Australia’s Department of Defence is redesigning its processes for identifying, developing and procuring innovative new technologies. Even the name of its new organisation—Advanced Strategic Capabilities Accelerator—emphasises the core mission of bringing on capability at speed. Everyone in the department with a hand in the innovation enterprise—from the Capability Acquisition and Sustainment Group to Defence Science and Technology—has highlighted this imperative.
An important element of the strategy is developing partnerships with private industry and universities to rapidly pull through disruptive technologies.
In defence innovation, the case for leveraging private-sector capital and expertise is strong: funding is tight and advanced technical proficiency among public servants is scarce and valuable. But while private capital is a critical enabler of public-sector research and development, it comes with costs. Three of these bear consideration: the alignment of solutions with military requirements, the ownership of intellectual property, and the long-term technical sophistication of the acquisition enterprise.
The first of these—the fit of dual-use technology with military requirements—has been discussed elsewhere. Effective management of intellectual property and human resources is equally important in building a successful defence innovation strategy for the long term.
The problem can be stated simply: dual-use technology—indeed, any R&D that relies primarily on private capital—keeps intellectual property in the hands of private firms. It comes as no surprise that corporations and venture capitalists tend to be advocates of this approach. It has clear and immediate implications for contract pricing. But at the same time, and far more importantly, it constrains the ability of the defence acquisition enterprise to sustain capabilities over time.
Such constraints may be a necessary cost of doing business; however, their implications must be carefully considered early in the development of a procurement strategy.
However exquisite a new technology, it will eventually need to be upgraded or replaced to meet an evolving threat. When that time comes (and the innovation game is cycling ever faster), private ownership of intellectual property in core technologies limits Defence’s ability to use other firms for follow-on contracts. It creates vendor lock and stifles the innovation arising from deep and open markets. To see this effect in action, one need only look at the ongoing debacle in the US over upgrading GPS systems to be jam resistant.
Intellectual property law exists for a purpose: firms must be incentivised to innovate. But acquisition professionals must pay close attention to it in developing procurement strategies. They must design those procurement strategies with future upgrades in mind. They must identify systemically core technologies and be prepared to invest directly so the government maintains ownership of the most critical elements of any new military capability.
The US is learning this lesson the hard way. Belatedly realising that vendor lock is stifling the Pentagon’s ability to innovate at speed, it is pushing the open-systems approach. The strategy is a good one: by designing a system from the outset around a standardised architecture (the heart of which is owned and managed by the government), private companies can bid to supply plug-in components. Upgrades happen more quickly and suppliers can be sourced on the open market.
But you can’t go back. Legacy systems that have relied for years on one or two contractors have long histories of intellectual property that prevent acquisition professionals from cracking open the box and allowing plug-and-play components. If they want to foster competition and accelerate the upgrade timeline—to introduce the open-systems approach—they must start from scratch. Catching up with the state of the art can be nearly impossible.
This brings us to the final consideration in designing a procurement strategy for the long term: the technical sophistication of the acquisition enterprise. Leadership of smart contractors requires smart program managers. Program offices that have completely outsourced R&D—or worse, simply bought core system components off the shelf—will not maintain the in-house expertise required to steer a program over its operational life.
Building the expertise to innovate at today’s technological standard doesn’t happen overnight. It can’t be bought, at least not at public-sector pay grades. It requires careful organisational design that fosters institutional memory. It requires building a culture that operates in close partnership with industry rather than relying entirely upon it. The best way to do that is to introduce such a construct from the beginning.
As Defence dives headlong into the race to bring on new capabilities at speed, it must account for these factors. It has rightly acknowledged the importance of achieving initial operating capability quickly and introducing upgrades in an iterative fashion. Now it needs to build an innovation strategy that accounts not only for today’s desired technological capabilities, but for a future that’s impossible to foresee. Intellectual property and human capital must be key components of that innovation strategy.
Private industry is indispensable to national defence. Its experts offer valuable insight when they write opinion pieces and deliver keynote addresses at conferences. But they can’t do it all. An effective partnership means understanding the implications of relying on private capital and expertise, and being willing to invest directly when circumstances call for it.
If the defence acquisitions enterprise outsources everything, it will find itself in the same bind that US procurement officials are experiencing again and again as they try to bring legacy capabilities up to modern standards.