Breaking the Mold: Why Cultural Change is Key to Modernizing Defense Acquisitions
An open letter to the incoming U.S. Secretary of Defense,
Your appointment presents an opportunity to solve a longstanding challenge within the Department of Defense (DoD), and your approach will determine whether you oversee a Department that perpetuates U.S. military decline. This challenge is an antiquated acquisitions culture that accepts that the current average time required to bring new military assets from inception to deployment is eleven years. As a result, the DoD fails to deliver the newest technology to U.S. troops at the speed needed to stay competitive on a global scale. Transforming acquisitions culture within the DoD would reestablish American military technological superiority over China and Russia, restore U.S. credibility with allies, and drastically lower the cost-per-effect of U.S. military actions (e.g. eliminate commonplace phenomena like the U.S. Navy shooting down $2000 Houthi drones with $2mm missiles in the Gulf). To fix this broken culture, you must first install acquisitions leaders committed to radical change, and second, you must replace acquisitions middle managers that have historically prevented that change. A bit of context:
The Federal Acquisition Regulation (FAR) established the modern acquisition system in 1983. Designed to help the U.S. win the Cold War, the system focused on achieving technological supremacy over the Soviets through massive investments in advanced or "exquisite" capabilities which required experimental R&D and multi-year lead times, such as stealth bombers and aircraft carriers. The DoD determined that a select few "Prime" contractors (e.g., Boeing) were the safest bets to deliver these technologies and entrusted them, with the oversight of acquisitions middle managers, to deliver the systems necessary to deter and defeat the Soviets. However, after the Cold War ended, Congress substantially reduced defense expenditures, prompting DoD acquisition leaders to add burdensome requirements in FAR contracting and introduce a risk-averse culture that eschewed Cold War-era acquisition values like experimentation and calculated risk-taking.
This post-Cold War acquisitions culture remains in place today, but it was not designed to address today’s threats. China and Russia have intentionally built their forces to blunt American military technological advantages (e.g., Chinese GPS-denial to counter precision guided munitions), while simultaneously deploying their centralized planning systems to ensure that their militaries, unlike American forces, are able to quickly access and integrate new innovative technologies (e.g., AI, hypersonic rockets).
The DoD stated that the optimal mix of military assets to counter these adversaries is a portfolio of both exquisite capabilities as well as lower-cost, higher-volume assets that iterate over weeks rather than years, such as autonomous drones and small-satellite constellations. Unfortunately, the DoD has made little progress towards achieving this optimal mix, primarily because it has struggled to buy assets from non-Primes. The struggle is often blamed on the challenges of FAR-based contracts, which critics argue favor the Primes, who excel at building exquisite assets, but are no longer seen as innovation centers. As a result, smaller parts with novel technologies are largely prevented from selling to the DoD because of the burdensome legal, accounting, and administrative requirements placed upon companies in FAR-based contracts, which often require an entire team to navigate.
Yet, numerous contracting reforms have already been proposed and implemented to address the challenges of FAR-based contracts—including simpler alternative contracts, military units formed specifically to build relationships with non-Prime contractors, and financing mechanisms to bring private capital into defense technology. However, these changes are all as necessary as they are insufficient. The core issue is fact cultural: acquisitions professionals have had faster and better contract vehicles for years; they simply choose to stick to the status quo, i.e. buying from Primes using FAR-based contracts, because they are following path of least resistance and have no incentives to experiment or take risks. Unsurprisingly therefore, in each of the past five years, less than one half of a percent of the DoD budget has been employed via non-traditional contracts, and in 2023, 75% of vehicles and weapons DoD contract dollars went to Primes.
Given the above, the fundamental question to you as the incoming Secretary of Defense is: are you willing to do what’s necessary to meaningfully change the DoD acquisitions culture?
Step One: Install Visionary Leadership
One of the first cases taught at HBS is Cynthia Carroll at Anglo American, in which the new protagonist-CEO must tackle the longstanding history of serious injuries and deaths occurring in the company’s mines. In this case, prior CEOs had followed the path of least resistance and were unwilling to risk the impact to earnings that would result from any serious attempts to address the safety issues. They instead tried (and failed) to address the problems via incremental solutions, and in doing so created a culture that accepted employee fatalities as the status quo. The choices of DoD acquisitions professionals eerily mirror those of Carroll’s predecessors: by sticking to FAR-based contracts with Primes because they are afraid to take risks with new vendors, the acquisition corps is risking the lives of American troops by failing to supply them with the best technologies.
However, unlike acquisitions leaders and previous CEOs at Anglo American, Carroll was willing to do what was necessary to change culture. She chose to shut down the company for months at great financial cost to shareholders while investing heavily in better training with the result that accident frequency declined dramatically, and workers stopped dying. In other words, she demonstrated that cultural change at a large organization is possible, but that it requires forceful leadership and an intolerance of an undesirable status quo.
The best example of a DoD entity defying the acquisitions status quo is the Space Development Agency. SDA’s motto “Semper citius” says it all: always faster. The SDA boasts an average of 111 days from posting a solicitation to awarding a contract, far fewer than the DoD average of 209 days. One acquisition expert stated privately that SDA “is the only one at DoD fully leveraging Middle Tier of Acquisition and Other Transaction (e.g., simpler, non-FAR contracts) at the scale and speed they were designed.” Moreover, the SDA has done this all quickly, deploying satellites in just 2.1 years, compared to the DoD satellite program averages of 7+ years.
This has all been possible because of the leadership of SDA Director Dr. Derek Tournear. Dr. has created a culture focused on speed, capability, and value by mandating that employees only use FAR vehicles as a last resort–a novel phenomenon within the DoD. The results speak for themselves. In SDA’s new satellite constellation, the DoD estimated each satellite would cost $150 million apiece. The SDA disagreed and instead delivered at a price point once deemed unachievable: $14 million per satellite.
The SDA’s success proves that acquisitions culture can still be changed within the DoD. You cannot copy and paste Dr. Tournear across the Department, but you can install leaders like him who can adopt the SDA model.
Step Two: Clean The Slate
However, even a visionary leader’s attempts to change culture can be stopped by uncooperative middle management. One HBS professor shared this applicable anecdote with my class: earlier in his career, this professor had become the CEO of a firm outside the U.S. where he tried to modernize technology, make the work environment more inclusive, and improve operations but found that his efforts were continuously stymied by the middle managers and executives. After investing significant effort into change with no success, this CEO instead took a radical approach: he fired every employee at the company over a certain age, hired and promoted more open-minded personnel to reconstitute middle management and the executive team; and voila, achieved the desired cultural changes and in doing so dramatically improved the performance of the firm.
Interestingly, while “cleaning house” is often done in the private sector, it is a radical concept within government agencies where civil servants are actually three times less likely to be laid off than private sector employees. This is because most civil servants cannot be fired “at will” but rather can only be removed “for cause,” meaning that the cost of time and effort to remove low performers often exceeds the downsides of keeping them employed. It is time that this tactic, which has worked well on countless corporate teams, be considered to achieve the needed shift in acquisitions.
In closing, I ask the incoming Secretary of Defense to use the opportunity of a new administration to set defense acquisitions on the right path. Rather than placing faith in incrementalism, the DoD must drive real and radical change by installing visionary leaders and removing the personnel impediments to progress. Small innovative acquisitions pockets like the SDA will not be enough to enable the U.S. to deter and defeat near-peer adversaries–we need a systemic acquisitions cultural overhaul now. Please take this opportunity to change course before we find ourselves woefully unprepared in a moment of crisis.
Ben Buchheim-Jurisson is a JD/MBA candidate at Harvard University and a former intelligence officer in the U.S. Air Force.
