The incoming Trump administration has stated distinct priorities for making America great again. A top priority of that journey is the ability of the Department of Defense (DoD) to entice innovative companies to do business with the government through a whole range of programs, including initiatives such as Defense Innovation Unit Experimental (DIUx). However, some of the foundational deterrents for the aerospace and defense industry doing business with DoD are widespread feelings that they are ignored, misunderstood, or their message is lost in translation.
Industry knows it is in trouble when a government civil servant says, “I understand your need to make a profit.” If you need to say it, then you really don’t understand the imperatives business face.
The Federal Acquisition Regulation (FAR) gives government contracting officers “wide latitude to exercise business judgment.” Unfortunately, most contracting officers have little to no experience in private industry, and their business judgment is based on bureaucratic processes and certifications rather than profit and loss. From determining if intellectual property rights are valid to negotiating the amount of profit a contractor should receive, the government’s business judgment is sometimes arbitrarily skewed in the government’s favor.
Arguably, either by intent or because of decades of culture, there exists an inherent adversarial mentality with industry and a clear lack of understanding of why industry needs to prosper and make a profit in order to innovate, let alone survive.
The FAR requires contracting officers to work together as a team with industry and end-users. Unfortunately, the relationship between contracting officer and contractor is rarely described as teamwork. The lack of common understanding between the stakeholders creates a combative relationship that drives delays and increases costs, as each side is wary of the other’s intentions. A less-than-standard commercial-sector profit margin would make defense contractors less competitive in global capital markets, where defense firms compete with the full spectrum of businesses.
One simple solution to the challenge of government’s lack of understanding is to require contracting officers to have relevant private-sector experience. Just as the uniformed military is exploring options to have service members take a sabbatical to pursue private-sector experience, so should the civilian bureaucrats in DoD. This simple step would generate a richer acquisition work force that is better equipped to exercise business judgment appropriately.
Another solution is to have contracting officer warrants approved and renewed by a joint panel of government and private-sector representatives. Such a venue would give industry and DoD acquisition leadership a tangible mechanism to ensure that the people on the front lines of implementing acquisition policy are adhering to published guidance, statute and the spirit in which those are written. This process would facilitate the teamwork between government and industry as envisioned in the FAR, and such a panel would be able to observe general trends, weaknesses and strengths, and be able to make broader, informed recommendations for systematic improvement.
There is no magic bullet to make DoD the customer of choice for Silicon Valley. However, if DoD had contracting officers and program managers with vast private-sector experience, they would see that many of the regulations they are required to adhere to fly in the face of commercial best practices and certainly defy the concept of teamwork.
For example, in the very same section of the FAR that charges contracting officers to negotiate acceptable terms with contractors in exchange for transferring data rights to the government, they are first directed to consider alternatives — such as reverse engineering the contractor’s product — or cherry-picking relevant specs and using them to acquire or develop functionally equivalent items.
Thus, the government clearly states its intent to either reverse engineer your product or provide some of your technical specifications to your competition. That is not a business environment in which any vendor wants to operate.
Small innovative companies, whose owners have invested their time, talent, hearts and indeed their very own personal financial livelihoods, have learned quickly that doing business with the federal government bureaucracy is not conducive to a thriving business.
The taxpayers deserve a defense establishment that is held to the same business standards as the rest of America. Requiring private-sector experience for acquisition professionals and allowing industry to retain its intellectual property would increase the level of trust between industry and government and attract innovative companies to do business with DoD.
• Retired Navy Capt. Dale Lumme is president of the Navy League of the United States, National Capital Council; maritime adviser at The Spectrum Group; immediate past chairman of the National Maritime Policy Committee; and a member of Veterans for Acquisition Accountability.