Leaders from some of the largest defense industry associations told lawmakers today that Congress should reform the Pentagon's labyrinthine acquisition system in favor of all military contractors, not just new-entrant technology companies angling to disrupt the status quo.
Speaking today before the House Armed Services Committee, David Norquist, head of the National Defense Industrial Association who previously served as deputy defense secretary and Pentagon comptroller in the first Trump administration, said Congress should take care to be mindful of “traditional” contractors (Lockheed Martin, RTX, Northrop Grumman) as it seeks to reform military procurement.
“[A]s the Congress moves forward to reduce regulatory burdens and incentivize novel contracting approaches to attract and retain new companies, it is important to give traditional contractors access to the same streamlined system,” he said. “Otherwise, we are signaling to nontraditional contractors that as they succeed, they will eventually graduate into the current slow, burdensome and costly system.”
Norquist’s statement follows President Trump’s high-profile elevation of tech billionaire Elon Musk and the increased public posture of companies like Palantir and Anduril, who are advocating for Pentagon acquisition reform as they seek to win defense contracts.
Lawmakers and defense officials have also spoken increasingly of their desire to increase spending on emerging technologies like artificial intelligence and autonomous drones, rather than continue spending on “legacy” weapon systems that might not be suitable to deter China.
Additionally, Stephen Feinberg, whom Trump has nominated to be deputy defense secretary, told senators yesterday that he wants to “sponsor” non-traditional defense companies at DOD and provide them with “sole-source, non-competitive opportunities.”
NDIA's 'Vital Signs' report
Coinciding with today’s committee hearing, NDIA released its annual “Vital Signs” report on the state of the U.S. defense industrial base, expanding upon Norquist’s position that the politics surrounding acquisition reform seems to be leaving traditional defense contractors (TDCs) behind.
“The danger with the emerging policy debates is the potential for framing a zero-sum approach that pits established defense contractors against nontraditional contractors,” the report said. “Such an approach would be a fallacy. A better approach is to tackle the current paradigm, which is deeply flawed. It is counterintuitive to criticize TDCs mirroring the sclerotic acquisition process and government regulations with which they must comply.”
The current system, NDIA argues, will eventually turn NTDC into TDCs that become compliant with the same slow acquisition system.
“The current acquisition paradigm requires a seismic shift to create an unencumbered pathway accessible to all U.S. DIB participants: TDCs and NTDCs alike,” NDIA said. “Failing to create this accessible pathway will eventually subject the NTDCs, as they become TDCs, to the same morass of requirements that policy exceptions have been created to bypass.”
'Industrial base atrophy'
Meanwhile, the industry is often criticized as being too consolidated, most recently by Feinberg, who said yesterday “too much concentration among the big major defense players” left DOD overly reliant on a few large companies and “very exposed.”
In today’s hearing, House Armed Services Committee Chairman Mike Rogers (R-AL) also said industry consolidation was partly to blame for “industrial base atrophy.”
“Defense firms have consolidated,” he said. “Supply chains have narrowed, regulatory burdens have grown out of control, and recruitment and retention of the skilled workforce have become much more difficult."
But Eric Fanning, the head of the Aerospace Industrial Association and a former Army secretary, told the committee in written testimony that mergers and acquisitions are good for the defense industry and the government.
“Mergers and acquisitions (M&A) should be viewed as a tool to strengthen the industrial base and provide stability to the workforce and business operations,” he wrote. “Too often, these opportunities are reflexively dismissed rather than reviewed on the individual merits. M&A is a tool for companies to grow and to stabilize the workforce, unleash innovation, bolster performance, and strengthen capability and capacity. Some companies need to access the tools and resources of a larger company to continue development, while some investors view M&A as a faster path than becoming a program of record.”
Fanning said the government should seek to “fairly review the benefits and costs on a case-by-case basis considering the long-term health of the DIB.”
Rep. Adam Smith (D-WA), the committee’s ranking member, said in written remarks that much of the problem with the current procurement system is there is a “lack of trust” between the government and industry.
“The relationship between government and industry must be seen as a partnership where both parties are singularly focused on the same goal of fielding the needs of the warfighter,” he said. “When a lack of trust exists, the government becomes too risk-averse and industry becomes unwilling to make investments in new and innovative processes.”
Smith said the government should do its part by “sending signals to industry so that they can properly invest,” and not consistently pass continuing resolutions that prohibit new production spending for months at a time.
“There should never be a time where a company feels that it is not worth it to work with the Department of Defense,” Smith said.
But industry must do its part as well, the congressman added, noting “industry primes must be willing to subcontract” with smaller companies using disruptive, innovative technologies.
“When a contractor fails to take advantage of innovations in the supply chain,” he said, “they are not being a reliable partner in the effort to more quickly filed capabilities to the warfighter.”