Hearing Wrap Up: Government Procurement Process Must Modernize to Boost Defense Innovation

WASHINGTON—Subcommittee on Military and Foreign Affairs held a hearing today titled “Clearing the Path: Reforming Procurement to Accelerate Defense Innovation.” During the hearing, members underscored how burdensome defense acquisition and procurement procedures in the Department of Defense (DOD) continuously stifle innovation in the American defense industry at the cost of U.S. national security and competitiveness on the world stage. Members also explored ways Congress can modernize government procurement and acquisition processes to foster innovation, strengthen national security, and restore government transparency to the American people.  
 
Key Takeaways: 

Bureaucratic red tape hinders defense contractors’ ability to efficiently collaborate with DOD, delaying the development and deployment of critical technologies. 

• Subcommittee Chairman William Timmons (R-S.C.) stated in his opening remarks: “Unfortunately, for too many of those innovators, the path to partnership with the federal government is blocked by a procurement process that is opaque, rigid, and often punishing. The risk of entering the defense market—both in time and cost—deters even the most promising companies. And for those who try, many never make it past what many in the industry have called the ‘valley of death,’ where transformative technologies die on the vine between prototype and production, often because of bureaucratic red tape.” 
   

• Margaret Boatner, Vice President of National Security Policy at the Aerospace Industrial Association, stated in her opening testimony: “Flat defense budgets, the annual reliance on short-term continuing resolutions, and abrupt programmatic changes have created instability in an uncertain business environment that makes it difficult for the defense industrial base to develop innovative new technologies, maintain production lines, or support a skilled workforce. Couple that uncertainty with the defense acquisition system born in the Cold War and fundamentally designed to eliminate risk, and the result is a rigid and lengthy system which does not enable the flexibility or speed required by today’s evolving threat landscape. As evidence of this, the average amount of time for a major acquisition program to deliver capability is now eleven years.” 
   

Overbearing and burdensome procurement and acquisition processes and innovation lags negatively impact national security.  

• Margaret Boatner testified that: “[The] federal acquisition regulation, which governs the federal procurement process spans more than two thousand pages. When combined with the DOD’s supplementary regulation, known as the DFARS, it totals more than five thousand pages, and this does not include the thousands of additional pages of requirements contained within various defense policies, guides, and manuals, taken together, these challenges have had a corrosive effect on the health of the industrial base and our national security. In some cases, these obstacles have driven companies to stop participating in the defense ecosystem altogether. From 2011 to 2020, approximately forty percent of small businesses decided to leave the DOD market.” 
   

• Eric Snelgrove, Senior Fellow at the National Defense Industries Association, remarked in his opening testimony: “Despite growth in venture capital and new entrants into the defense marketplace, small businesses still account for a disproportionately small share of defense contracts. Promising technologies remain locked in pilot programs or mired in procurement cycles that outlast the companies themselves. For early-stage defense technology companies, the financial realities are stark. The average time between venture funding rounds is just twelve months, placing immense pressure on founders to quickly demonstrate product market fit, validate their technology, and secure meaningful government contracts. Yet, the DOD procurement cycle operates on a much longer timeline. As a result, many, many promising startups either pivot away from national security or fail outright, not because of technological shortcomings, but because the system is simply too slow to keep pace with private sector tempo.” 

 
Congress must reduce the regulatory burden, allowing for more open competition between commercial enterprises, non-traditional, and traditional defense contractors alike, to boost defense innovation and strengthen national security.  

• Shelby Oakley, Director of Contracting and National Security Acquisitions at the U.S. Government Accountability Office, testified: “Bottom line, programs aren’t using the framework to achieve the efficiencies the [DOD] intended for it to. As a result, the war fighter is still left waiting more than a decade for capability…There’s near universal agreement that the status quo is not working, but DOD can’t keep applying workarounds to a broken system. The threat environment is evolving too quickly for that. What’s needed is a full-scale shift toward an acquisition model built for speed, flexibility, and innovation.” 

 
Continuing Resolutions (CRs) create barriers for streamlining and modernizing the procurement process and are one of the biggest drivers of funding, budgeting, and fraud problems in the government. 

• Subcommittee Chairman Timmons noted in his closing statement: “As we seek out waste, fraud, and abuse to try to streamline our costs government-wide, the Pentagon can be no exception. If anything, it’s probably the spot that we can find the most savings and deliver the best results. I think one of the things I’ve taken away from this, I mean, I kind of knew this, CRs are just really bad for the government in general, and they’re really bad for the military, but they’re also really bad for procurement. And so we have to do our job, and we have to fund the government, and we have to create predictability for the defense industrial base to continue to provide the best possible products to our military and our competitiveness. Our national security depends on it.” 

 
Member Highlights: 

Subcommittee Chairman Timmons inquired about the amount of time a non-major defense acquisition program takes. 

Subcommittee Chairman Timmons: “Ms. Boatner, can you give us an example of how long a non-major defense acquisition program takes? More specifically, how much time does a commercial grade prototype spend on contract negotiations versus research, development, and testing?” 
 
Ms. Boatner: “We’ve talked about major development programs taking about eleven years. When you’re talking about a non-major system and you’re focused on commercial, that should be able to be done in a matter of months. I think what you see in reality, though, is that it can take upwards of years. Congress and the [DOD] have given streamlined authorities to procure commercially, and what I would tell you is that within the Department of Defense, I think, you know, in response to risk aversion, a creeping back of those requirements that Congress intentionally tried to remove. And while it should only take a shorter amount of time, particularly when you’re talking about a smaller system, it could be done in months—it’s taking years.” 

 
Rep. John McGuire (R-Va.) inquired into Department of Defense’s procurement process creating commercial barriers. 

Rep. McGuire: “So, Ms. Boatner, how often do your member companies lose promising suppliers due to time and complexity of a traditional DOD procurement?” 
 
Ms. Boatner: “All the time. That is one of the number one problems that they raise when they talk to us. Suppliers up and down the supply chain will walk away, particularly commercial suppliers. So, when you’re talking about drones, when we try to force government, you need requirements down the supply chain. And we don’t allow them to use some of the streamlined commercial processes that have been made available by Congress. They will walk away because they have other marketplaces.” 

 
Rep. Eli Crane (R-Ariz.) highlighted that the Department of Defense has not passed an audit since the department was required to in 1990. 

Rep. Crane: “Do you know when the last time the DOD passed an audit was? They haven’t, right? … Since they were required to in 1990, they’ve never passed one, is that correct? So, it’s interesting that we sit here and talk about this, because this is a bipartisan problem. This isn’t Republicans or Democrats. This is Republicans and Democrats. Let me pose it this way—why would the DOD pass an audit, or even try to pass an audit, if we continue to fund them at the same levels, or increased levels, over and over again?” 
 
Ms. Oakley: “I think that’s a very good question. What is the incentive, if there’s no consequence of not passing the audit?” 
 
Rep. Crane: “Absolutely. That’s the only language people and organizations up here in D.C. understand.”