated, but largely irrelevant.
Imagine working off a plan that was pre-COVID, pre-Ukraine/Russia War, or pre-Oct 7. In fact, many of the leading companies in Defense Tech today that can offer the DoD better solutions — Castelion, Saronic, True Anomaly — weren’t even founded in 2019! We need to give DoD officials a parallel process that is shorter, more iterative, and can be used to adjust course.
#5 Manufacturing Capacity over System Capability
The most important capability the U.S. Defense Industrial Base needs to develop in the coming years, is not a singular weapons or defensive system. It is the manufacturing capacity itself to produce, at scale. During an active conflict, with the flexibility and agile nature to adapt to the requirements needed. When supply chains are constrained, when personnel is limited. This is the ultimate test of our DIB. As Elon says, this is why the factory is the product.
#6 Pause or Remove Major Out-Dated Programs
These are not my personal judgements to make, however, it certainly is plausible, nay I say likely, that the DoD and various government agencies have major budget expenditures on programs that are no longer needed or relevant. And if the newly created Department of Government Efficiency (DOGE) aim to significantly streamline budgets, one must go to the largest areas of allocation.
Does NASA’s SLS program still need to continue? Should the F-35 Joint Strike Fighter be continued, even as the GAO admits it will cost $2T+ and the Air Force states it will use the system less? Should the U.S. build another Aircraft carrier? Are purchasing Virginia & Ohio class submarines through the 2040s the best approach to maritime detterence? Tough decisions will need to be made about where the largest of defense dollars are allocated today and moving forward.
#7 We Need a Manhattan-Style Project for Ship-Building
As most Defense insiders are aware, the state of our shipbuilding and maritime manufacturing industries should be a national embarrassment. In 2022, the U.S. built only 5 oceangoing commercial ships. That same year, China built 1,794. The U.S. Navy estimates that China’s shipbuilding capacity is 232x greater than ours. If we have any serious thoughts about a potential conflict with China by the end of the decade, we need a heroic reallocation of dollars, resources & talent towards the maritime domain.
#8 The Future is a Space-Enabled One
The commercial industry and our defensive platforms and weapon systems, increasingly rely on Space Technologies to operate and be effective. Without the space segment serving as an infrastructure, connectivity and intelligence layer, many of our personnel and assets are much less impactful.
Yet Space & the Space Force remains the least funded branch of the DoD, with $29.5B of the $824B DoD budget. If our adversaries have leverage over us in a space-based conflict, where they could take down all GPS, missile defense and intelligence gathering systems, it may not matter if we have more advanced maritime or land-based capabilities. As such, we should massively prioritize and accelerate all defense funding and programs to Space.
#9 Make Them Justify the Status-Quo
While creating a culture & incentive structure to encourage new procurement approaches is radically important, and why I listed it as #1 above, we should also require decisions that double-down on the status-quo to be publicly justified. If PEOs award contracts over a certain threshold (perhaps $100M or $250M) and cheaper options were submitted by non-primes (as an example), the PEOs should be required to submit and publish a written reasoning for why. We need accountability and transparency with our tax-payer funded programs.
#10 Give our People the Tools they Need
The DoD needs a massive transformation of the software, IT and AI tooling they can have access to in order to become more productive. We cannot expect massive productivity gains simply through brute force, we must also enable our personnel to be more productive. We should evaluate, bid out and implement new, modern software systems. The end-state here is one where our Government users are leveraging some of the most advanced software & AI tools available before the commercial sector, not several decades behind.
