How Changing the Requirements Process Could Boost Innovation

The Pentagon and other government agencies spent much of the past two years experimenting with rapid-acquisition strategies designed to speed up technology insertion by shortening the requirements process, streamlining proposals and accelerating decisions.

The Defense Innovation Unit Experimental (DIUx) and a host of other rapid-acquisition, innovation and development offices across the department employ prototyping, iterative development and mostly small and non-traditional defense suppliers, to cut the time it takes to develop and deploy new capabilities.

Now, as a new administration arrives in Washington questioning high-priced defense programs and hoping to enforce a new brand of business-minded management, the question is whether this approach can accommodate both large-scale contracts and enterprise technology programs.

“Future Foundry,” a new report from the Center for a New American Security, lays out a strategic approach it calls “optionality.” The central idea: By placing more, smaller bets on competing technologies and concepts up front, the government can achieve a more diverse portfolio of choices over time.

The central problem its authors see is that major programs take so long to develop, it’s impossible to anticipate every potential future requirement at the outset. That, in turn, leads to the piling on of requirements up front, increasing complexity, risk and costs. Instead, they argue for investing in smaller-scale prototypes and demonstrators and then adding capabilities with rapid, incremental upgrades over time. The result: risk is minimized by committing to just one stage of development at a time; competition is enhanced because players remain in the game longer and costs are contained because large-scale program failures and cancellations are reduced or eliminated.

This, the report argues, should help DoD “exploit advantages, particularly human, in which the United States is expected to remain dominant in the foreseeable future.”

Sean O’Keefe, former NASA administrator, U.S. Navy secretary and Pentagon comptroller and now a Syracuse University professor, co-wrote the introduction to the report, which he said tries to address a fundamental problem: ensuring the largest possible pool of potential suppliers for defense requirements.

Today, O’Keefe said, “There is a very finite number of companies that are deeply engaged – almost to a point of exclusivity – in national security. And then there are others who could have applicability, but aren’t sufficiently attracted because there are so many things you’ve got to overcome, just to be a participant in that market. And the size of the market, relative to other opportunities today, leads many companies to conclude it just isn’t worth the gain.”

DIUx and other rapid procurement programs seek to reduce the barriers to entry by eliminating much of the contracting red tape that slows things down, but the strategy only goes so far. While small companies may see such work as valuable because it could spur investment or attract buy-out offers, established businesses are less willing.

“I have more opportunities than time to pursue them,” said Russell Stern, chief executive at Solarflare in Irvine, Calif. The company produces networking software and hardware that accelerates, monitors and secures network data and conducts low-latency networking. Though it has the skills and capabilities the government seeks, according to Stern, “we can’t afford to have someone sit there and spend months or years on a project that might not pay off.”

That’s where CNAS’ optionality concept comes in, says lead author Ben Fitzgerald, director of the think tank’s Technology and National Security Program. “The strategy is one in which DoD intentionally invests in many more and different types of systems. There are military reasons for doing that and also business reasons, to engender more competition and hopefully to lower some of these barriers to entry.”

The Pentagon needs a more nuanced approach to its industrial policy because it no longer dominates the technology markets it depends upon. Instead, it sources products from four distinct groups:

  • Manufacturers of military unique systems, such as submarines or aircraft carriers, in which competition is limited or non-existent
  • Makers of military unique systems, such as fighter aircraft and combat vehicles, where competition is viable
  • Commercial technology suppliers with products that can be adapted to military use
  • Purely commercial technology providers

“We don’t actually have any industrial policy for [the last two], despite the fact we talk about buying commercial technology all the time,” he said.

“We’re trying to expand the choices,” O’Keefe said, in order to escape a business model in which “you freeze-frame characteristics and then, for the rest of time, are restricted to the limits of what those capabilities are.”

The optionality approach, he said, offers “the agility to produce varying capabilities on the forward end of the spectrum” and the ability to choose, based on evolving threats, which is most effective and then field it contemporaneously. The current model locks in choices too soon, he says, and the process is so long that stakeholders tend to load up on requirements out of fear that if they miss their chance this time, it could be a decade or more before they’ll get another chance.

“We’re urging choices to take a range of different paths without commitment,” O’Keefe said.

Information Technology
For information technology systems, the concept would require a fundamental shift in how systems are typically procured. The requirements process for government information technology systems maps directly to commercial best practices for IT acquisition, as defined by industry standards like the Information Technology Infrastructure Library (ITIL) or Capability Maturity Model Integration (CMMI).

“It’s rooted in the need to build something aligned with a business or mission need, and that must work reliably, securely and supportably,” said Stan Tyliszczak, vice president of technology integration at General Dynamics Information Technology. “Every change has multiple, disparate downstream effects – and the bigger the enterprise, the greater the impact of those effects.”

But while that may be the right approach for a system where the underlying uses are all well understood, such as when an existing system is being replaced in a one-for-one upgrade, it is less than ideal for situations in which brand new capabilities are being introduced. In those circumstances, it’s not possible to foresee all the potential requirements.

“An Amazon doesn’t build everything at once,” Tyliszczak said . “They develop a platform and then deploy agile increments later.” Those increments include both planned capabilities and new ideas fueled by user interactions.

That’s what makes agile development different. Unlike block upgrades on a weapons platform, agile iterations are launched in a series of sprints, rather than planned and scheduled years in advance, and can be pushed out as they are ready. Requirements are treated more fluidly and can change over time. That’s a fundamental shift for government acquisition.

Making that work in a government contracting context will require a different approach to defining requirements. While there’s no one-size-fits-all approach, Tyliszczak said, one way to accomplish that could be to treat some efforts not as fixed, long-term capabilities, but as short-term, flexible purchases: Acquire a capability for a specific use, then once that mission is complete, take a fresh look. That could mean scrapping the system in favor of a new approach or enhancing what is already in use. But because the system wasn’t contracted with full life-cycle expectations and costs, the initial investment is smaller and the agency has more options at the end.

“Individual sprints might even be developed by different contractors,” Tyliszczak said. “There might be one integrator to pull together all the pieces, but additional capabilities could be procured from different providers.”

The concept isn’t applicable to everything. “But having the ability to provide this agile or incremental overlay on top of an acquisition is probably a good thing to do,” Tyliszczak said.

DoD’s Dependence on Commercial Tech
William J. Lynn III, the former Deputy Defense Secretary who is now chief executive at Leonardo North America and DRS Technologies, and with O’Keefe, co-authored the forward to the report, agrees with Tyliszczak: “We can’t have a one-size-fits-all policy,” he says.

There are too many barriers to entry to the defense market, Lynn says, citing the need for separate accounting systems as one example. “If you’re a big IT behemoth, why would you bother?” Ideally, DoD should promote policies that support each of the four technology sectors on which DoD depends. “But if DoD doesn’t do that, industry will have to on its own.”

U.S. military strategy is centered on technological superiority being a force multiplier on every battlefield – land, sea, air, space and cyberspace. But while the military was able to drive that development in decades past, today it no longer wields the same influence.

“The United States’ ability to maintain its military-technical edge is tied to its ability to leverage advances in commercial technology,” the report argues. “Theoretically, the DoD possesses the legal authorities and acquisition regulations to procure these systems. [But] in reality, the lack of an acquisition workforce familiar with these types of procurement, the nature of the current requirements system, and a lack of support from mid-level leadership mean that commercially adapted military technologies remain stuck. Even prototypes are acquired in the same way as military unique systems.”

To fix that, the report urges the Pentagon to “establish agile methods by which validated experiments, challenge grants, competitive wargaming, emerging combatant command considerations, and prototypes can be used by the services and OSD to establish needs and start new acquisition projects.” Likewise, experimentation, prototyping, capability improvement and upgrade opportunities should be used “to identify and define problems, developing technologically informed requirements before proceeding to production.”

The report’s authors acknowledge that the existing acquisition system is built for military-unique programs, and that the bureaucracy is large and often resistant to change. So they argue for creating a new acquisition pathway that can operate in parallel, one designed expressly for prototyping new systems and adapting commercial off-the-shelf and existing military systems for new uses.

Noting that the 2017 National Defense Authorization Act requires DoD to create a new undersecretary for research and engineering, the report suggests this office could become the new home for DIUx and DoD’s Strategic Capabilities Office, the Joint Rapid Acquisitions Cell and small business programs, providing sufficient organizational heft to drive policy and protect this alternative acquisition pathway.

Such an alternative path will have to overcome perceptions that it is either one administration’s pet concept or that it favors one group of contractors over another. Whether DIUx survives the change in administration is an open question. Concerns that it and other rapid-acquisition programs lean too heavily on the use of Other Transaction Authority (OTA), a contracting tool designed to let the Pentagon more easily contract with small and non-traditional defense suppliers, also muddy the outlook. “If they can do it for them they should do it for everybody,” says Alan Chvotkin, executive vice president and counsel at PSC.

Ultimately, no one sector or group of companies holds all the keys to innovation. To maximize their effectiveness, alternative acquisition pathways should be open to good ideas wherever they come from.

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