What Will It Take to Create A True DoD-Industry Partnership?
(Source: Lexington Institute; issued December 4, 2012)
(© Lexington Institute; reproduced by permission)
Senior defense officials like to claim that they see their relationship with private industry as a partnership. If this is true it is the most dysfunctional partnership since Shakespeare's The Taming of the Shrew. Outside the marriage counselor's office or The Jerry Springer Show it is rare to find examples of situations in which one partner simultaneously professes to want a close relationship while treating the other with such disrespect, suspicion and even outright hostility. The defense acquisition system is a classic hostile workplace environment for a private company.

A partnership is a voluntary association of two or more entities based on shared interests and risks, a common purpose or goal and a pledge to act towards one another in good faith. In essence, there must be trust between the partners. This is true even where the partnership is codified in a contract -- be it a marriage, civil union or agreement between two corporations. It is possible for adversaries to cooperate when their interests align. Even the United States and the Soviet Union were able to pursue common interests such as strategic arms control. But this didn't make their relationship a partnership.

The Department of Defense is dependent on private companies for virtually all its weapons systems, platforms and supplies. The Pentagon also relies on the private sector for much of its maintenance, sustainment and logistics. While there is a requirement in federal law that half of all depot maintenance dollars be spent in public sector facilities such as depots and Air Logistics Centers, a portion of those funds are spent on spare parts provided by private companies. Even though DoD directly employs millions of people, both uniformed and civilian, and owns a massive amount of land, buildings and equipment, it is the department most dependent on the private sector in order to perform its missions.

Yes, the private sector is dependent on DoD for contracts. But only a handful rely on defense spending for more than half their revenues and these typically are the large prime contractors. For the vast majority of the companies involved in defense production or support, this constitutes a relatively modest portion of their overall business. When it comes to the companies leading the way in areas of advanced technology such as computing, telecommunications, or software, not only is government a small customer, but the costs of complying with unique standards and specifications, complex accounting standards and additional reporting requirements act as a deterrent to greater involvement in government contracting. Some defense contractors make a good living operating as middlemen between the Pentagon and private companies that refuse to acquiesce to doing business as the government demands.

A recent study by the Defense Acquisition University supports my assertion that despite decades of working closely together, the relationship between the Pentagon and private industry today in no way resembles a partnership. There is little respect for industry or understanding of its interests. A survey of government Program Managers revealed that many "see industry merely as uncommitted vendors, motivated only by profit; as a result, industry must be managed harshly."

This is surprising since many of the PMs' industry counterparts are former DoD employees, most often retired military personnel. This study also suggests that government representatives lack an understanding of money flows in the private economy or the importance of profits. In addition, the Pentagon does a poor job communicating its requirements, needs or interests to industry. Increasingly, DoD officials are seeking to avoid communicating with industry for fear of being accused of improprieties.

Most private contractors work very hard to be a good partner to DoD. Despite the attitude of many in the acquisition bureaucracy, they are motivated by more than money. The Pentagon needs to reciprocate this commitment by becoming a good partner to industry.

The Under Secretary of Defense for Acquisition, Technology & Logistics, Frank Kendall, spoke recently about the importance of better training for acquisition professionals. A significant part of that training should be in micro economics -- that portion of the dismal science that deals with how companies operate.


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