David Norquist, who served as acting defense secretary, deputy defense secretary and Pentagon comptroller during the Trump administration, is now at the helm of the National Defense Industrial Association where he says he has a much different job, but similar priorities.
At the Pentagon, he told Inside Defense in a recent interview, his day was segmented into carefully managed 30-minute increments.
“And the decisions you make are both more frequent and more significant,” he said. “But there is a lot of similarities. The most common is the part of your job that involves solving complex problems. Many of the key issues in defense are not partisan. They are just really hard.”
Like other current and former defense officials, Norquist, who was named NDIA's president and CEO in March, wants to help accelerate the Defense Department’s infamously dysfunctional acquisition process and lower barriers for promising technology companies who might be squeamish about doing business with the government.
“There are a lot of barriers to entry that we have to work to reduce,” he said. “There are places where there have been breakthroughs, but the question is: Why is it hard?”
Norquist said he views NDIA -- because it is classified as “an educational non-profit entity” and not as a registered lobbying organization -- as a bridge to communicate with senior defense leaders, something he said he appreciated when he was at the Pentagon.
“The role is to connect government with industry in a way that allows government to be more efficient in taking advantage of private-sector innovation, technology, conferences, reports, that sort of thing,” he said.
Norquist said, however, that when he was at the Pentagon, he often found himself challenged when he wanted to meet with defense contractors.
“The biggest problem I found was when I went to meet with industry, the lawyers would tell me you can meet with that firm, but if you meet with one firm you really have to meet with all of them, and there are several thousand,” he said, adding: “Oh well, never mind.”
But being able to meet different contractors at events arranged by NDIA and other business associations is “such an essential part” for Pentagon leaders and their understanding of the defense industrial base, according to Norquist.
Working with NDIA and other associations, he said, “became a way for the department to meet with multiple experts in an area without committing to a firm” or accidentally running afoul of DOD policies and standards that restrict many forms of communication between the government and the private sector.
“Part of what I like about the role of NDIA is that since we don’t represent a firm, we represent 1,800 firms -- 75% small business -- the answer is, ‘Would you like to talk to 20 subject matter experts on robotics? We can do that for you,’” he said.
Communication is especially necessary, Norquist said, because DOD’s acquisition system suffers from so many requirements-related problems it might not otherwise have if it had a clearer sense of what vendors could do. It is far better, he said, to communicate with industry than to “go behind closed doors, write a requirement and then throw it over a wall in a contract.”
Norquist said he wants to get to the point where “there is much more of a communication, the requirements are better, the solutions are better, the process moves faster.”
Though he is no longer charged with overseeing the Pentagon’s day-to-day operations, Norquist said he still views himself as working to implement a key tenet of the 2018 National Defense Strategy, which calls for deterring China.
“We’re not going to deter China by promising to be better at central planning than a communist government,” he said. “If we want to deter China, we’ve got to be taking advantage of our private sector.”
Key to that, he said, involves pushing Congress to adopt policies that strengthen the defense industrial base and signal to commercial companies that working with DOD would be good for business.
The central challenge to do those things involves advocating for a much higher defense budget than President Biden has proposed in the hopes of mitigating historic rates of inflation. Norquist said he is happy to see strong bipartisan votes in Congress that would authorize anywhere from a $37 billion to $45 billion increase in defense spending.
“It’s very good to see very sound bipartisan votes -- House and Senate, Republicans and Democrats -- in order to increase the defense topline to reflect both the strategy, the NDS and to reflect inflation,” he said.
Norquist, a former DOD comptroller, said the inflation challenge is likely to persist at the Pentagon for a few years.
“It’s not just assuming a different level of inflation for next year,” he said. “That was built off of a budget that assumed a different level of inflation this year. The numbers that everything was built on for next year are going to be off substantially.”
Present calculations put inflation at 9%, while the federal government’s multiyear defense plan has been built assuming a rate of about 2%. Though defense officials stress DOD is not subject to the exact rate of inflation seen by U.S. consumers in everything it buys, Norquist pointed out that defense contractors and their suppliers are, which in turn makes acquisition more expensive for the department.
“It cascades through when you go from 2% to 9% or whatever it turns out to be,” he said. “The labor costs, the raw material costs, the fuel costs, all of these flow up. Now, if you’re in a cost-plus contract that has one effect. But if you’re on fixed-price and it was built with a 2% assumption, you’re not going to be able to function under that and it’s going to cascade down.”
Norquist said part of his job at NDIA is to help DOD understand how inflation is impacting small defense firms.
To help alleviate some of those stresses, defense business advocates have been pushing DOD to keep a pandemic-related set of progress payment rates in place. Under the current progress payment system, large companies have been paid as much as 90% of incurred costs, up from the traditional 80% paid as progress goals are met, while for small businesses the figure is 95%, up from 90%.
Pentagon acquisition chief Bill LaPlante has pledged to review the current progress payment structure and DOD is in the midst of studying broader approaches to contract financing.
Norquist said he believes the current rate structure should remain in place.
“My general belief is that I think they’re still needed, which means the current accelerated payments should be maintained,” he said. “Part of that is we’re just not out of the hole yet on the economy. We still have supply chain issues, we still the inflation issues, we still have a lot of things. And if you hit the primes, you hit all the way down to their sub-tier suppliers. And I come back to sort of what I view as the basic goal, which is we want to increase the number of vendors who are willing to operate inside the defense industrial base and bid on government work in order to promote more competition, get better technology, get lower prices.”
Norquist said DOD and Congress should be as business-friendly as possible in order attract new private-sector companies.
“So, when you look at a change the question is,” he said, “does this make firms more willing to enter the market or, if they are already in, stay? Or does it make them more likely to leave? And for the firms that are there, does it drive their costs up or down?”
The Pentagon has also taken a more aggressive view on defense industry competition recently, releasing a report in February -- following the Federal Trade Commission’s ruling to block Lockheed Martin’s acquisition of Aerojet Rocketdyne -- saying the department recognizes it has a “historically consolidated” defense industrial base and plans to enforce greater competition in several ways. Among its strategies for doing so are increasing reviews of company merger and acquisition activity and seeking new DIB entrants, preferably small businesses.
Norquist, who was a top Pentagon official when Raytheon acquired United Technologies Corp. in 2020 and Northrop Grumman acquired Orbital ATK in 2018, said he believes the government is poised to crack down on the wrong thing.
The Pentagon’s report, Norquist said, acknowledges that the bulk of defense industry consolidations occurred in the 1990s at the direction of the DOD after the end of the Cold War.
“The mergers are the effect, not the cause,” he said. “The cause, even according to the report itself, is budget cuts, low interest rates and long gaps between new programs. So, if you want to try to turn that around, you have to go after the cause. To try to close the door on the effect is not particularly effective or useful.”
Norquist has brought another belief to his new position that he often spoke about during his Pentagon service: the deleterious impact of congressional continuing resolutions, which traditionally give lawmakers more time to reach bipartisan budget deals, but handcuff DOD with stopgap spending restrictions and prohibit the beginning of any new weapons programs.
“A CR is the simple question of how much of a head start do you want to give China?” he said. “You’ve got a new technology that the department believes in, you’ve managed to convince [the Office of Management and Budget] to let you fund it, you take it to the Hill, the House and the Senate both like it, the authorizers and the appropriators amazingly both agree with you, the Republicans and the Democrats all combine and kumbaya together, and we say, ‘Not so fast, it’s a long race, let’s give China a couple more months of a lead.’ Why? Why give them any head start at all? It all works to our disadvantage.”
Norquist is also a member of the ongoing Planning, Programming Budget and Execution Reform Commission, which is in the advent of its work.
Norquist said he is excited about the commission’s possibilities and plans to push for the presentation of case studies so the team can be as specific as possible about root causes and systemic problems.