Industry Leaders: Defense Department Must Adopt Commercial Market Practices

By Yasmin Tadjdeh

SAN DIEGO — In order for industry to develop cutting edge technology, the Defense Department must adopt more commercial market practices as well as increase its communication with contractors, said leaders from Textron Systems Corp. and BAE Systems.

“We have to use more commercial practices,” said Ellen Lord, CEO of Textron Systems on Feb. 11. “In commercial businesses you look at your market, see what the gaps are, you predict what the market needs and you build that. Typically in the defense world, you’ve been paid to develop and then commercialize something.”

To build new advanced technology, industry needs to make “smart bets.” But it can only do that if it has effective communication with the Defense Department, she said during a panel discussion at the AFCEA West 2015 Conference.

“We no longer have the level of dialogue that industry needs. I need to understand where I put my discretionary money. I don’t want to build things that no one needs,” she said. “I need to talk to the acquisition community about what those mission capability gaps are.”

Jerry Demuro, CEO of BAE Systems, said industry is being stifled by odious acquisition red tape. Contractors must navigate layers upon layers of bureaucracy before it can develop systems. Contractors are also dealing with exhaustive audits that tie up personnel.

Extensive audits and bureaucracy are not “improving the affordability [or] the quality of these products and certainly the time to get that delivered to the soldier,” he said.

“Industry has demonstrated that it can be very agile, … but we have organizations … where we have one third of the revenues, half of the employees and now three times the number of auditors resident in the facility,” he said.

Dealing with audits and regulatory hurdles are expensive and labor intensive. That is money that is not going toward the development of “the next whiz bang application,” he said.

Gordon England, a former deputy secretary of defense who moderated the panel, said the Pentagon’s bureaucratic approach to acquisition was unlikely to change.

“I don’t think it’s going to get better,” England — who was deputy secretary of defense from 2005 to 2009 — said. “It’s nice to say it is, but it is a regulated industry.”

At one point when England was in the Pentagon, there were 128 separate studies to improve acquisition reform and yet there are still issues today, he said.

“The commercial world, their cycle is about six months and we … [take] a couple years before we get started on a program. That’s the reality,” he said. “It is a real issue in my mind going forward.”

There is little incentive for commercial companies to work with the Defense Department because of its many layers of bureaucracy, he noted.

“I don’t believe commercial companies are going to jump into this walled environment because it hurts their commercial business,” England said.

Both Lord and DeMuro agreed that increased dialogue between the Defense Department and industry could help drive innovation.

“It comes down to simplicity, speed and communication,” Lord said. “Let’s be much clearer about what capabilities are desired and then let’s simplify the process of industry understanding what that is by not just having an industry day and maybe seeing people at one or two trade shows.”

The Defense Department should adopt the commercial market practice of frequently engaging with its customers. Forums and meetings with program executive officers multiple times a year is important, she noted.

DeMuro said clear direction from the Defense Department is key to industry innovating.

Topics: Defense Department

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