Iron Sharpens Iron: A Gentle Reminder About Traditional Defense Contractors

posted in: Other Transactions | 1
Share this:


When it comes to who will shape the technological future of the US military, the impact of traditional, large defense contractors shouldn’t be understated. Innovation exists everywhere, regardless of company size.

Recent articles, guidance, and interview snippets from policy influencers would make one assume that creative, progressive concepts can only emanate from “two guys in their garage building the next Apple”. Without a doubt, small companies are being rightfully recognized for their tremendous and unique ideas that often spark amazing outcomes.

However, it’s very difficult for the more resource-constricted firms to steer the over-sized vehicle of federal acquisition. And that’s a vital part of the equation – who becomes the matador guiding the momentum created by forward-charging advancements?

For decades, large, well-known defense contractors have grown in-house innovation cells within their corporate structures. Mostly free from the bureaucracy of their overarching mothership, these brilliant teams are energized to push the envelope, advance ideation into tangible products, and establish a first-mover advantage.

Raytheon’s Bike Shop, Boeing’s Phantomworks, and the legendary Skunkworks of Lockheed Martin are just a few examples. The historical impact of what those future-focused divisions have sped across the terrain and launched into the skies is astounding. World-changing creations like our first jet fighters, solar-powered drones that can stay in the air for years, smart weapons, and “invisible” aircrafts have all been hatched from these centers of ingenuity. This isn’t even the tip of the iceberg; Imagine what we haven’t heard about yet.

It’s clear that these companies understand innovative pursuits, have considerable talent, and are supported by solid internal systems that make lofty project objectives, like full scale production, a reality. Their ability to replicate attributes of small businesses (e.g., agility, deep expertise, solid risk tolerance, disruptive tech, etc.) within a small division of a gigantic corporate machine should be positively acknowledged. If imitation is the greatest form of flattery, the defense giants must be blushing.

That same model of deploying smaller tactical cadres focused on rapid innovation is now mimicked and heavily promoted on a daily basis. The sudden surge of Government-backed WERX organizations (a nod to the private sector’s “-works” divisions of lore) have been empowered by the relentless calls for systemic change.

It may be slightly overwhelming keeping the WERX’s straight, but it’s not necessarily a bad thing. Broader popularity of the model is a symptom of the acquisition community finally committing to the excavation of what mechanisms can actually deliver when urgency and technological evolution are both at a fever pitch.

Per 10 USC § 2371b, if a company is a traditional defense contractor (generally explained to mean a large business with federal contracts covered by certain accounting standards), it must contribute at least one-third of the total cost for an Other Transaction-based prototype project. There is an opinion that the cost sharing element of the referenced statute is a punitive finger-wag to the corporate Goliaths who essentially co-designed our current acquisition system.

Habitually generalized as exploitative and unfairly successful, negativity aimed towards large defense contractors is often traced back to prophecies of our own leadership.

During his final address, with the greatest nation in the world on the brink of a significant social and economic transition, President Dwight Eisenhower warned about the grave implications that would affect the United States’ societal structure if the influence of a “permanent armaments industry” continued to rise.

Cementing the daunting phrase “military-industrial complex” into American lexicon, Eisenhower pointed at the burgeoning defense companies as budding sources of significant harm to the American way.

Scary stuff.

Small businesses, and other nontraditional contractors, more than deserve their value being embraced through statutory support. Rationale for the guidance becomes even more obvious when realizing the nonstop barriers they must overcome just to inject their novel concepts into a conversation.

However, I don’t believe that the wave of promotion amplifying nontraditional companies through legislation is a pivot to take the future away from those currently in control.

Right or wrong, a powerful handful of large private sector matadors will remain in the upper echelon of both income and influence. The campaign enforcing nontraditional company involvement is an attempt to balance ease of access while re-energizing the complex.

But leveling the private sector battlefield doesn’t require a see-saw approach where one group is pushed down to elevate the standing of another. As such, it shouldn’t be promoted or explained in that fashion. A tug of war can tire the victor as well.

The relevance of what larger defense firms can contribute to any project—Other Transaction or not—remains worthy of recognition. Having provided the military’s backbone for every major conflict has allowed decades of life-cycle wisdom to be stockpiled within those walls. They’ve been here before and diminishing their capability won’t make them go away or transfer their experience to another entity’s knowledge base.

If nothing else, just be prepared to duck. Federal acquisition policy operates like a pendulum swayed by current events, public opinion, and politics. As evidenced by our procurement system’s evolution over the last 230-plus years, that pendulum can reverse direction at a moment’s notice.

Right now, nontraditional methods of contracting are booming. And sure, the exponential popularity and support among the acquisition community has been measurably beneficial. A rising tide raises all ships, but great sailors are not made at the marina. Companies must use this opportunity, this wonderful window of flexibility guided by common sense, to exchange philosophies and practices that work.

One day, when we reflect upon these good old days of unencumbered potential, let’s be sure we can recite awe-inspiring anecdotes of how massively individual companies collaborated with each other for the benefit of the collective. Iron sharpens iron–regardless of size.


written by Iain Skeete, Director, Strategic Contracting, NSTXL (republished with permission)

  1. Richard Beutel

    Thoughtful piece, but it ignores the enormous vested interests that the large metal benders have in perpetuating old, legacy systems with enormous and lucrative maintenance tails. Their “butts in seats”-based cost-plus business models actively stifle innovative and prevent the adoption of disruptive breakthroughs because it threatens to reduce or eliminate proprietary lock-ins, technology bloat and ages-old company sinecures. Just look at all the hysteria by them regarding the modest inroads from OTS-based agile acquisition to small innovative companies. It’s the wild west! The sky is falling! 🙂