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Pentagon To Create 'Technology Offsets,' Encourage R&D Spending

Jun. 14, 2014 - 03:45AM   |  
By MARCUS WEISGERBER   |   Comments
Encouraging Investment: Deputy Defense Secretary Robert Work steps off a V-22 Osprey as he arrives to make remarks at a conference of the Aerospace Industries Association in Williamsburg, Virginia, on May 22.
Encouraging Investment: Deputy Defense Secretary Robert Work steps off a V-22 Osprey as he arrives to make remarks at a conference of the Aerospace Industries Association in Williamsburg, Virginia, on May 22. (Glenn Fawcett/US Defense Department)
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WASHINGTON — Newly installed US Deputy Defense Secretary Robert Work has launched a major push to encourage industry to invest in capabilities the Pentagon believes will give it the edge on the battlefield, Pentagon sources said.

Work has already started sharing his vision for what he is calling “technology offsets” both inside the Pentagon and in meetings with defense industry executives. He is expected to articulate his vision in the coming weeks and months, sources said.

The deputy secretary’s focus is making sure the US military keeps its strategic advantage, even as the defense budget contracts, those with knowledge of the plan said. He is also pushing for the Defense Department to gain a greater understanding of the capabilities possessed by potential adversaries.

During a May 22 meeting with the defense industry CEOs organized by the Aerospace Industries Association in Williamsburg, Virginia, Work spoke of two major technology offsets that have allowed the US to remain an uncontested superpower since World War II: the development of nuclear weapons and networked, precision-guided munitions. Now, he is focusing on the next game-changing capability.

As part of technology emphasis, DoD is looking to introduce more innovation into acquisition plans and practices for its Better Buying Power — procurement improvement — initiatives, Byron Callan, an analyst with Capital Alpha Partners, said in a June 11 note to investors.

“That might be good for some firms that embrace change and risk but not so good for those who don’t, or can’t manage it,” Callan wrote.

Work — a retired Marine Corps colonel and former Navy undersecretary who became deputy secretary on May 5 — began exploring these tech offsets last year when he was CEO of the Center for a New American Security (CNAS) in Washington.

The think tank just completed a review of the global defense industry led by Bill Lynn — CEO of Finmeccanica North America and a former deputy defense secretary under Robert Gates and Leon Panetta — and retired Adm. James Stavridis, dean of Tufts University’s Fletcher School of Law and Diplomacy.

Work’s technological offset initiative will serve as guidance to the defense industry, which has been pressured by Frank Kendall, the Pentagon’s undersecretary for acquisition, technology and logistics, for nearly a year to invest more in research-and-development (R&D) projects.

Companies have argued that DoD has needed to better articulate its long-term technology strategy so R&D investments are not made in vain.

“It’s really hard for industry to invest right now when they don’t know what the future holds,” one industry source said. “What great things are out there for companies to invest in and can they depend on those programs being there in five years after they’ve invested millions of their own dollars ... on developing the technologies?”

As defense business shrank in recent years, many firms have reduced their internal R&D work. With uncertainty looming indefinitely over federal spending levels, companies argued DoD needs to better articulate its future needs, so they know where to tailor investments.

Marillyn Hewson, Lockheed Martin’s chairman, CEO and president, said on June 9 that her firm plans to boost its internal R&D spending by more than $30 million this year from the $700 million it spent last year. But despite the increase, the company’s investment in these types of projects is still lower than the $822 million it spent in 1999.

Companies are encouraged that Work, so early in his tenure, took the time to come speak to with them about his tech offset plan, the industry source said.

But, Lynn and Stavridis argue in the CNAS report that the defense industry is moving too slowly to adjust to trends in technology and security.

Global defense companies should import and adapt more commercial technology into military weapons of the future, Lynn said at a June 11 CNAS conference.

“To maintain our technological edge, what you’re going to have to see is the defense sector is going to have to become more an importer [of commercial technology] than we have in the past,” Lynn said. “The balance has been more toward export.”

Historically, defense companies have developed military systems — such as GPS and the Internet — which were then made available commercially.

“The model was to develop things internally and then put them out [commercially],” Lynn said.

“We still need to do that in some cases, but in many more cases we’re going to have to pull commercial technologies in and militarize them and operationalize them,” he said.

The Pentagon is more often using these types of technologies, such as 3-D printing and IT systems, allowing troops to use smartphones to view real-time reconnaissance information.

In the past five years, Lynn said the commercial content in defense acquisitions has risen from about 10 percent to about 30 percent.

While the jury is still out on what types of technologies will give DoD the advantage in the future, experts say cyber tools will certainly be on the Pentagon’s wish list of future capabilities.

Lynn said cyber, unmanned, biology and nano technologies are among the capabilities that will shape the future.

Traditionally, when the military has downsized, leaders have invested in technologies they believe can be game changers, said retired Marine Gen. James Cartwright, now with the Center for Strategic and International Studies. Technologies such as directed energy, cyber, electromagnetic pulse and rail guns could be those kind of game changers, he said in May.

Arati Prabhakar, director of the Defense Advanced Research Projects Agency, said in May that her agency is coming up with “powerful new approaches” to space systems, weapons, radar and navigation, and communications equipment. ■

Email: mweisgerber@defensenews.com.

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