China and Russia are challenging America’s high-tech dominance. The goal: not just to contest but to achieve superiority in every fighting domain, including air, land, space, sea and cyberspace.
Focused on enhancing censorship, surveillance and military capabilities, China and Russia — each of which represents an existential threat to the U.S. — are developing and deploying new technologies together. China is implementing President Xi Jinping’s military-civilian “fusion” strategy, incorporating artificial intelligence, neuroscience and quantum communications in its blueprint for a global “return to military preeminence.”
Alarm bells should be ringing in the White House, because the number of high-tech companies partnering with the Department of Defense has been steadily decreasing. Defense contractors are investing fewer resources into military-relevant research and development. Facing lower profit margins than in the private sector, onerous bureaucratic regulations, and long lead times before contracts are signed, the defense industrial base lacks the financial incentive to develop the technologies on which the Pentagon relies.
The U.S. military still has not cracked the code on expanding the defense industrial base to keep pace with its rivals’ technological advances. The U.S. has sought to maintain technological superiority by upgrading the acquisition process to the “speed of relevance.”
But defense acquisition meshes poorly with private sector imperatives, particularly for high-tech companies with cutting-edge technologies. Government contracting remains a risk-averse culture focused on complying with regulations rather than on fostering innovation and accomplishing missions.
The Biden administration has put a high priority on defending, deterring and countering Russia and China. To succeed, the U.S. must leverage the most critical comparative advantage we have — the free-market economy, which can turbo-boost the development and deployment of high tech for our fighting forces.
But doing so will require repairing and transforming the Defense Department’s acquisition process in five key areas.
First, defense officials need to slash regulations and accelerate acquisition cycles. The acquisition system is too slow, convoluted and bureaucratic to stimulate commercial interest, which has diversified away from the military over the past few decades. The Pentagon should conduct a zero-based review of acquisition laws and regulations — with congressional oversight — to eliminate obsolete, unnecessary processes and procedures that raise the cost of doing business with the government.
Second, the department should offer commercially competitive incentives, especially with respect to profit margins. While maintaining strict accountability for spending, prices should be negotiated not based on some amorphous, unrealistic profit standard, but rather based on commercial market forces and the value to the government. Low profit margins lead companies to cut cost corners on R&D and cybersecurity.
Profit margins should therefore reflect the expense of R&D and cyber defense, and be sufficient to attract additional companies to enter the bidding, thereby increasing competition and getting the best deal at the best price for the taxpayer.
Third, the Pentagon should invest in private-sector research and development. Testing 5G at military bases is only one example of how to leverage the military’s unique capabilities and authorities to stimulate innovation. The Defense Department should also cultivate relationships with business and academic innovators, including small start-ups which would otherwise face barriers to entering the market.
Fourth, the Pentagon must do a better job protecting and, when necessary, paying for companies’ intellectual property. IP theft has a significant negative impact on private-sector businesses and the national security programs they are trying to support. The 2018 National Defense Authorization Act, which ordered the creation of a cadre of Defense Department IP experts, was a good start, but the Pentagon must go further to safeguard sensitive and valuable new ideas, especially from China, which has stolen American IP on an industrial scale.
Fifth, the department should promote a culture of innovation and intelligent risk-taking among its own contracting officers. One of the silver linings in the pandemic has been how the Pentagon increased capacity to promote competition for innovative medical treatments, streamlining contracts and payments schedules and partnering with small businesses to develop disposable injection devices for vaccines.
Defense acquisitions can indeed be executed quickly, effectively and with appropriate oversight. The Pentagon should apply what it learned over the past year across the board.
Domestic industry is the bedrock of our military strength. Harnessing the 21st century revolution in technology will not be possible without an efficient and innovative acquisition process at the Defense Department.
The Biden administration should make this a priority if it doesn’t want to see Mr. Xi’s aspiration — that China’s military will be the world’s strongest force by 2049 — come true.
• Daniel N. Hoffman is a retired clandestine services officer and former chief of station with the CIA. His combined 30 years of government service included high-level overseas and domestic positions at the CIA. He has been a Fox News contributor since May 2018. Follow him on Twitter @DanielHoffmanDC.
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