Defense Innovation Faces Hurdles

By Teka Thomas
One of Secretary of Defense Ash Carter’s main priorities is to find the right approach to procuring services and software from information technology companies. However, the government’s policies today do not encourage constructive partnerships with these nontraditional suppliers that are capable of providing innovative products. 

There are two issues the Defense Department must tackle in approaching the “non-defense” business sector. The first being control of the use of technology, and the second being acquiring the right talent at the right time.

There is a small, specialized body of intellectual property law that deals with federal procurement. In lay terms, depending on how much federal funding goes into a product, the government has varying “use rights” for the product and its technical data. If the government pays for all of the development, the government can give it away to multiple companies. Under the best circumstances for an outside contractor, the government can use its technology only for its own purposes.

There is a practical problem however. The “government” is often made up of a lot of embedded service contractors. To an extent, government procurement is a transaction involving other businesses. Thus, contractor employees at a military base could see the secret sauce of a tech company and reverse engineer it for their own company or any other company that lures them away.

They are not yoked to the tech company with stock options, so their interests are not aligned with the firm that created the technology. Procurement with high-growth potential technology firms will require a lot of contract negotiation if these firms are to be made comfortable in selling their wares to Uncle Sam.

When procuring service contracts, in which private employees work directly with the government, the key guiding legal concept is the “inherently governmental function.” Public law, executive orders, and the Federal Acquisition Regulations define the types of functions that cannot be contracted out, and must be performed by sworn government personnel. People of different ideologies can argue about the proper scope of government, but all can stipulate that certain roles must be governmental.

Technological advancements, and an ever more complex global society, means that inherently governmental activities will outstrip the capacity of government personnel to regulate and program. Thus, our current conception of inherently governmental activities will become increasingly dependent on private experts. And the management of personnel and their institutional knowledge will require new approaches to human resources management.

The government’s personnel and procurement challenges converge as agencies try to innovate and modernize their information technologies. The speed with which software and hardware are funded and developed in the private sector is not only shorter than the federal budget cycle, it is often shorter than a typical contract solicitation. Often these high-tech products require servicing that only private vendors have the expertise to do.

The government acquisitions force (civilian and military alike) has formed a culture and a personnel system based on the industrial age and the budget process of a Madisonian government. The culture could change if promotions were based on exposure to private enterprise, particularly in fast growing industries. Six-month career moves in high tech, doing hackathons and design sprints would have an impact on how the federal government does business. Perhaps the best career experience for a program manager or contracting officer is an entrepreneurial one: building his or her own product.

The fastest way for the entire government to inculcate a more entrepreneurial mindset is through the formal training curriculum of program managers and contracting officers. Imagine if promotion to a rank such as GS-15 or a function-like the head of contracting activity required classes in design thinking, lean methodology, empathy maps and pivots. One of the biggest breakthroughs would be that an essential element of innovation is an acceptance of failure.

Startup companies are said to be experiments in the form of corporations. However, in the private sector a product must have a use, customers in an open market and the potential to grow in valuation many times over. Uncle Sam is a different kind of customer, who only needs to know if the product will work at a fair price. The public sector’s problem is that the public’s money is involved, and a lot of people across two branches of government have a hand in these decisions.

There seems to be bipartisan support for some type of “revolving door” personnel process for career military and civilians. Private sector employees could gain insight into the prerogatives of the government and its missions. The government workers could gain insight on the marketplace, and developing products for it. Cross pollination has mostly an upside for America.

An MBA at a Palo Alto startup may be inspired to public service, and a program manager at a naval installation may conceive of a market disrupting software.

The end game would be an executive branch populated with employees who think in terms of contemporary innovation. Hopefully, the legislative branch would allow discretionary funds designed to take the stigma out of failure.

Contract solicitations could be more general and incent prototypes that can be judged, as opposed to having committees of users designing requirements on paper. This could lead to the government, which is a public trust, being able to buy the best it can, quickly and for the best value.

Teka Thomas is a business attorney in Washington, D.C. and a former Air Force procurement officer.

Topics: Business Trends, Doing Business with the Government, Defense Department, DOD Policy

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