The Defense Department wants to shake up how it works with value-added resellers.

In a draft memo obtained by Federal News Network, the Pentagon would place a 5% cap on most fees charged by resellers starting with a specific special item number (SIN) for IT products. This cap would only apply to IT products sold through the General Services Administration’s schedule contract.

DoD says it spent about $2 billion in fiscal 2024 through the GSA schedule on these technology products.

The draft memo is one of two expected from the administration to address what it believes are higher than normal costs when buying IT products and services through resellers.

GSA initiated this review and proposed overhaul of the reseller market earlier this year. It started in June with a letter to 10 value-added resellers to collect data to better understand the role of such companies and what it would take for original equipment manufacturers (OEMs) to sell directly to the government. Then in early October, sources said GSA was close to issuing a memo that would establish such a cap on resellers.

While GSA has yet to issue such a memo, this undated draft memo from the undersecretary of Defense for Acquisition and Sustainment, Michel Duffey, offered more specifics into what this market cap and oversight process would look like.

Duffey references GSA’s plans in his draft memo.

Duffey wrote the initiative would “initially entail GSA contracting officers’ use new control measures to support their determinations of price reasonableness for products offered for sale under IT Special Item Number 33411. Specifically, GSA will more closely scrutinize pricing from entities that hold themselves out as resellers.”

It would focus on SIN 33411, which is for the purchasing of new electronic equipment, including desktops, laptops, servers, storage equipment, routers and switches and other communications equipment, audio and video equipment and even two-way radios.

Since this cap would only apply to purchases off the GSA schedule, DoD is returning to the idea that these prices are no longer automatically considered “fair and reasonable.”

This harkens back to 2014 when both DoD and NASA issued deviations to the Federal Acquisition Regulations that said schedule prices shouldn’t be automatically considered fair and reasonable. Several years later, DoD and NASA removed that deviation.

“When placing orders on IT contracts, I expect the department’s contracting officers to independently determine fair and reasonable pricing by considering the unique factors of a given acquisition in the same manner as GSA,” Duffey wrote in the draft memo. “Finally, and in general, we will apply the same common-sense approach to avoid paying excessive pass-through costs and avoid paying non or low-value added price markups across the complete range of the procurement.”

A third change DoD would require is for vendors to disclose in their price proposal the manufacturer or dealer price, the percentage markup from the OEM price. DoD also will require a description of the value provided that compromises the markup amount. Any markup more than 5% would require additional vendor justification and a higher level management attention. The memo doesn’t describe what either of those will look like.

Multiple emails to DoD seeking comment were not returned.

DoD’s reasoning for price caps questioned

Federal acquisition experts and resellers questioned the DoD’s rationale for applying price caps.

Three different executives who work for resellers as well as a former federal acquisition official, all of whom requested anonymity for fear of retaliation and to talk about a pre-decisional memo, said this approach flies in the face of what the Trump administration has been trying to do since January to relieve the burden of federal acquisition and encourage more vendors to participate.

One executive at a reseller says the first thing that DOGE went after was cost plus contracts. Now, DoD wants to take what this person called clean and simple transparent firm fixed price contracts for commercial products and turn these into cost plus type contracts, which the executive said makes no sense.

“Audits, narratives, justifications, additional steps and time, how is this simplifying acquisition and growing the industrial base?” the executive asked. “Are they going to cap gross profit on other items they buy like cars, furniture, office supplies, building materials, heating, ventilation and air conditions (HVAC) systems, lighting, plumbing, tools, safety gear and maintenance supplies next?  Where does it stop? Why are we being targeted?”

The executive says there seems to be a big misunderstanding about the role of resellers and even how the market works.

“It’s competition, not price controls, that drive down price. If that’s the ultimate goal,” the executive said. “Capping margins would drive out the best, service-oriented partners that invest in engineering and innovation — leaving behind low-touch resellers who only process orders. This reduces competition, supplier diversity and access to expertise.”

Another executive at a reseller says determining what constitutes an “excessive mark-up” is subjective. The source said for an administration that wants to keep things moving in a timely pace, giving contracting officers discretion about what is an excessive mark-up will cause more problems than it will solve.

“They are assuming that the contracting officers have the appropriate knowledge and training to do that,” the executive said. “Unfortunately and frequently that isn’t what the contracting officers have. There is a lack of understanding that will end up causing confusion and delays.”

VARs solve problems

A third executive questioned how DoD, or any agency, would oversee this entire initiative.

They asked whether the resellers would not need a cost approved accounting systems? If so, that would add significant costs and burdens.

Finally, the former federal acquisition executive, who spent more than 25 years in the federal government, says resellers provide a lot of value to agencies, partly because OEMs traditionally don’t sell directly to the government nor do they want to, but also because the resellers solve problems for the agency.

“They know the technology. They know the OEMs and can tell you what will work or what will not work. Resellers are invaluable,” the former executive said. “In terms of their markup, you just have to negotiate better. If you get at least two resellers to bid, you will get a good price.”

Is capping profits even legal?

All the sources agreed that if DoD or GSA wants better prices, they should do two things: ensure there is competition at the task order level and train contracting officers and other acquisition workers to be better negotiators.

“If you don’t have contracting officers who can push for better pricing at the task order level, then how are you going to have contracting officers who can make these determinations of the value of the markups that are over 5%?” asked the third executive. “You are better off training contracting officers to go after better prices at the task order level. GSA has ways to help like the 4P tool that combs all over for publicly available prices. But applying caps on fees or profit goes against capitalism. It goes against common sense and it will be detrimental to the government and its industrial base.”

Aside from just questioning the rationale behind the price caps, experts also asked whether the memo would violate the FAR and even some federal laws.

One of the reseller executives highlighted five FAR provisions and/or laws this idea seems to violate.

The executive says this requirement seems to violate the Truth in Negotiations Act (TINA) in the sense that commercial Items are not subject to TINA, which requires contractors to provide certified cost or pricing data to the government during negotiations for other items because the commercial marketplace is presumed to be a competitive environment and should drive a reasonable price.

Another part of the FAR this initiative may violate is Part 2 for the acquisition commercial items. The executive said if the government is obtaining a “fair and reasonable” price, then the focus is not about contractor costs, reasonable mark-up, or profit, it’s about the price the agency is paying.

A third section of the FAR this may violate is under Part 15. This includes a prohibition on obtaining certified cost and price data for commercial items.

Cy Alba, a procurement attorney with the firm Piliero Mazza, said if the government is buying through a firm fixed price contract, then they are not supposed to be asking for cost or price information. He added if it’s awarded through the GSA schedule and it’s below the maximum order threshold then prices are determined to be fair and reasonable by GSA.

Alba also said if it’s a commercial item, or really anything that has adequate price competition, the market is supposed to make that determination that the price is fair and reasonable. He said if the government thinks the markup is too high, then they don’t have to buy the product or service from the vendor.

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Interview transcript:

Terry Gerton: You’ve recently laid out a mix of reforms and warnings and priorities for the 2026 National Defense Authorization Act, which is still moving through Congress. What’s the overall message before we dig into the specifics that POGO wants to send about this year’s recommendations?

Greg Williams: Sure. I think we all welcome all of the extraordinary work that Congress has done this year to produce two different versions of NDAA bills that work very hard to overhaul military acquisition. Now that said, they place an enormous emphasis on deregulating military acquisition, with the Senate’s version repealing no fewer than 86 distinct statutes that govern military acquisition. Now, Congress has its own research arm to help inform for these decisions, and that’s the Government Accountability Office. Now the Government Accountability Office maintains a database of suggestions. And last I checked, there were 750 recommendations they had for how the Defense Department is run and exactly none of them recommend repealing any statutes having to do with military acquisition. Now I think the unavoidable question is if Congress doesn’t seem to be listening to the GAO, its own investigative body, well, who is it listening to? I think it’s only logical to wonder to what extent these changes are being pushed by the defense industry, perhaps at the expense of the interests of the taxpayer.

Terry Gerton: Are you seeing any specifics in the NDAA that relate back to those 750 GAO suggestions?

Greg Williams: Frustratingly few. Two that I’ll call out that I think are really important are passages in both the House and Senate versions that secure greater right to repair the military’s own equipment. Just imagine you’re far from home, you have a piece of equipment that you rely on, perhaps for your safety or in order to be able to complete your mission, and it breaks. Right now, there are rules, laws, contracts that often get in the way of military personnel fixing those things. This year’s NDAA, whether the Senate or the House versions prevail in this context, will dramatically increase the military’s right to repair its own equipment. And I think it’s really important that those passages survive conference. The other one that I think is particularly important in terms of acquisition law are some reforms to what’s called the Nunn-McCurdy Act, which stipulates that Congress needs to be informed if weapons development or procurement programs breach certain cost thresholds and requires that the Secretary of Defense or Secretary of War recertify those programs and provide updated timetables and budgets for their completion. So the passages that amend that provide Congress more say in the recertification of those programs and they make it easier to call out cost overages, especially in the case of large programs like naval shipbuilding, where if you look at the overall program, you may not have breached overall cost thresholds. But you’ve already built two or three ships and you can tell that they’re way over budget. What this passage allows you to do is to treat them as distinct subprograms and apply those thresholds to them individually.

Terry Gerton: Well, you’re right. There’s certainly a lot of coverage in the NDAA, both versions, around acquisition reform. One of the other pieces that POGO has really called out is the use of military force. First, you recommend that the authorizations for the use of military force from 1991 and 2002 tied to operations in Iraq be repealed. Why is it so important to take those off the books now?

Greg Williams: Well, those AUMFs have been used very pervasively to authorize all kinds of use of violence around the world that seem to have very little to do with the original intentions of those two AUMFs. And one of the ways Congress can clarify the use of its power to decide when and where we go to war is by not leaving things like that lying around to be potentially misinterpreted or reinterpreted by the executive branch.

Terry Gerton: I’m speaking with Greg Williams. He’s the director of the Center for Defense Information at the Project on Government Oversight. Greg, let’s follow up on this a little bit because there are conversations happening between the president and his team and Congress right now about operations in Venezuela. So how do those AUMFs relate to those kinds of current conversations?

Greg Williams: Well, I’m going to emphasize that there are operations against Venezuelan nationals and Venezuelan boats, and they’re being treated by the administration as being very distinct from potential operations that might take place in Venezuela. And in fact, the administration is arguing that they don’t need to comply with the War Powers Act in the context of the Venezuelan boats because we’re not deploying troops in harm’s way. As you may know, these boat strikes are believed to be largely conducted by unmanned aerial vehicles and so arguably, American troops are never in any danger as we execute these strikes. Now if we were to invade Venezuela or if we were to fly crewed aircraft over Venezuela or even close to Venezuela and engage in a shooting war with them, that would more clearly trigger the requirements of the War Powers Act, or at least that would not be subject to the exclusion that the Trump administration has called out in the context of those boats.

Terry Gerton: One of the other concerns that you raise about military deployments is border enforcement and the use of military forces in that function. What’s the concern there?

Greg Williams: Well, the overall concern is that what we’re seeing is a steady erosion of what we thought were bright lines, protecting both American citizens and others against being arbitrarily seized or killed. And whether we see those lines blurred outside our borders, as in the context of these boats or inside of our borders, it just makes us all a lot less safe. It’s much harder to count on not being swept up in some raid and potentially deported to a foreign country without any meaningful opportunity to defend our rights.

Terry Gerton: Well, military deployments and acquisition reform are really big topics. I want to pull you down to something a little more wonky and talk cost accounting standards because you’ve got a recommendation in here and there’s been a lot of conversation about moving DoD from cost accounting standards to GAAP, Generally Accepted Accounting Principles. Why was that important enough to raise in your memo?

Greg Williams: I think it represents a fundamental misunderstanding of how accounting in general works. And it undermines a very basic control that any customer organization wants to have over vendors that are submitting things like expense reports. So at a high level, I would describe the generally accepted accounting principles as a set of tools that are created by an industry consortium to protect shareholders in private organizations from misrepresentation of the value of the enterprise. Cost accounting standards are like the expense report guidelines that any consultant or anyone who’s ever worked as a customer for a big business has to comply with. And different customers have different standards. Some say you can’t have any alcohol at all with your dinner, some say you can have one drink. Some say if you’ve traveled less than 50 miles, you can’t submit any meal-related expenses. It represents an agreement between the customer and their vendor about what is and is not an acceptable expense. And it’s a very basic structure that any business person should recognize.

Terry Gerton: How does that relate to DoD’s ability to pass an audit?

Greg Williams: I don’t think it is particularly related. As long as you follow whatever rules are articulated for you, you can pass an audit. I think use of cost accounting standards is more about making sure that the government gets a fair deal from its vendors when those vendors submit cost reports for reimbursement.

Terry Gerton: So POGO’s list is pretty specific in terms of things that you would hope Congress would consider. If they were to take up your list, what kinds of impact would you expect to see in terms of military readiness and operations?

Greg Williams: Well, I think it’s really interesting that over the last several weeks we’ve paid a lot of attention to the USS Gerald Ford Carrier Strike Group. There are two readiness issues that bear on it directly that have received some attention, I think, should probably receive more attention. One is that it was called out as a specific example of how service people are affected by the inability to repair their own equipment. And the example that was used was, I think, more than half of the ovens used to prepare meals for sailors embarked on the Ford were out of commission and had to wait an extended period of time for the vendor to repair them. Now that’s one thing when you know you can’t have muffins with your breakfast. But if similar principles apply to systems that allow the aircraft carrier to launch and recover aircraft or move weapons to the flight deck and things like that, just imagine being 6,000 miles away from the contractor who might repair those things and having one of them break and having to wait or redeploy back to the continental United States to have those things fixed. It’s just, I think, a fundamentally unreasonable expectation and puts our troops needlessly in danger.

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A new forecast projects that defense spending will keep rising through 2035, while civilian agencies face years of flat or shrinking budgets, continued cuts and growing pressure to scale back. 

The Professional Services Council’s latest federal market forecast, compiled with input from more than 400 industry volunteers and subject-matter experts, predicts that in an environment where legislative logjam is likely to persist, defense spending will continue rising at roughly 2% annually after its first $1 trillion budget in fiscal 2026 — a one-time spike driven by reconciliation —  while cuts will “continue to fall disproportionately on civil agencies until elections change the balance of power.”

“What this means in practical terms is that the fiscal environment for the next decade will be tight, competitive, highly dependent on supplemental funding, reconciliation and prone to crisis-driven appropriations. Base budgets alone will struggle to drive new initiatives, especially on the non-defense side. In this environment, as one of our interviewees suggested, it’s best to keep your customers close and your congressional supporters and lobbyists closer,” Mike Riley, a volunteer for PSC’s Vision Federal Market Forecast told reporters last week.

In the defense space, PSC volunteers said their discussions with defense stakeholders revealed a shift, or “strategic realignment,” in the Pentagon’s priorities. While the Indo-Pacific Command remains of “elevated importance,” the Northern Command and Southern Command are gaining new emphasis as the department puts greater focus on homeland, border security and expands its presence in Latin America and the Caribbean. 

“This year was a bit of an interesting year for us. A lot of defense folks acknowledge the growing importance under this administration, but also a lot of consternation about the directions the administration might be going and just kind of the lack of clarity. There’s some continuing trends — deterring China, integrated deterrence, that pivot to the Pacific — that’s an ongoing thing that didn’t change from the previous administration. Of course, border security, the Department finds itself in an uncomfortable position,” Jason Dombrowski, a volunteer for PSC’s Vision Federal Market Forecast, said.

“They are getting a little bit more heavily involved in domestic politics than they would otherwise prefer to. Certainly, they always reiterated their intent to be responsive to the commander in chief. But historically, of course, the American military has tried to avoid a domestic role,” he added.

The department is also placing greater emphasis on the Golden Dome missile defense system, shipbuilding and munitions under this administration.

“I think everyone’s been paying attention to the news that there has been some very notable plus ups and focuses of this administration, most notably around shipbuilding, but also to include things like nuclear modernization, which in previous years we had highlighted as a potential toss up, but this year definitely moved into the winners category,” Dombrowski said.

Acquisition reform

The Defense Department also moves to implement Defense Secretary Pete Hegseth’s sweeping acquisition reforms, which emphasize greater competition, faster delivery and making commercial technology the default option. It’s unclear whether the department has the ability to implement those changes given deep personnel cuts across the contracting workforce.

“The contracting professionals — there seems to be a large reduction. How do we get this done? That fundamental capacity to get things done is really going to make a difference, whether you’re putting out contracts, supply chain, workforce throughput … It’s going to affect how we can actually help out the government. Adaptability is the name of the game,”Jim Kainz, a PSC volunteer, said.

In addition, the department’s new acquisition strategy promises to lower barriers to entry to encourage startups and non-traditional vendors to join the defense industrial base. Dombrowski said that while stakeholders are cautiously optimistic about the reforms, there is also a “healthy cynicism of saying, ‘How is this time any different?’” 

“This administration has made a big priority of trying to attract new people, and we looked at the pros and cons of it. It’s probably worth noting that, aside from a few very notable successes that we can all figure out, there hasn’t really been much movement in this regard,” Dombrowski said. 

“We’re very excited, certainly [Commercial Solutions Opening] and [Other Transaction Authority] and just a variety of things that should provide a lot of flexibility, but let’s see it,” he added.

Winner and losers

Dombrowski and Kainz said several areas emerged as clear “losers” in this year’s defense outlook, including the department’s buying power, which continues to erode as inflation and reshoring efforts drive up costs across programs.

Legacy systems and advisory and assistance services are facing cuts, and U.S. Africa Command and Central Command are being pushed lower on the priority list as resources shift toward European Command.

There is also uncertainty around operations and maintenance funding, which Dombrowski and Kainz said remains a major concern for both think tanks and potential customers. Sustainability initiatives appear to be split — the “green side of sustainability” will most certainly lose ground, while efforts tied to energy resilience may gain momentum. 

Contested logistics, once considered a toss-up, is gaining traction as a priority, and scalability — the ability to rapidly increase production in a crisis — is emerging as a clear winner across the department.

Overall, research and development spending is increasing, but only in areas related to advanced weapon systems, technologies, drones and energy. 

“However, there’s a belief and a growing expectation that the contracting community will bear more of those responsibilities,” Dombrowski said. “It’s really unclear where that line is going to be drawn between things that are really government exclusive where DoD is willing to pick up all costs associated to it. There are things we can all imagine, like fighter jets. But what about things that are more in the gray areas? Avionics, business process systems, back-office systems, things like that — definitely more of a sense that we are going to have to be developing those on our own.”

If you would like to contact this reporter about recent changes in the federal government, please email anastasia.obis@federalnewsnetwork.com or reach out on Signal at (301) 830-2747.

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Interview transcript:

 

Bob Venero As we look at AI in in the federal government, but also in the companies that support the federal government — like the Northrop Grummans of the world, the Raytheons — AI is extremely important in helping them accomplish mission. Whether that mission is for the warfighter or whether that mission is for the Veterans Administration or any of the other areas within the government. And what we’re seeing is there’s a tremendous amount of pilots that are happening within those government agencies. At the end of the day, AI means something different to everybody, right? And really if you look at it, what is going to be the business outcome of some type of AI strategy or AI automation that you, as an agency or as a federal systems integrator, are trying to accomplish? That’s the key factor. I don’t want to say there’s no magic behind the curtain as it relates to what AI is — it’s things that are going to happen at speed and scale, tied to incredible technologies from companies like NVIDIA. I look at them as the grandfather of AI. And actually, I think next week is NVIDIA’s GTC event in DC, right? Really geared towards the government and you know what AI is doing for them. So as we look at different areas within the different government spaces, automation is key. Having the proper large language models to support what those agencies are trying to do, and then really protecting the security around what those AI models are going to do, and the guardrails that the government has to have, which is different than the bad actors around their AI testing processes and procedures.

Eric White That’s one thing I’ve been curious about as large language models and other AI tools start being implemented and the idea of contractors competing for different jobs. How are government officials going to judge who has the better large language model or who’s piggybacking off of who? Just getting your thoughts on what the future in that realm will look like.

Bob Venero Well, when you look at that … people are saying, hey, prove to me that you didn’t use an AI model to do that, right? And I look at it and say, if I’m smart enough to use that AI model, you should be looking at me because I’m going to be innovative and smart to help accomplish the goal. I don’t necessarily look at it as a bad thing. Who is going to leverage the proper tools that are out there to accomplish the job in the most efficient, effective and cost-based area? And I think that’s key for people to start to look at. You’ll see now when people actually do interviews, they’re asking them, are you doing this interview with AI or not with AI? And they have to attest to that. But to me, that goes counter to what AI is looking to do for everybody, right? It’s about speed, accuracy, and automation. And if someone knows how to leverage it better, that’s probably the person that you want, because those tools are going to be in your environment. It doesn’t necessarily mean that it’s a bad opportunity or they’re a bad contractor or there’s a bad comparative against large language models. It’s who’s using the technology to the best of its ability to accomplish the goals and the business outcomes? That’s the answer.

Eric White How much help will it provide on the bottom line, do you think, as far as budgets are getting tighter and tighter? How much more will this provide?

Bob Venero As we look at what AI can accomplish, automation is a lot of that AI conversation. Because when you can do automation, then you can take people out of the mundane tasks that are just labor-intensive and have them focus on better things to do, that are more thought-provoking, within their environment. So, it will make a difference as far as cost is concerned. Because if I have an individual that we’re paying $150,000 a year, and we had him doing tasks that were mundane because it was a part of his job description and now we can automate that and have him do more thought-provoking things? That’s better for the environment that we’re going to put him in, but it’s also better for the bottom line. Because now I can do things quicker, more efficient, and more effective. And now I can come in under budget potentially. So as budgets become more and more strained, AI becomes a much better tool. But you know, the big fear … am I going to lose my job to AI? That’s a very broad question. You shouldn’t lose your job to AI, and if you do lose your job to AI, then you weren’t focusing on really what your career was in your future. Because if AI can just take the job away, then you haven’t built value for yourself as an individual. It’s about how AI can help you do your job better, faster and right now the question is accuracy, right? Because there’s a lot of mistakes that happen within that model. Whether it’s Grok or ChatGPT, and you ask it a question that you know the answer to, and you know that the answer they gave you is wrong, and then you just say, are you sure? And you prompt that in, and they’re like, oh you’re right, actually, I did make a mistake. Now that I thought about it, here’s what it is. So it’s not even a question of oh, is that model 100% accurate? If you’re taking that as the rule of law, then you’re going to be in a situation where it’s going come back and bite you in the butt.

Eric White We’re speaking with Bob Venero, he’s the president and CEO of Future Tech Enterprise. That’s been the selling point of this technology, faulting whatever the doomsdayers say about loss of jobs, that you know it will help automate and free you up from those mundane tasks. Are we already seeing that or when is that going to kick in? Because I still find myself doing a lot of data entry here, Bob.

Bob Venero I think it’s definitely happening. Not as efficiently and effective as it should, and that’s because we haven’t been educated properly on prompt engineering. If you don’t know how to ask the AI model the question the right way, it’s going to take you longer sometimes to get to the end result. So there’s a whole education cycle that needs to happen on how to create the right prompting, to ask the right questions to get to your end result and goal. And I think that’s going to develop over time. So right now we’re in the infancies of it. I can tell you that it definitely helps in some of the mundane tasks that are tied to, hey, I want to write a brief about something, here is my topic. It gets you 80% there, and then you have to go in and adjust it. But that 80% has saved you a lot of time and effort, from starting it from the beginning to the end. But then you need to validate what it is, the end result, and make sure your answers are correct. So, we’re not quite there yet. I think in the next 12 to 18 months you’ll see a big difference as these models become more and more intelligent in supporting the businesses that they’re handling, the government agencies that they’re handling, whatever the area that it is, because it’s all about the data. And you know … [garbage] in, [garbage] out, right? And that is, from a data perspective, extremely important as these models become trained.

Eric White Let’s zero in on the defense side of things. Where, from a warfighter perspective, could this technology even work out for the Department of Defense? In the procurement contract world, could this technology be of assistance?

Bob Venero Oh, without a doubt. So a lot of times when the agencies like the DoD put out an RFQ for some type of solution, they’ve got criteria that they need to look at and vet each time the respondent is doing what they’re doing. And that criteria now can be handled by AI versus an individual having to compare hundreds or thousands of pages of response, going through it, pulling out the key areas in there, and then evaluating them across each other. And I think that’s very important. As you take a look at the speed of getting things done, what we’re seeing in the organizations, the systems integrators, speed is so important to them. Now to be able to respond to something accurately, efficiently, and be there first versus somebody else who maybe isn’t leveraging those tools is key. If the Department of Defense can use those same tools to evaluate and compare and contrast versus the human eye, it’s a game changer. It really, really is. And it can give you weighted results against each of the potential bidders on there and pick what it believes is the right solution based on your criteria. But then you still have that human intervention that says, okay, let’s really weigh the results here. Thank you for giving me the information. I see it this way, but Northrop Grumman performed better than BAE did on this, or vice versa, and there’s historics that you can take a look at from a DoD perspective. So I think the more and more it’s adopted within that space, the more efficient those agencies can become, the quicker they can give awards, and the better the cost base will be. They it’s going to reduce their costs as well.

Eric White And the bidders may be able to use it if they have to go through a lengthy RFQ, right?

Bob Venero Which without a doubt. Future Tech as a company, we do a lot of RFQs because we support a lot of the federal systems integrators. And we have an AI tool now — we’ve been in business 29 years, so 29 years of responses — and we fed it into the large language model. So now when something comes across the plate, I don’t have to have a team of seven: “Hey, pull from this, pull from that, pull from here, pull from that.” The AI goes in, it looks at the criteria, it then pulls it in and helps us write a draft of what the response is, the key things that we’ve had. And that’s been amazing from a time-reduction perspective and from a personnel and skill perspective.

Eric White Yeah, pointing it back at yourself, you gave that example. What are you having those seven folks do now that you don’t have to have them digging through all of that paperwork?

Bob Venero Here’s a perfect example. The person now who heads up our RFQ team, she wanted to expand and be a part of the onboarding and training for individuals that come into the company. And so now she has a dual role in the organization. That role wasn’t there before, but now we created this additional role, she’s got both of them, she has the time to do it based on the tools that are there. And now from an onboarding and training perspective, we’re going to bring in an AI module that’s going to help her with that as well. So if you’re embracing it properly, it is going to take you to places that are good. I always use this analogy. I’m a boater, right? And years ago, you had two sticks when you had two engines, right? You had sticks for left and right and back and forth, and then they came out with a joystick. And the joystick is just like we know, you turn the joystick left, it goes left, turn it right, back, forward. All intelligence built into it. The key and smart thing about what that has done — I used to get yelled at, “you’re a cheater, you’re a cheater, you know, you’re not learning the old way.” I’m like, no, I’m actually smart — it’s a lot easier to do it this way. I can get to my route quicker and I can park a lot more easy. It’s the same thing with these tools, right? Embrace them. Bring them into your environment, leverage them out there, and it’ll help you as an organization. But also any of the agencies that do it, it will help them be more efficient, effective, and that’s important right now, tied to costs and cost reduction.

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Interview transcript

Terry Gerton Mr. Buzzett, let me start with you. Tell us a little bit about the National Armaments Consortium. What is it, how does it work with the Department of Defense?

Joe Buzzett Yeah, so the National Armaments Consortium is a group of engineers, designers, scientists and manufacturers from across the defense industry, really focused on the armaments part of the portfolio. We’re one of the oldest, I think the oldest [Other Transaction Authority (OTA)]. We were started in the early 2000s. We came out of what was called the [Warheads and Energetics Technology Center (WETC)]. It was really focused originally out of Picatinny Arsenal on warheads and energetics. And since that time, it’s really grown over the last 25 years to include now missile systems, broader energetics, rocket motors — across the whole industry. But we’re really the nation’s armaments consortium. We’re a CMF-based consortium, OTA, and we really have a broad range of large and small businesses.

Terry Gerton And one of the things that you all do is help DoD stay current with technology and innovation, right?

Joe Buzzett That’s exactly right. That’s exact right. And you know, over 75% of our members are small, non-traditional businesses. Of course we have a large traditional business, the Raytheons and General Dynamics and Lockheed Martins, but what really gives us the innovation is being able to have that collaboration that we bring through our consortium where we can get a lot of the startups, a lot of the non-traditional businesses and get that developed into the warfighter in a very quick manner.

Terry Gerton And Mr. Harris, Mr. Buzzett has just talked about the range of companies in the NAC, but you also have 1,100 … Member organizations. With that broad of a scope, could you give us your assessment of the defense industrial base, especially from the armaments perspective? How are we doing there?

Ben Harris We’re doing better than we were 10 years ago, but we have still a long way to go. Right before I retired from the army, we were working on a 15-year modernization plan just for the ammunition industrial base. So we started that in 2016 and we finally have support from throughout the department and Congress. And you see that pendulum now shifting everywhere because it’s not just building ammunition. You also have to be able to have all the depots to do the ship overhauls and repairs. You need the depots to rebuild your helicopters and paladins, so there’s a huge investment that this country is gonna have to make to really reset that industrial base.

Terry Gerton Well, certainly at current events, the war in Ukraine has shed a lot of light on the ammunition industrial base. How has that changed the focus or maybe increased the urgency of these modernization plans?

Ben Harris Well, the focus always seems to focus to ammunition when there’s at least more than one conflict happening, because we typically cut back on ammunition. And there’s a reason for that. If you order too much ammunition, 40 years later you’re going to have a huge demilitarization problem where you’re gonna have to pay to destroy it. So there’s delicate balance there. The good news is the weapons systems that this country has innovated on are proving to be very successful overseas. There are a lot of foreign customers now that are all looking to buy U.S. Weapons systems. So that’ll be good for the industrial base. So if the U. S. Has to cut back on its purchases, there should be foreign orders that can come in and keep the capacity running so that those plants are operational and able to surge.

Terry Gerton Mr. Buzzett, did you want to add on to that?

Joe Buzzett Yeah, I also wanted to add the aspect that, you know, we’ve been working on next generation capabilities specifically for the Pacific. So, you now, one of the highlights of the programs that we did was the Prism missile, you know a missile that goes out 500 plus kilometers that was started in 2018 under the OTA and has just been fielded. So there’s a lot of things, innovative things that we’ve been able to do through the use of OTAs and through the flexible contracting that we get with OTA’s to do things quick, get them out to the field, and get them tested and fielded.

Terry Gerton Mr. Harris?

Ben Harris I’ll just add that two other OTAs that went through the NAC [were] the new hypersonic weapon system, Dark Eagle, and the new radar upgrades for the Patriots, the LTAMs. Those both were OTA’s through the NAC.

Terry Gerton I’m speaking with Ben Harris. He’s the executive director of the National Armaments Consortium. Joe Buzzett is NAC’s executive committee chair. Mr. Harris, let me come back to you. You mentioned foreign demand for US armaments, as well as domestic. Talk to us about the biggest challenges that the industry is facing in terms of capacity, technology, innovation, supply chain.

Ben Harris Well, it’s time and money, first off. You know, they want it now. Factories don’t build themselves overnight. Everybody knows that. But … I see significant funding being added to increase that since 2022. There was a lot of congressional supplemental dollars that were added to expand our capacity. And now that we also see — we support the Navy at Indian Head. They actually now have funding where we see the beginnings of a rebuilding of the Indian Head facility there.

Terry Gerton So Mr. Buzett, let me come to you. You’ve just added five new industry veterans to your executive committee. Tell us about how their experience, their companies are going to shape NAC’s direction and really build better collaboration.

Joe Buzzett Sure. So our executive committee is made up of six large businesses and six smaller non-traditional businesses. And plus we have one university — Penn State University is representative. So we use this diversity to manage the board. We are all volunteers. We all have day jobs that are in this business, so we’re all very committed to this OTA model, to providing capability to the warfighter. So our new members are from Raytheon, Dan Zimmerman and Applied Research on the large business side. And then E-optic, which is an optics business. We have PER, Precision Energetics Research, and McCormick Stevenson. So we really have a diversity of large and small businesses that help us guide the NAC. We have goals and we have Ben Harris, who is our our lone employee, and Ben executes our vision for us. So he’s very hands-on, very experienced, and we go through and our vision is, we want speed. We want speed for the warfighter, and I think it lines up very well with with some of the new policy changes that are going on in the administration.

Terry Gerton Mr. Harris, let me come back to you to talk about some of those new policy changes. The Trump administration is really emphasizing speed, flexibility, OTAs, as both of you have already talked about. How are these changes affecting NAC, its objectives, and its members’ ability to deliver?

Ben Harris It’s all positive. Ever since the executive order came out on 9 April, we’ve really been able to share with everyone, hey, we’re here. We’ve always been here. And so what it’s enabled us to do is to focus on the time to award. We had kind of drifted away from being able to get OTAs awarded quickly. But now with all of the administration’s focus on trying to do as much as they can in the development sphere through OTAs … We’re able to now message, hey, let’s start focusing on not just where the dollars go, but how fast are those dollars are getting on contract, which is really what our members have been pushing for.

Terry Gerton And how are your members assessing their own capacity to respond to that faster delivery objective?

Ben Harris There’s no pushback from our members. We typically — we’re really looking forward to the Army’s announcement [about] the transformation that they’re doing. And then the memo that just came out this week from the Secretary on the transformation all focusing on speed. We’re still going to focus obviously on cost and performance, but this new emphasis of speed is what we need. It’s difficult for small businesses to write white papers one year, and it takes over a year to get it on contract. You’re counting on cash coming in and you spent dollars to actually write these white papers. So this is all going to be good news for our members.

Terry Gerton So, Mr. Buzzett, let me come back to you to kind of wrap this up. As you look to the future, 2026 and beyond, what are NAC’s critical priorities?

Joe Buzzett So as Ben mentioned, it’s doing things fast. It’s being able to answer to the department’s needs. Some of the needs that we’re really focusing on are counter-UAS. We see the proliferation of all these drones and how do you counter them. We’ve got active programs on proximity munitions and other ways to defeat these UASs. And then on the offensive side, the UAS weaponization piece. So as the army decides and the department decides how they were going to fight with drones as they watch what’s going on in Ukraine and how we use that as a force multiplier. So, you know, right now this isn’t our first rodeo, as they say. We have 550 active projects. We’ve been doing this a long time. We measure, every month how we’re doing on, from the time the Army or the [Department of] war says we want something to when we can get it under contract. That’s piece one. Piece two is actually delivering that prototype, and getting it to the hands of the warfighter quickly.

Terry Gerton Mr. Harris?

Ben Harris And I’ll just say we also continue to try to recruit new members to help expand the defense industrial base. So that is another one of our focuses going forward. So the more members we have, the better the competition is. And all our members are U.S. Based.

 

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© The Associated Press

The Space Force is finalizing a strategic roadmap that will lay out what space systems, infrastructure and manpower it will need over the next 15 years to stay ahead of emerging threats.

Chief of Space Operations Gen. Chance Saltzman said most of the work on the document, known as the “objective force” is largely complete. 

“I want to publish objective force 2025 before the end of the calendar year. That’s the task I’ve given the staff. And of course, they immediately push back saying we can’t possibly do that. I think they can. So I’m really trying to hold them. I think the bulk of the work is almost complete,” Saltzman said during a Center for Strategic and International Studies event Thursday.

Saltzman said the “objective force” is designed to be a living document, updated regularly and republished every five years. The 2025 version will outline what the service will need between now and 2040, but its purpose is not to list everything new that’s needed by 2040. Instead, it maps out which systems the service will need to sustain, phase out or bring online over the next 15 years.

“There are systems we are flying today that we will continue to use into 2040, so the objective force will account for that. There are some systems we use today that we will wean ourselves off of in the intervening years between now and 2040 — the objective force will say that, ‘Hey, we plan to sunset in the 2030 time frame, 2035 and the new system will be growing along the same time so we preserve that mission capability,’” Saltzman said.

“That’s the way you want to think about, it’s not what do we need for 2040, it’s what happens between now and 2040 to make sure we have that objective force we need,” he added.

The document, however, will go beyond simply cataloging the types of systems the service already has or will need in the future. It will also outline the broader infrastructure needed to sustain the mission, including how many bases and squadrons are required and whether new military construction will be necessary — offering a full roadmap for what it will take to build and maintain a future Space Force. 

Saltzman acknowledged that circumstances and requirements will inevitably change, so the roadmap is meant to adopt along with them. 

“There will be annual updates based on resourcing, obviously, and then every five years we will re-snap the chalk line and say, ‘So objective force 2030, we’ll be looking to 2045.’ It’ll be this rolling campaign of learning to make sure that we have the force documented that we think we’re going to need in the out years,” Saltzman said.

Clear demand signal

Saltzman said the Space Force needs to clearly and formally communicate what it needs long-term to its stakeholders, including Congress, defense contractors, allies and partners. 

“We’ll try to lay all of that out, to publish it to the stakeholders so that they can see what our plan is and see a stable, comprehensive demand signal to what we need to buy, what approvals we need, how much resourcing we might need to put it in place,” Saltzman said. 

While Saltzman had originally aimed to publish the document by the end of 2025, he said its release will most likely slip into 2026.

“I think while you may not see a published document before the end of December, I can pretty much tell you that the work will be complete by the end of December, and we will be in final approvals to say yes. We’ll take this to the secretary, obviously, and make sure that the whole staff understands what we’re trying to do,” Saltzman said.

“I think the work of the force design will be done in 2025, and then hopefully publish it again to stakeholders in early 2026. That’s kind of what I see as the current timeline,” he added.

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Interview transcript:

 

Terry Gerton A lot has happened over the last few weeks and as people in the contracting world get back to their desks and start things back up again, they’ve got a lot to touch base on. Just before the shutdown we had the publishing of the FAR overhaul and defense has come out with a lot of new priorities. How can people start to put all these pieces together and make sure they’re working with the whole picture?

Emily Murphy It’s a really complicated picture right now. I want to go back and say — GSA, DoD, NASA, OFPP did an incredible job in getting that FAR overhaul done and published. And they even got the updated FAR companion out during the shutdown, which I know has to have been a struggle. So they did a wonderful job with it. USDA, Department of Homeland Security, and GSA have all adopted the entire new set of standard deviations. That means, however, that no other agency has. So if you’re a contracting officer right now or you’re a contractor, there’s not a standard set of rules you can go to. You have to be looking at which deviations did this agency adopt? How does that interface with what contract vehicle I’m using? And what about this other policy that’s happening over at the Department of War? There’s not a clear one-size-fits-all answer to the problem anymore. If you think of GSA, for example, assisted acquisition has always said that they follow the rules of the funding agency. So, money and requirements coming into GSA’s assisted acquisition service, they’re going to follow that agency’s money and the rules that come with it. Well, that might mean that they’re adopting, if it’s coming in from Department of Energy, one set of rules; Department of War, another set of rules. If it’s coming in from the SBA, it might be a third set of rules. So I keep thinking that if I’m an 1102 right now, a contracting officer, I want more monitors. Because I’m going to have to have so many different versions of rules and guidance up until we can make it through this. I think the standardization is going to come, but I think it’s going to be a really tough few months — as the new rulemaking takes effect  as more and more agencies adopt those standard deviations, and as we get more clarity on what the Department of War’s new announcement from the 7th of December actually means in the application, so that we know what to expect with those contracts.

Terry Gerton How much more complicated does the continuing resolution make it? Because now some agencies have full-year appropriations. We have a CR in place for others through the 30th of January. And on top of that, we have all these new rules that you’re talking about.

Emily Murphy So if one thing contracting officers are used to dealing with and contractors are very used to dealing with, it’s CRs. I don’t think that that’s going to be the hard thing. It does slow down new starts for the agencies that have a continuing resolution. For the agencies that actually have their appropriations, it means that they can get started. It actually may help balance the workload out a little bit, because you can start the new starts for agencies that have the authority while you’re still working on the continuing resolution and continuing the existing contracts for all the other agencies. But the sort of mosaic of rules and regulations out there is going to make things tougher … it’s one more complication thrown into the mix. And the irony is that this is all really intended to make things simpler, faster, cheaper, better. And I think ultimately it will, but it’s going to be a little bit painful for the next couple months.

Terry Gerton Well, speaking of simpler, faster, better, cheaper, what’s the perspective of contractors? We’re talking first about the contracting workforce, but contractors and especially small business organizations who might not have a big contracting shop to help them navigate all of this. What should they be looking at and thinking about in this new, sort of interim period?

Emily Murphy So they need to be really carefully looking at not just their contracts, but the agencies they’re doing business with and seeing where the changes are coming. For example, if you’re an 8(a) firm, you need to be looking at the new competition rules that are in part 19. If you’re a service-disabled veteran or a woman-owned small business or hub zone company, it’s opening up the realm of what you can compete for, because things that were previously in the 8(a) program are now available if an agency chooses to take them and compete them amongst those other socioeconomic categories, they can. That’s just looking at the small business programs. They also need to be looking at the clauses. Right now, their contracts probably have the old clause matrix in them. Part 12 reduced for commercial type contracting, reduced the number of clauses by about 30%. Which clauses are changing? Which ones can they get, and what does that transition look like for them? What can they stop doing? And what do they have to change how they’ve been approaching? And it’s going to be a sort of a contract-by-contract answer. Someone’s going to deal with their flow-downs. And then we’re also hearing — I think Jason Miller, your colleague, reported on it — that there’s going to be maybe some changes to how IT value-added resellers are being treated. So that’s not even in the current regulations, but it’s something that’s sort of looming out there over the community that they that they’re going to need to be paying a lot of attention to, because limitation on subcontracting is becoming more important. Compliance with contracting terms, frankly even the move towards OTAs and CSOs and all sorts of alternative contracting, they’re going to have to become masters at a whole other set of contracting options — or award options, I should say, not even contracting options at that point.

Terry Gerton I’m speaking with Emily Murphy. She’s former administrator of the General Services Administration and senior fellow at the Baroni Center for Government Contracting at George Mason University. Emily, along with all of these changes, you’ve been a strong advocate for training of 1102s. But with all of this happening, and we have Secretary Hegseth announcing a complete shift in focus for DAU, now the Warfighting Acquisition University, what do you see as key to keeping 1102s current and keeping their mindset focused on these new ways of doing business?

Emily Murphy So we’re giving the 1102s, the contracting community, a lot of new tools. I mean, you’re seeing GSAI, the Department of War is rolling out new tools as well. Everyone’s got new tools. We’ve got new regulations, we’ve got new authorities. What I haven’t seen is anyone budgeting for the time to train the workforce on how to use these and how to use them properly. There are some very powerful tools out there and very powerful changes in the regulations themselves that give that workforce a lot more authority. But you’ve got a realignment of who the your contracting officers are going to be reporting to within the Department of War, so that they’re going to be reporting instead of up into a contracting organization, they’re going to be aligned with the program instead. At least that’s what’s been stated. We haven’t seen the reassignments happen yet. So how is that going to change day-to-day business? Who’s taking the time to sit down and explain you can now do a simplified acquisition procedure for commercial items up to $9 million? What does that look like? How do I do it? How do I do it well? If I still have to get a senior-level approval for an award above — and choose your threshold because it varies from agency to agency — $100,000, $50,000, $250,000, $1 million, what advantage is there to these new simplified tools that I’ve got if everything’s still going to go through an enhanced level of review that’s imposed at the agency level? How does that play itself out? And where should I be spending my time and prioritizing to get that best deal? There’s so much more data. How do I use it? How do I make sure that it doesn’t create a conflict of interest, also? If I’m educating an AI model, how do I make sure I’m educating it appropriately and then using it in a way that it doesn’t create its own organizational conflict of interest or its own problems with inherently governmental? How do I make sure it’s not hallucinating?

Terry Gerton Who should be thinking about that training and who should be funding it since so many of these changes are centrally driven?

Emily Murphy  I know that GSA has been thinking about this. Clearly the Department of War, with the rebranding and renaming of the BAU to WAU, is thinking about training. The problem is time. You’ve got a workforce that has been under enormous pressure to get things out the door. And training isn’t something that happens … they lost over 40 days, they lost over six weeks of opportunity that they couldn’t go and take that training. And there is a backlog of work. Training, unfortunately, gets frequently put on the back burner at that point when it needs to be prioritized first so that you’ve got the ability to actually execute better on what’s waiting on your desk. But that’s easy to say. It’s a lot harder to do when your desk is overflowing with work.

Terry Gerton Contracting shops are a lot leaner after all the DRPs and downsizing. We’ve got lots of new confusing rules. Do you anticipate that this is going to pose a problem in terms of oversight and then potentially protests as this plays out?

Emily Murphy I think it is. I think it’s interesting. I heard the other day that it’s about 25% of the acquisition workforce that’s gone. I couldn’t point to the source of that statistic, but that’s a substantial reduction at a time when we’re not seeing a reduction in contracting actions or in spending. And when you’ve got different rules and different interpretations of those rules and guidance that can be changed regularly, that doesn’t have the same effect as a actual regulation, it leaves open the possibility that contracting officers or program offices or others can be interpreting things in different ways. And a difference of interpretation is ripe for oversight. And I don’t mean that in a in a negative way; that oversight can actually help highlight where you’ve got discrepancies if it’s done appropriately. It can also, though, turn into a game of “gotcha.” And for a workforce that’s already stretched pretty thin, playing “gotcha” with them just doesn’t seem very fair right now.

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Interview transcript: 

Jared Serbu Don’t need to dig into all of the details that went into the source selection here, but if you could give me, just give our listeners a minute or two on this new platform and what makes it such a step forward from the platforms it’s replacing, that would that would help us out greatly for the rest of the conversation.

Ryan Ehinger Yeah, and I could go ahead and give an industry perspective on that. And this is Ryan. So really back in the 2012, 2013 timeframe, we were looking to differentiate capability for the warfighter in terms of vertical lift capability by going twice as fast and twice as far. And a lot of that was under the future vertical lift program effort. And so we started with a demonstrator concept called the V-280 Valor. That really captured a lot of lessons learned from previous tilt rotor experience that Bell had, and it really leveraged that to fly a demonstrator in 2017, accumulate about 215 flight hours on it, and I think inform the Army on tilt rotor technology and requirements that could be met by that technology to support their eventual solicitation and down select of a tilt rotor for supporting the future long-range assault aircraft program.

Jared Serbu Great. Anything to add on that, Colonel?

Col. Jeffrey Poquette Yeah, it’s very similar in that the Army was looking for something that provided transformational speed and range over the current Black Hawk fleet. And then additionally, the government really wanted the aircraft to be an open system. So the ability to upgrade the aircraft in the future quickly, cheaply, without necessarily having to go to any one particular vendor. So the open system is another key part of the platform.

Jared Serbu Got it. And so at this point looking forward, the ask from the Secretary, as I understand it, is to get a prototype up and running by next fiscal year, which is pretty ambitious. So talk us through a bit some of the key things that you’re going to be doing to meet that schedule.

Ryan Ehinger Yeah, we’ve been laser focused on acceleration and getting a prototype out there next year. And so a lot of the work that we’ve been doing is taking the success that we had on the V-280 demonstrator, applying a lot of the items from that in terms of configuration and critical technologies, applying that to a design meeting the requirements for the future long range assault aircraft. And so what we’ve been working on with the government team is first and foremost establishing a foundation of an all digital design, incorporating using model-based systems engineering, but incorporating, as Jeff mentioned, the modular open systems approach. So a lot of the design work that we’ve been doing with the government to date has resulted in more than 90% of our engineering being released and a significant amount of work going on across the industrial base related to building hardware to support that first, and not just the first prototype, but the first six or eight prototypes that will be coming out of the program. But we’d look to complete that in early FY 27, that first prototype.

Jared Serbu Colonel, from the government side, what sorts of risks does that aggressive schedule potentially introduce for you, and what are some of the things that you’re looking to do to manage that?

Col. Jeffrey Poquette Yeah, I think initially when we were asked to accelerate, our concern was, okay, if we start working now while we’re still in the middle of the design process, the chance is always there that we could end up building a prototype that doesn’t do what we need it to do. The reason why we’re okay with that and are willing to accept some of that risk is exactly for the reasons that Ryan mentioned. The V-280 demonstrator gives us a lot of confidence in tilt rotor technology. We know Bell knows how to do it. The open system is something that they’re fully on board with. And then the digital engineering and the digital environment provides the government a lot of insight into the design itself as it’s occurring. Other things that we’ve agreed to do was allowed Bell to pursue some commercial best practices when it comes to safety of flight on some of the early prototypes and being able to leverage FAA certifications instead of Army airworthiness certifications, while in the background we’ll continue to work Army airworthiness. So that is a little bit of an elevated risk, but one that the Army was willing to accept. Some of the digital engineering and technical deliverables, we’ve deferred the actual delivery of the items. However, what we’ve decided to do is really work together as an integrated team. So my team of a hundred or so engineers very often are down there out in the Dallas-Fort Worth area, working side by side along Bell engineers. So we have the insight of working along the way. Bell has the ability to ask questions and make adjustments and they get feedback very quickly, as opposed to maybe earlier it was about handing over technical deliverables for very thorough reviews. So we’ve kind of accelerated our review process, other things. The supply chain is always a concern and the Secretary asked us to leverage the Defense Production Act. So we are engaged with the Army and soon to be the Department of War on how we can potentially get some elevated priority on our program when it comes to the Defense Production Act.

Ryan Ehinger Yeah, and I do think that approach is working well, and I do appreciate when people ask us the question about risk associated with acceleration because it gives us a chance to kind of walk through why I think we’re in a uniquely favorable position to accelerate. And part of it we talked about was the demonstrator and going 215 flight hours and all the data we were able to capture from that successful effort, but then also looking at the steps that we go through from early digital engineering and digital design where we have fly-throughs leveraging virtual reality and augmented reality. We bring the maintainers into that virtual environment and have them simulate maintenance of the aircraft very, very early in the design phase so that we don’t have discoveries, three, five, ten years later as we’re trying to sustain the platform. A lot of that gets baked in early. And then from the standpoint of getting to first flight and flight test activity, we spend a lot of time trying to get discoveries as early as possible in the process. And how we do that is by doing a lot of component-based testing, whether it’s fatigue testing, vibration testing, things of that nature at the component level. And then we integrate all of those components, aside from the structure, but all the systems, a pilot in the loop, all the software in a weapon systems integration lab. And we have that facility down in Arlington, Texas, and the pilot will fly a fully integrated set of systems on the ground for months and months and months, proving out the software and proving out the integration of these components before we ever step foot in an aircraft. So we get a lot of opportunity to reduce risk and learn these lessons early in the program before we’ve started making even some of those accelerated LRIP aircraft.

Jared Serbu Digital engineering’s come up a few times in the conversation so far, and I’m wondering if either or both of you want to give some concrete examples of some of the work that you’ve been able to do in that virtual world and save time that way versus things that, in a previous era, would have had to be done purely in a physical world.

Ryan Ehinger Yeah, just to give a couple examples and then I’ll pass it to to Jeff. But I mentioned the maintainers, and being able to have maintainers, in some cases it’s veterans that we’ve brought over from the services into Bell that have done this for their first career and now they’re spending their second career, so to speak, making sure we get it right. But they actually have virtual, I’ll say tools and toolboxes, and they work to maintain that aircraft. And they’ll come to the engineering team after a test run and say, look, I had to remove three things to get to the part I was trying to fix, and it gives us an opportunity to fix that and make sure that number one, keep things from failing, but if something does fail, let’s make sure it fails in a benign way and in a way that we can replace it and repair it in the field and as easily as possible. And the digital engineering, and I think Jeff will probably touch on this, it is an investment. And it’s an investment early on that allows you to also take all these digital artifacts as kind of one source of truth and use them to support your tech pubs and your manuals, and again that sustainment and logistics tail that the aircraft will have for decades to come. But it all goes back to that initial investment in digital engineering and that single source of truth. And I’ll pass it to Jeff.

Col. Jeffrey Poquette Yeah, we’re really proud of the fact that this program was born digital. So we are clearly leading the way for defense acquisitions. We’re a digital engineering pathfinder for the department. Like Ryan said, I think there’s perhaps a misnomer out there that the investment in digital engineering somehow means that you get to go fast while you’re designing. And I always say, look, this is an investment in time. So it doesn’t necessarily mean that we are designing faster. What it means is when we complete the design and then build it, you can actually test faster because there’s a lot more that’s right with the aircraft. You’re a lot closer to what you wanted to get. The model-based systems engineering approach has allowed us and allowed Bell to really come up with a design that we’re very confident won’t miss any of the key requirements. In the past, it would be hard to know whether you were going to miss satisfying a requirement until you got to test. And then if it happened to be a big expensive miss during test, then you’re now iterating in the test environment. The goal was to really iterate in this digital and MDSE environment such that when you build the prototypes, you can have a test program that’s half as long as a traditional aircraft test program that has occurred in the past. So that’s really what we’re getting at. MDSE and digital engineering go hand in hand. My engineers can go right to their computer and workstations and look at the design in real time. And that has never been able to be done before when you do things the old way.

Jared Serbu On that requirements piece, I’d love to hear you both talk through a bit about the extent to which, if at all, requirements have needed to be changed in order to meet that go faster directive. And if the answer’s no, tell us a bit about why not.

Col. Jeffrey Poquette I’ll take that one. Look, this aircraft is made up of hundreds and hundreds of requirements and they’re tiered into different buckets. None of the most important requirements to include things that are deeply important to the Army, like MOSA, have had to be trade off. Might we have to trade some weight, take on a little bit of extra weight to include some provisions to ensure that the aircraft is truly modular and can handle the SOCOM variant and handle the medevac requirement? Might we have had to make those kinds of decisions? Absolutely. Are there certain things in the requirements document that are deep down in the in the requirement that might not be on the first aircraft? Probably. But that’s not what we’re seeking. We’re not seeking perfection. The Secretary and the Chief made it very clear. We’re not trying to get it absolutely perfect. What we need to do is deliver transformational capability. That’s what we mean when we talk about the speed and range twice as far, twice as fast, and the ability to handle the MOSA architecture and the open system. If we get that, we’re going to have a very, very good first iteration of the aircraft. And by the same token, the open systems architecture will allow us to go in and upgrade anything that needs upgrading. When you go faster, you might have to trade off requirements. We haven’t had any big decision event like that yet, but it is certainly something that we might have to think about in the future.

Ryan Ehinger Yeah, and I would echo that. I think we’re very proud of where we’re looking relative to the requirements for the platform and the capability it will provide the warfighter. And I’ll just go back to the, I’ll say, head start we had relative to tilt rotor technology being being mature and giving us a good foundation to start with.

Jared Serbu Last thing here, and I don’t want to look too far down the road, but now’s the time to start thinking about these things obviously, and obviously you have been already thinking about sustainment, but specifically, what do things like that open systems architecture, having that engineering data, having all of that digital engineering data in hand, do for you, down the road when you get to a sustainment phase on a platform like this?

Col. Jeffrey Poquette I’ll take this one initially. So sustainment is one of the things we’ve been thinking about very early on in the program. When we went to our development decision, Milestone B, I would say nearly half of the very extensive and rigorous documentation we had to submit to the Army and the Department of War was focused on the lifecycle sustainment plan. So it’s very much a key element of the program. I would say one quarter of my office are logisticians that focus on things like training, on maintenance and that kind of thing. Ryan mentioned the digital environment, being able to look at the design through virtual means with virtual headsets or augmented reality, that kind of thing. That has given us the ability to provide feedback so we get it right the first time. And then having access to certain data rights allows the Army to write training so that the training meets the Army’s standards. It allows us to make decisions on what components we want to overhaul in the depot out there in Corpus Christi. Most importantly, I would say, is maintenance and ensuring that we have a good understanding about when parts will need to be replaced. I think all the work that Bell has done has allowed us to have a lot more insight into when components would need to be overhauled and replaced. Digital twins will be developed. So every tail number in the Army out there will have its own digital twin that will reside and can be accessed by my office so that if there is a problem in the field, my logisticians and former maintainers will be able to look at that digital twin and have a really good snapshot of what’s going on with the aircraft. And like Ryan said, it all comes down to having a single source of truth. In the past, documents would get shoveled over email, and eventually, inevitably, someone would end up with an out-of-date or not the current version of what you’re supposed to be looking at. This eliminates a lot of that churn, and I really see the sustainment of this aircraft is going to be a big part of why we call this aircraft affordable. As you know, sustainment, for the lifecycle of a program, we consider about 70% of the cost of the lifecycle of the program to be due to the sustainment phase. So it’s very important to us that we reduce those sustainment costs. And kind of final point here, you typically can estimate the sustainment burden of an aircraft based on its weight. And while the MV-75 isn’t especially light, it’s on the heavier side when you compare it to heavier lift aircraft like Chinook. We have a much, we’ve predicted through simulations and modeling that the sustainment is going to be much, much less than aircraft of its size and weight.

Ryan Ehinger Yeah, I think that’s a good point. And I would just say from an industry standpoint, programmatically and I’ll even say culturally, we’ve approached this clean sheet development in a different way that I think provides a lot more tools for the user, for the Army to maintain this long term. And some of the things that Jeff mentioned related to the correlation between weight and maintenance cost or weight and cost in general. I’d like to think we’re breaking some of those cost curves with this because of a lot of the tools that we’ve used, and quite frankly because of some of the newer technologies that are available today that weren’t available when some of the currently fielded aircraft were developed.

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Interview transcript: 

Terry Gerton You, I’m sure, paid very close attention to Secretary Hegseth’s speech last Friday on the arsenals of democracy. What was your takeaway?

Stephanie Kostro Thanks so much for asking, Terry. And not only was I listening with bated breath, I was actually in the room. And for any Hamilton fans out there, it was the room where it happened. There were roughly 250 folks in an auditorium on Fort McNair when Secretary of War Hegseth rolled out his ideas for transforming acquisition. And there was a lot to be said, Terry, he spoke for well over an hour, nonstop, no questions, just kept going. I would say it’s fair to characterize the audience as a rapt. We were waiting for everything he had to say. There were three main topics he wanted to talk about. One was reforming or transforming the requirements process. The second was transforming the acquisition process. And the third was reforming foreign sales processes, and that’s including both foreign military sales and direct commercial sales. So all of that were key topics for everyone in that room.

Terry Gerton Well, let’s take those one by one and the requirements topic, of course, came up first. He talked about the end of the JCIDS and a realignment of the JROC. What did you take away?

Stephanie Kostro So the requirements process has long been an issue of great concern to industry, as well as from my time as a congressional committee staffer on House Armed Services Committee, talking about by the time you go through the several years to validate a requirement, it may actually be obsolete by the end time you roll out of that process. And so the idea of transforming the requirements process has been long anticipated. And I really appreciate what the secretary said regarding being flexible. Going for combining the requirements process with the acquisitions process so that it’s modular, that it does leverage available commercial technologies and products, that it really looks forward to getting a faster delivery times and getting weapons both developed and then deployed and in the hands of the warfighters who need them. So that was very much appreciated. No one, I think, will cry over the demise of JCIDS, but the question becomes, what rises to replace it. And, of course, the under secretary of war for acquisition and sustainment owes guidance on this issue to be released 45 days from the date of that directive, and then the military services have to come up with plans of action within 60 days. So the next two months are going to be very, very busy.

Terry Gerton All right. Part two was a reform of the acquisition process itself. The headline here is the elimination of PEOs and the replacement of them with program acquisition executives, right?

Stephanie Kostro PAEs, that is correct. So I think the other piece of this that goes hand in hand with requirements transformation is the reform and the transformation of the war fighting acquisition system, as they call it now, not the defense acquisition system. And it really focuses on the war-fighting piece of it. I think what I took away, and he said this a few times, Secretary Hegseth, and I’m going to quote him here, they want to increase acquisition risk in order to reduce operational risk. And for me that means putting flexibility in the hands of contracting officers and those in the programs to pursue modular, multi-source solutions throughout the development of a requirement, or rather the development, of a capability. And then actually to get it into the hands of the warfighter. They want to reward and incentivize speed and performance over bureaucratic processes. And that is music to a lot of industry’s ears.

Terry Gerton So a big part of that speed increases buying commercial first. Secretary Hegseth said they are willing to settle for 85% functionality and work toward 100%.

Stephanie Kostro So that was, I think, an interesting turn of phrase for him, mostly because he did say a few times to increase acquisition risk to reduce operational risk. And of course, you’re going to have to have a balance there of what is that 85% and what 15% are you going to be missing? And so I think as they move forward with embracing modularity, fostering competition and pursuing multi-source procurement, that you do want to move fast to contract. He also did mention not over-relying on the testing element. And so we’ve seen that in previous memos, particularly back in May, where Secretary Hegseth signed some memos about operational test and evaluation and streamlining that process in those offices. And so what I also found interesting is talking about putting contracting officers within the program offices too, so they can sit alongside the requirements developers and the folks who are responsible for fielding the capability, so they get a better sense of what the requirements are and how to incorporate those into contracts, leveraging commercial technologies as much as they are available.

Terry Gerton I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Stephanie, let’s touch on topic number three quickly, the foreign military sales reform.

Stephanie Kostro Part of this reform, or they keep saying transformation, not reformation, so I’ll key into that, transforming what military sales looks like. We’ve had lots of conversations, and I was at the Pentagon, in particularly the European office, talking with our allies and partners about how they could access U.S. solutions, and it always was a multi-year process to go from all of that pre-work where we talk about requirements to a letter of offer and acceptance at the end of it, and actually delivering the materials. It’s multi-year and it is so frustrating, particularly when companies want to compete with non-U.S. companies who don’t have the layers of bureaucracy. And so I look at the reorganization that the secretary laid out, that is to move the Defense Security Corporation Agency and the Defense Technology Security Administration, so I’ll say DSCA and DITSA, which is how we call them, over to the acquisition undersecretary. I think those are smart moves if in fact you want to speed up the fielding of compatible and interoperable equipment with our friends and allies. That said, I think it’s important to note that we need to incentivize folks in order to speed those situations up. And one thing that works really well, and it’s something that PSC has talked about in the past, is if you’re going to have an assistant secretary in a military service responsible for acquisition, and each of the military services has that individual, you need to put into their performance metrics foreign sales. They need to be measured on how well they are doing on that front as well. And that is something that I will be talking to the Pentagon folks and our CEO at PSC, Jim Carroll, will be taking to his Pentagon friends as well regarding how to actually incentivize this behavior.

Terry Gerton So this speech on Friday was the tip of the iceberg, much remains to follow in terms of detail, right? What will you be watching for there?

Stephanie Kostro I will be watching for the number of times and the depth of availability of Department of War individuals to speak with industry. This needs to be a collaboration. When you’re talking about speeding up requirements and speeding up contracting and speeding up foreign sales, you really need to talk to the industry that will be responsible for that. One thing that I did take away from the speech on Friday was an openness for profit. And I say that because a lot of times industry gets demonized for making a profit. But what happens is when you have profits, you can actually turn them back into the company and then make investments in future opportunities. And so if companies are allowed to make a profit, then they can have more money to invest in their companies and their technologies and actually move the ball forward faster. And so as we go through this, I will be looking at opportunities not only to comment formally through written comments, whether that’s through the Federal Register or the System of Acquisition Management, or SAM.gov, but also having round tables. We’ve offered to Department of War individuals, we at PSC are happy to schedule and facilitate a round table to have industry speak candidly with their government partners about how to make this happen faster, better and more efficiently.

Terry Gerton So you’d say that the speech was pretty well received by the folks in the room, then.

Stephanie Kostro I would say it was very well received as a rhetorical device. The proof is always in the pudding. The devil is always in the details. I think as we move forward, there will be more enthusiasm. Enthusiasm will grow, but it really depends on what those reports look like, that guidance from the undersecretary in 45 days, the military service plans of actions in 60 days, and how much input it reflects from industry. I think there is generally a recognition across the board, industry, executive branch and Congress, that something needs to change here. And in fact, a lot of what was in the speech reflected things that are under negotiation in the National Defense Authorization Act conference right now. And I think we are all rowing in the same direction. And I hope we stay doing that.

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Interview transcript:

Terry Gerton From printed circuit boards to drone assembly, the Army’s organic industrial base is evolving to meet future combat needs. Colonels Brett Ayvazian and James Crocker from Army Materiel Command say modernization is underway, but aging infrastructure and supply chain fragility remain key challenges. They joined me at AUSA’s annual conference to discuss the situation…starting with a general description of the Army’s industrial base.

Col. James Crocker I think the Army’s industrial base is our organic ability to repair or manufacture things that are necessary for our Army to fight and win our nation’s wars.

Terry Gerton And some of these are Army-owned/contractor-operated, some of them are contractor-owned/contractor-operated?

Col. Brett Ayvazian Yes, ma’am. Government-owned/government-operated, government-owned/contractor-operating, and then part of the further broad defense industrial base is the contractor-owned/contractor-operated.

Terry Gerton Both of you obviously have direct personal experience here and you’ve been in combat operations, you’ve served at all kinds of different levels. From your perspective now, at the headquarters of Army Materiel Command, would you say that the Army’s industrial base is adequate to meet the demands that we face both today and in future operations?

Col. James Crocker I would say that our organic industrial base is evolving.  I think it’s evolving from what we needed in the last 15 to 20 years to what we need in the future. For my experience at Tobyhanna Army Depot, we were very focused on communications electronic command systems that would come in and do repairs on those systems. Very rote system; so many trailer-mounted communication things that come through a year, you’d refurbish them, put them out of the field, and meet those requirements that are coming out of specifically Operation Iraqi Freedom and Operation Enduring Freedom. Today we don’t see that as much of a requirement inside Tobyhanna. So we see more of a move towards a technological requirement. In the last year, Tobyhanna has stood up its surface-mount technology printed circuit board manufacturing line to get after those things that are not necessarily easily available in the supply chain and try to enhance readiness that way. Focusing more on working with our PEOs and our PMs to work on the front side of the logistics cycle, like producing all of the mounting kits for all of our stuff going into next-generation C2. Things like that, I think, are where the future of our C5ISR depot are going. Because we may not be having to do overhauls that we did in the past, because of the cost are so cheap on those equipment, that there’s not really the benefit to do the overhauls.

Terry Gerton So tell me more about that in terms of how that’s changing the repair strategy for the kinds of equipment that Tobyhanna supports.

Col. James Crocker In your communication systems, you’re seeing — obviously, we’re still repairing shelters, right, there’s always going be a need for shelters that go in the back of Humvees and 5-Tons, and that’s a very vibrant repair line. But you may not be repairing all the components that go inside that shelter, right? You may just be refitting a rack, resetting up to a different configuration to meet the next requirement that the Army needs for the next evolution of what our communications architecture will look like.

Terry Gerton In the ammunition space, how are we doing there? We’re hearing a lot about ammunition inventories and supply. From your experience at Blue Grass, how are doing?

Col. Brett Ayvazian So ma’am, from the storage and distribution perspective and refurbishment at Blue Grass itself, I think we’re well-postured for where we are. However, our infrastructure definitely needs to be upgraded and updated. I mean, we’re still operating out of World War II-era facilities with just poor, old, degraded buildings. And so part of the whole OIB modernization effort is, over 15 years, to bring us up to date and up to speed to where we need to be as far as, you know, manufacture, refurbishment, storage, distribution, DMIL. So we’re on the path to get there. The last couple years that we’ve been in the OIB modernization space, the first portion of that is trying to upgrade our facilities so that we can modernize, we can get new lines, we can get robotics in there, we can expand our capacity. One of my subordinate units was Scranton Army Ammunition Plant, and they make the 155-millimeter metal parts.

Terry Gerton I’ve been to Scranton. It’s like a time travel experience.

Col. Brett Ayvazian It is. The building was built in like 1908 and it’s an old railroad car refurbishment place. When you walk and you still feel like you’re in the 1920s and 1930s. And one of the things that they’ve done there is they removed some of the older lines that they use to produce other munitions to put in additional lines to double their capacity for 155-millimeter production. So, you know, with the investments in that, and then as well as the investments where, at Blue Grass for example, they modernized one of their 105 millimeter-round refurbishment lines to additionally add on the capability to refurbish 155 millimeter as well. So we’re on the path. We’ve got a long way to go. It’s going to take a lot of time, a lot money, and we’re almost there, but we’re not close

Terry Gerton Our NATO allies really have modernized their ammunition manufacturing capacity significantly, really — 21st century capability. How does that mismatch in capacity and fabrication or manufacturing, how does that play out in operations?

Col. Brett Ayvazian Well, to be honest with you, I’m not so familiar with our allies and what their production capability and capacity is, but what I can tell you is that we have definitely played a big role in helping supply and double our production and with some of our government-owned/contractor-operated and contractor-owned/contractor-operated places, we’ve definitely expanded to be on point to double that production and make sure we meet up those needs to help not only ourselves, but our allies as well.

Terry Gerton One of the ways that we help close capability gaps in the industrial basis through partnerships, right? With OEMs, with other manufacturers, folks in various stages of the supply chain. Talk to me a little bit about how that’s playing out both in the depots and then in the ammunition plants.

Col. James Crocker Yes, I think at Tobyhanna, we had a very vibrant public-private partnership program. So I think we’re about 52 active P3s at Tobyhanna today, which is quite a bit. A lot of them for DMIL operations for communication security devices, but also some really good ones where we’re helping organic industrial manufacturers produce components of their systems to get in the hands of our soldiers. So like a P3 for being able to do weldments or do manufacturing. We’re trying to get into some space in some circuit cards up there today where we can help meet some reduced backlog for OEMs so that they can go into. So, places like that is where we really see a lot of benefit for our organic industrial base. Brett’s been working a lot with Dr. Hill on trying to revitalize P3s, or try to expand P3s inside the organic industrial base and really bring some of that greater defense industrial base cooperation together at our organic facilities.

Terry Gerton That’s got to help a lot with training the workforce as well on all the different kinds of technologies.

Col. James Crocker Absolutely, especially when we have — we’re in periods right now where we’re going through modernization. You don’t see as many refurbishments going through programs. And what that lets us do is really supplement our workforce so we can maintain that technological skill for human capital, so that when the Army does bring in the next sets of systems, those skills are still there and ready to move on to the next thing. So that’s really key for us.

Col. Brett Ayvazian Yes, ma’am, and to add onto that, one of the things that we’ve done at AMC headquarters in the last 60 days is conducting an assessment directed by the Secretary of the Army to understand where we are as far as our capability gaps, our capacity gaps, and then come up with recommendations on how to move forward. And part of that is we’ve decided that in certain places, where it makes sense, we’re going to explore partnering with industry to further grow public-private partnerships and augment our workforce. For example, one of the places, we’ve got a ton of underutilized storage capability. Ammunition bunkers, inside warehouses, outbound storage, container storage. So what we’re trying to do is partner with third-party logistics companies that have customers that are looking for short-term storage. We will partner with those companies and have them store and we will actually look to do the actual warehousing and distribution of that so it keeps our workforce fresh. And another example of something like that is we’re looking at potentially getting into partnerships with civilian companies that have heavy trucks and running them through our lines and doing some of the maintenance on it, so while it’s not doing military equipment, it’s still keeping those mechanics and those artisans still turning wrenches, still fresh in their craft, relevant and moving forward.

Terry Gerton Any other big observations from that assessment?

Col. Brett Ayvazian Well, at this point, the assessment’s not complete, ma’am, so what I can tell you is we owe an outbrief. We’ve done an interim. We owe an outbrief to the Army senior leadership, but we’re well on the way to producing this. We’ve got a backbrief here coming up to the end of the month to the Army Materiel Command commander, and then furthermore, the Army senior leadership.

Terry Gerton Got it, got it. We talked a little bit about technology coming into the depots. Technology, of course, is also coming into the end items that the Army is using, everything from unmanned systems, to satellites, to microelectronics. How are you adjusting — how is technology affecting both the work of the depots and arsenals, but also the kinds of equipment that you’re having to modernize and take care of?

Col. Brett Ayvazian I think you’ve got some great experience there with the SkyFoundry and that whole initiative.

Col. James Crocker Yeah, twofold for that. So the first point is from what we saw in the Tobyhanna workforce was actually a really large shift in what we consider floor laborers or our wage-grade employees moving towards more towards technical skills like engineers they require. Especially when you look at what Tobyhanna is doing for the future, more SATCOM-based work, managing everything from uplinks, doing testing and test environments before we deploy them on SATCOM systems. So a lot more complicated, a lot more software and digital requirements on our workforce than what we’d traditionally seen 15 or 20 years ago, for sure. And that seems to be a prevailing trend. Microelectronics, same thing. Getting into circuit card manufacturing, a lot of high-end electronics repair, and less reliance on what we would consider the old refurbishment labor in the past. Recently, AMC has taken on the initiative called SkyFoundry, and SkyFoundry is moving the organic industrial base into a SUAS manufacturing capability. The idea is over this next year to rapidly expand out five of our sites to do a distributed manufacturing model where we can produce at scale tradable UAS systems for our soldiers and support the department’s requirements. And so that’s a completely different kind of construct, different way of doing business. So instead of having a one-site set for one system, like at JMTC, we would use their advanced manufacturing capabilities to make the frames or the chassis. At Tobyhanna Army Depot we do the internal electronics and the brush motor manufacturing, and then we’d ship all those parts right over to Red River Army Depot, who would do the assembly of them, do the final test, they’ll make propellers and they’ll assemble batteries there for the final components and ship off to their soldiers. And then at Blue Grass Army Depot, where Brett commanded, we’re going to set up an innovation hub. And that’s a place where we do soldier-centered design, taking the feedback from the field, bring that in, and inform either a government design, or if it’s a public-private partnership where a company owns that design, we can give them that direct feedback. They can go to the innovator on it and say something that works great in CENTCOM, but it doesn’t work good in the Arctic. They can say, hey, we need to polarize this, get it ready for cold weather, and be able to up-degree that design for a one-off variant for what we’re going to ship up to that region, right? And we think that’s going to be very powerful for us. The folks at Blue Grass are doing a lot of great things on some AI, ML work on drones already, working with PEO-EIS. And so we’re just going to use that as a springboard to move forward. So really trying to use the strengths of our organic industrial base and not start from the ground up to move this a lot faster.

Terry Gerton That is fascinating. You mentioned AI, I’m just curious, how is AI changing the planning for Army logistics, especially at the depots? Are you doing more with predictive analytics?

Col. Brett Ayvazian So I think we’re just getting started on that. The Secretary of the Army and the under and the deputy just had recently an AI TTX, or tabletop exercise, and we’re looking and exploring options on how do we actually incorporate AI into our depots. Because again, we still operate in early this-century mode, at best, when it comes to data and data management and tracking and sorting everything that we do in our inventory and in our processing. So that’s one of the things that we’re exploring in looking at public-private partnerships to bring in companies that can help us take a look at how we might digitize the entire OIB, creating digital twins of the OIB so we can run simulations and we can factor in different data bits and data points so that we can better optimize our operations.

Col. James Crocker That’s a good point. And so for OIB modernization, one of the things we’re having to look at, it’s like SkyFoundry, and as we build in, we’ll digital twin that line before we install it, right? And so we may not be able to afford the automation in year one, but in year two, year three, we’ll have a cutout where we can go in and do automation at that point in time. You know, automate where it makes sense, keep manual where it doesn’t, right, but have those inflection points so that the line is designed to be able to do that, which is different than the past. And then once you have all that data, across the organization, based on the LOEs under Ms. Stephanie Hoagland’s OIB Modernization Task Force is to do automation of our network. So building the industrial control network necessary to control all those machines. Do all the fiber runs to make sure we have, you know, NIPRNET throughout the entire depot so that all your CNC machines, your lathes, your water jets, things like that. We can actually pull the data off there, look at it, use data-informed decisions when it comes to maintenance. Do predictive maintenance on those things and say, hey, when we saw this the last time, this is what went wrong, let’s go and order to that part now so we can fix it before it breaks, and we don’t have line stoppages. But also be able to look at capacity on those lines and say, “all right, we think we have capacity excess at Letterkenny, Tobyhanna, ship your excess workload down there,” and so Letter Kenny can execute that. Because it’s only a couple hours away, right, reducing shipping costs; they’re so close they should be mutually supportive. Those kind of decisions are what we’re looking at for that industrial control network and the ability to leverage that data. And then once we have that and we have good, clean data, then we’ll be able to use the artificial intelligence to help us make very, very risk-informed decisions.

Col. Brett Ayvazian And I can add on to that just one piece on the human workforce, human capital piece. As we digitize, as we start implementing more AI, we may not necessarily need workers on certain positions. But then that’s where we would actually retrain them and upscale them to focus on other areas so that they stay maintained, they stay operated, and we develop that workforce in that manner.

Terry Gerton I’m really glad to hear that. The AMC workforce is a national treasure, I think. I want to follow up here though, as we talked about the things that we’re doing to modernize the organic industrial base. Col. Crocker, I know you’re working with supply chain analysis right now. What are you finding in terms of the Army supply chain? Is it fragile? Does it have gaps?

Col. James Crocker There’s things we have to fix for sure, and so one of the initiatives I’ll talk about is our advanced manufacturing. So recently Lt. Gen. Mohan was granted authorities from the Secretary of the Army to qualify advanced manufactured parts, which is a game-changer for us. It lets us have another route to bring stuff in. So we’ve got, in fact at the Warrior’s Corner tomorrow, Brig. Gen. Behn from TACOM will talk about advanced manufacturing with our NIAR rep, who’s the partner we’re using on this, and so we’re trying to go fast. They qualified 60 parts in 60 days. And so the TACOM CG will talk about that, I won’t steal her thunder, but it’s a way for us to start getting parts faster, use our advanced manufacturing database so that when we get those parts, we can either get them out to a manufacturer or we produce them organically if we have the capacity to handle it, and that they’re already qualified parts that we know will work on our equipment, right? And so we’ll start with risk buckets, what’s low risk, what’s moderate risk, what’s high risk? Solve all the low risks and moderate risks and worry about the high risk later, right? And that way we can start solving readiness issues today as opposed to trying to figure out what the high risks will get us to. That’s a great initiative, one of the ways that we’re trying to help that supply chain.

Col. Brett Ayvazian And I agree in addition to that, again, our OIB workforce is so talented and they have such capability that they have been able to take a look at some of those long lead-time parts. They’ve been able reverse-engineer some things and have the capability to produce it themselves internally and like James just said, we’ve been granted the authority to go ahead and certify those parts, which gets us the parts that we need in the hands of the soldiers to fix the equipment a lot faster.

Col. James Crocker One last thing I’d bring on to that too, when you start talking about the more advanced supply chain — on the Q53 radar, one of the systems we maintained at Tobyhanna, there was a circuit card that was never intended to be repaired on it. It was made to be a disposable, supposed to be readily available, relatively low cost, and we found out because of post-COVID production lines, there’s like a two-year backlog on these things. So working with the OEM, no P3 involved, just working with Lockheed Martin, who was the OEM for that machine, they helped us figure out what it would take to do component repair on that, and so we can turn them around to five or six weeks as opposed to two years, right? And so not really a cost savings for the Army. But working with that strong defense industrial-base partner with the organic depot, it lets the manufacturer focus on manufacturing and getting the stuff they need out for the PM, but enabling the depot to be that source of support to make sure that we’re able to maintain our readiness. Things like that are important and what we’re going to have to continue to do inside our organic industrial base.

Terry Gerton Well, that seems to lead right into my last question, which is if the fight breaks out tomorrow, is the industrial base ready to scale at speed to support a major global conflict?

Col. Brett Ayvazian Absolutely. We’ve got the workforce, we’ve got the space and we’ve got the partnerships with industry to help us surge where we need to. Now again, as far as being in the modern facilities, we’re going to get there. It’s going to take us a little bit of time, but we’re ready to fight tonight.

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As Congress hammers out the final version of the fiscal 2026 defense policy bill, Democratic Sen. Elizabeth Warren is putting pressure on a leading industry group to stop opposing bipartisan right-to-repair efforts aimed at giving the Pentagon greater control over fixing its own equipment.

In a letter to the National Defense Industrial Association, the Massachusetts senator called the organization’s opposition to reform proposals in the House and Senate versions of the legislation a “dangerous and misguided attempt to protect an unacceptable status quo of giant contractor profiteering.”

“Your organization’s attacks are based on unproven conjectures and self-serving projections, making clear there is no real basis to oppose the defense right-to-repair effort other than to protect profits of some of the largest defense contractors in the country,” Warren said in the letter.

The reforms aim to help the Defense Department obtain more technical information to allow troops to repair their gear in theater, enhancing readiness, saving taxpayer dollars and strengthening innovation.

“NDIA’s last-ditch efforts to oppose commonsense and bipartisan legislation that is a Trump administration priority appears to be a desperate attempt to cling to a status quo that makes big defense contractors billions of dollars a year at taxpayer expense. Instead of fighting reform efforts, NDIA should commit to working with DoD to protect service members and promote a healthy and competitive industrial base,” she added.

The military services have long faced contract-imposed restrictions on how they can repair and maintain equipment and weapons, leaving them dependent on original manufacturers to conduct necessary fixes in the field, which is costly and time-consuming. 

Army Secretary Dan Driscoll, for example, recently pointed to a Black Hawk helicopter part to show how contractor restrictions drive up costs. The original equipment manufacturer refuses to repair or replace a small screen-control knob that grounds the aircraft when it breaks — forcing the Army to purchase an entire new screen assembly for $47,000. Driscoll said the Army could make the knob for just $15.

The right-to-repair issue has been gaining momentum and bipartisan support from Congress — and both the House and Senate included provisions in their versions of the 2026 defense policy bills. 

The House version of the bill includes a Data-as-a-Service Solutions for Weapon System Contracts provision, which would require DoD to negotiate access to the technical data and necessary software before signing a contract. That includes detailed manufacturing or process data, digital networks and models, software-related information, and operational and training information — all to be accessible as a service through various methods like online, in person or via machine-to-machine encryption.

Meanwhile, Senate lawmakers included a provision in their version of the annual bill that would require contractors to provide detailed instructions for repair and maintenance. 

“The Defense Secretary may not enter into a contract or agreement for the procurement, sustainment, or subsequent modifications of covered defense equipment unless the contract or agreement requires that the contractor deliver, or offer as a negotiated price option, Instructions for Continued Operational Readiness to the secretary upon delivery of the equipment,” the provision states.

The contractor would have to provide the department with the rights to diagnose, maintain and repair the equipment — and the department could withhold payment to the contractor until the company delivers those instructions. 

NDIA argues that the “instructions for continued operational readiness” that Congress wants DoD to have include “data, tools and software for operations, maintenance, installation and training, which could include sensitive and proprietary technical and manufacturing data and IP developed at the contractor’s private expense.” The group warns the proposal would allow DoD to provide those parts, tools and information to any authorized third-party contractor, including a company’s direct competitors under this proposal. 

In its white paper, NDIA said these efforts will “hamper innovation and DoD’s access to cutting-edge technologies by deterring companies, including traditional contractors, nontraditionals, and small businesses, from contracting with the DoD over concerns of forcing disclosure of IP; increasing legal, safety, and compliance risks; and introducing contractual and licensing conflicts.”

Some stakeholders, however, remain unconvinced.

“I’ve talked to folks that crafted the Senate language, and they don’t agree with that characterization at all. We’re almost dealing with perceptions here. I don’t see any real separation between the objectives in the House or in the Senate versions, but it’s in the particulars on how they do it,” Jerry McGinn,  the director of the CSIS’ Center for the Industrial Base, told Federal News Network.

In her letter to the industry group, Warren accused NDIA of “attacking these reforms with vague and threatening claims that don’t stand up to scrutiny,” including assertions that right-to-repair efforts would “hamper innovation.”

“The opposite is true. Small businesses have said that a defense right to repair law would create new business opportunities in the defense industrial base, not deter them from doing business with the military…Embracing competition will only grow the industrial base further,” Warren said.

“Your argument that such a right would deter companies from working with DoD is not supported by reality and appears to be a late-in-the game effort meant to confuse and scare members of Congress and muddy the terms of the debate,” she added.

In April, Defense Secretary Pete Hegseth directed the Army to incorporate right-to-repair provisions in all new and existing contracts as part of the service’s sweeping transformation initiative. 

Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said the debate is just the latest iteration of the government’s decades-long tug of war with industry over intellectual property and data rights. Ultimately, those issues need to be resolved early in a program’s life cycle and not moments of crisis.

“It is true that there have been very difficult negotiations between the parties when the government has sought data it believes it needed. Historically, the government has too often treated IP and tech data as a zero-sum game, demanding access far more broadly than needed. Meanwhile, industry has sometimes been overly zealous in protection of its IP and tech data rights. The lack of trust is real and endemic,” Soloway told Federal News Network.

NDIA declined to comment and referred questions on the matter to their aforementioned white paper.

The post Senator accuses defense industry of blocking Congress’ right-to-repair reforms first appeared on Federal News Network.

© (Photo Credit: 1st Lt. Ryan DeBooy)

While delivering capabilities at speed is at the core of the Defense Department’s acquisition system shakeup, the department’s top acquisition official said the Pentagon is not “mandating speed.”

“We’re continually going to be dependent on the judgment of program leaders who are executing these programs to understand where does the need for speed balance with the risk that we would undertake to cost and/or performance of the system,” Michael Duffey, undersecretary of defense for acquisition and sustainment, told reporters Monday. 

Last week, Defense Secretary Pete Hegseth announced a series of initiatives to overhaul the department’s acquisition process as part of what he described as a broader war on Pentagon bureaucracy. Key changes include prioritizing a commercial-first approach, cutting red tape, increasing competition and bringing more commercial firms and nontraditional contractors into the defense space and transitioning program executive offices (PAO) to portfolio acquisition executives (PAE), which would give these new portfolio officials greater authorities and responsibilities for requirements, resourcing and acquisition.

Most of the changes Hegseth unveiled last Friday are similar to measures currently making their way through Congress.

In the Nov. 7 memo, Hegseth emphasized that speed will be at the center of this sweeping transformation the department is embarking on.

“The core principles of this transformation are simple: instill the warrior ethos in the acquisition workforce and enterprise, inject a sense of urgency and relentless focus on speed by empowering those directly responsible for delivery to make and own decisions, cut through unnecessary layers to focus the [Warfighting Acquisition System] on speed, accountability and mission outcomes, and prioritize flexible requirements and resource trades to enable timely delivery at the speed of relevance,” he wrote in the memo. 

Duffey said while speed to capability delivery is key, given constant budgetary irregularities, his focus is on making the most of the department’s budget — optimizing the system to deliver the best capability at the greatest speed for the lowest cost.

“Those are the parameters we operate in, and that’s what we intend to empower the workforce to make the best judgments going forward,” Duffey said.

Portfolio acquisition executives, Duffey said, will be the ones responsible for striking the right balance between speed and risk, deciding when to accelerate and possibly cut corners to achieve speed or when to delay program delivery.

“We’re hoping to provide the flexibility to the portfolio acquisition executives to be able to move money around and to trade requirements. There’s certainly no question about the emphasis on speed but recognizing that there’s a need for judgment and flexibility in that triangle of cost schedule performance,” he said.

“One thing we’re doing around here nowadays is we’re now saying schedule performance cost instead of cost schedule performance just as a way of emphasizing the fact that speed is priority amongst us,” he added.

It’s unclear whether these portfolio acquisition executives will be the ones making that call — Duffey said the department is still working out those implementation details. “I think what you’ll find is there will be circumstances where they need to have a broader conversation, and there will be circumstances where the threshold will allow them to make that decision on their own,” he said.

Along with Hegseth’s “Transforming the Defense Acquisition System into the Warfighting Acquisition System to Accelerate Fielding of Urgently Needed Capabilities to Our Warriors” memo, the department also released the acquisition transformation strategy — five pillars laid out in the plan include expanding the industrial base; empowering the acquisition workforce to deliver at speed; introducing greater acquisition flexibility through cutting regulations and processes; developing high performance systems; and improving lifecycle risk management. 

Hegseth’s memo already directed the services to begin carrying out a number of key initiatives that emerged from those five pillars.

One of the changes the department seeks to implement is replacing what it calls “redundant and excessive” studies like the Analysis of Alternatives (AoA) that the strategy says delays the start of programs. The process, which takes place early in the acquisition process and is mandated by Congress, is designed to compare operational effectiveness, suitability and life-cycle cost of alternatives. 

The strategy calls for modifying those processes and providing “more rapid and impactful assessment of commercial solutions, existing technologies, and competing prototypes as a preferred approach to the extended document analysis.”

“I think that we can learn more from experimentation and prototyping than we can from an analysis of alternatives. We recognize there may be exceptional circumstances, specifically when it comes to large-scale weapon systems where we may need to do a study of what an alternative might be. But our intent is a heavy focus on prototyping and experimentation as the best learning and best connected to the art of cutting-edge technology,” Duffey said.

The post Speed is central to DoD sweeping acquisition reform, but not a ‘mandate’ first appeared on Federal News Network.

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