After watching Secretary Pete Hegseth’s Nov. 7 speech on radically overhauling how the department develops and buys military capability, one could conclude that Pentagon leadership finally gets what needs to be done to innovate at speed and compete with China. The speech was hard-hitting and substantive, and while the fixes outlined by the secretary didn’t include everything that needs to be done, he got pretty close.
That is, until one looks under the hood.
One week before the speech, Breaking Defense reported on a draft memo that would implement the secretary’s speech; that leaked text garnered a lot of attention, and is now a public document. This memo tracked almost perfectly with what the secretary outlined in his speech, but the same can’t be said for what was officially released a week later.
Comparing the final document with the leaked document lays bare the specific modifications made to the final draft. The differences are striking, and unfortunately the final memo got a lot of things wrong.
There could be many reasons for these changes. The leaked document could have been a much older draft, adjusted at the political level. Outside forces within the administration, from Congress, or industry could have weighed in. But the most likely to my mind is that the bureaucracy saw an opportunity and started to meddle. It would not be the first time in the government that decisions made by principals were somehow “misinterpreted” by staff in the final write up.
However the changes happened, it’s vital to note the clear disconnect between what was in the original memo and Hegseth’s speech, and what came out on the other side.
The watered-down final memo is different from the original in a number of ways, but we’ll focus just on the highlights, because it is very telling which reform ideas were struck down during internal deliberations.
First, it backs off on pursuing time-fixed development and production. Mandates to create “fixed delivery cycles that prioritize learning through iterative development” and fixed initial operational fielding dates were dropped between the reported memo and the final document. Also eliminated was the goal to “minimize the cycle time between identification of need, solicitation release, and contract or agreement award.” As this decision time currently takes up to seven years, minimizing that process is vital. The takeaway from these changes? A rejection of the time-based serial innovation and fielding of the type that has driven Silicon Valley success and once served as the basis for the establishment of US technological dominance in the 1950s.
Next, despite claims from Hegseth that Portfolio Acquisition Executives (PAEs) and Program Managers (PMs) will control flexible budget resources, the final memo backs off on direct delegation of reprogramming authority to PMs and inserts the service comptroller bureaucracies and lots of committees in the process. Let’s see how agility improves under that same old way of doing business.
What about streamlined lines of authority? The leaked memo wisely mandated that “acquisition authority shall run directly from Program Manager to PAE to Service Acquisition Executive (SAE), with no intermediate offices or approval layers.” Not so fast; that clause was taken out and, in its place, the multiple and often conflicting acquisition bureaucracies’ ability to micromanage and slow things down was restored. The PAEs also will be hamstrung as delegation of authority will flow first to the service bureaucracy that will continue to stifle innovation and progress.
The prospect of non-traditional participation in the industrial base has dimmed as the preference to use Other Transactions Authority (OTAs) was stricken from the final memo. This is extremely significant; the omission signals that the building plans to burden these contractors with unique government cost accounting standards, cost and pricing data requirements, intellectual property, and socio-economic contract clauses. These barriers to commercial participation have historically been the main reason why the industrial base has been limited to traditional contractors since the end of the Cold War. It was the prospect of widespread use of OTAs that mimicked how SpaceX was created that encouraged venture capital to flood into the defense market. Cutting this language on OTAs feels like a purposeful signal to industry that the department wants to return to status quo.
Performance metrics to encourage alternative sources were eliminated, such as incentivizing and measuring the “percentage of commercial content, number of dual-sourced components and production lines, successful third-party module integrations completed without original developer support.” If one adheres to the old Peter Drucker maxim that you get what you measure — we will get the same as before.
The Modular Open Systems Approach (MOSA) is another great idea that has again been kicked out to the future to remain irrelevant to current programs. The revised memo gives the SAEs the ability to waive the application of MOSA for new programs — which they undoubtedly will. Also notably, the original draft memo said MOSA was going to be used to spur new innovation and ideas into these existing systems, but the final language says the requirement will only be put on new programs, not upgrading older systems that desperately need innovation.
While Hegseth talked about the ability to decouple design from production to permit third-party surge manufacturing capacity, that approach was taken out of the final memo. Also eliminated was the requirement to establish “lean technical advisory processes to inform accelerated decision-making, ensuring technical rigor without sacrificing speed.” Speed, so emphasized by the secretary in his speech, does not seem to be that important to his underlings.
Finally, added to the memo and the separate 45 page “Acquisition Transformation Strategy” were enough qualifiers to ensure that the bureaucracy is given absolute discretion to ignore whatever its political masters have directed. This includes such standard lines as “where affordable and appropriate to gain greatest value for the warfighter,” or “to the maximum extent practicable” and the overused modifiers “appropriate” or “feasible.” This has turned the endeavor into mush — presumably, to the joy of the traditional acquisition bureaucracy.
There is still a lot to like in the final draft, even as it’s clear the goals laid out by Hegseth, included in the early draft, were watered down. Now, imagine what will happen in the coming months as the self-protecting acquisition bureaucracy begins to “implement” the guidance at the ground level.
Real acquisition reform doesn’t have a chance unless leadership quickly overturns all of this bureaucratic nonsense and backtracking. These changes can and should be corrected to correspond to the vision the secretary articulated so well, and senior leadership needs to keep its hands on the steering wheel to drive these changes home.
Bill Greenwalt is a senior fellow at the American Enterprise Institute (AEI) think tank, a former senior staffer on the Senate Armed Services Committee and a former deputy undersecretary of defense.