The Pentagon’s new requirements for independent research and development (IRAD) could impede industry’s ability to move quickly on interesting and innovative technologies, Northrop Grumman’s [NOC] CEO said today.
The Better Buying Power 3.0 guidance released this April would increase Defense Department oversight over government-funded IRAD dollars, requiring companies to have a department sponsor sign off on an IRAD project and submit a written report at its completion.
Northrop Grumman CEO Wes Bush agrees that the defense industry and Pentagon need to improve communication so that IRAD funding is focused on the most important areas, but sometimes there is a benefit to companies making decisions independently from government, he said during a May 26 discussion at the Center for Strategic and International Studies. When companies have that freedom, they can make progress on innovative technologies more quickly.
“One of the most important principles [for innovation] is: Don’t always just listen to the customer. You have to be thinking differently sometimes,” he said.
The Pentagon’s chief acquisition executive and author of Better Buying Power, Frank Kendall, has said that the changes to IRAD arose because some companies had used such funding to grow their own intellectual property or gain a price advantage on a contract bid.
While Bush praised Kendall’s work on BBP, he warned against fixing the IRAD problem with new regulations that could have unexpected results.
“I think we have to be careful about the fix. Oftentimes when we fix something, we actually impose new costs, and that has a lot of oftentimes unintended consequences,” he said. “If the fix is to try to put some controls into the front end of it, I think we end up in the wrong place.”
Instead, he implored the Pentagon to find a middle ground that would facilitate engagement between industry and government on IRAD but would preserve the independence of company projects.
Throughout his speech, Bush criticized the notion that private sector innovation can replace the research-and-development work done by traditional defense contractors. Because private companies are interested in profitability rather than meeting the military’s national security needs, they are ill equipped for creating technology such as hypersonic missiles, stealthy aircraft, offensive cyber capabilities or electronic jamming.
“Commercial solutions, while an important ingredient in much of what gets done, in and of themselves are not the answer to our national security need for technological superiority and therefore should not be an excuse for further reductions in R&D,” he said. “Commercial technology, being inherently broadly available, offers no national security advantages by definition.”
Defense contractors could learn from commercial industry’s ability to take risks and speedily develop a product, but the government also needs to encourage innovation in the defense industrial base. That means taking steps such as ending mandatory budget caps, increasing funding for basic research as well as making a permanent a tax credit that incentivizes R&D, he said.
While the United States still leads overall research and development spending, that is changing, Bush said. China’s total R&D funding, when measured by purchasing power, will overtake the United States in 2022.
Defense-related R&D has fallen from about 1 percent of the U.S. gross domestic product in 1960 to about half a percent of GDP during the past decade, he said. But by the end of the decade, it is expected to drop to one-third of 1 percent of GDP.
“I think those levels are frightening,” he said. “They’re simply insufficient to support the advances in technology that our future military will need.”