Steve BlankTechnology, Innovation, and Modern War – Class 16 – Acquisition & Sustainment – Ellen Lord



Story by: steve blank Steve Blank | Entrepreneurship and Innovation

We have just held our sixteenth meeting of our new national security class, Technology, Innovation and Modern Warfare. Joe Felter, Raj Shah, and I designed a class to explore the new military systems, concepts of operation, and lessons that will emerge from 21st century technologies – space, cyber, AI, and machine learning and autonomy.

Today's topic was acquisition and sustainability and modern war .

Read our summaries of the previous fifteen classes here to familiarize yourself with the class.

Some of the readings for this week included How the DOD Acquires Weapons Systems, the Planning, Programming and Budgeting Process, Acquisition Reform in the NDAA, Defense Foundation for DOD Contractors, and Defense Industry Base

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Our guest speaker was the Honorable Ellen Lord, Undersecretary of State for Defense for Acquisition and Sustainability. She is responsible to the Minister of Defense for the acquisition. Development tests; Contract management; Logistics and material readiness; Installations and environment; Operating energy; chemical, biological and nuclear weapons; the acquisition workforce; and the industrial defense base.

Prior to this appointment, Ms. Lord was President and Chief Executive Officer of Textron Systems Corporation, a subsidiary of Textron Inc. which ran a billion dollar business providing a broad range of defense and homeland security products and services, air and security Space, infrastructure protection and customers around the world.

I have extracted and paraphrased some of Ellen Lords' key findings and encourage you to read the entire transcript here and watch her video.

Progress in modernizing the defense detection system .
Everything we do here in the department is part of our National Defense Strategy (NDS). Acquisition and sustainability focus on supporting all three lines of the national defense strategy. So they are:

Restore military readiness as we build a more lethal force
Expansion and strengthening of alliances and partnerships.
Bring economic reform to the Ministry of Defense.

Strengthening our supply chain
As part of the first effort, lethality, we focus on the fragility of the supply chain. The nature of today's near-peer or peer-to-peer threat is not always kinetic. One of the ways our adversaries try to gain an advantage is to attack our supply chain through methods such as fraud, introduction of counterfeit materials, control of raw materials, attacks on cyber and intellectual property, and access to strategic materials and rare earth minerals deny. And finding ways to undermine our free market system.

The United States depends on a global supply chain for our goods, systems and services. For the most part, this is really very positive. We are enriched by investments from other countries, which have often helped build an infrastructure that supports a wide variety of industries. However, we really need to remain vigilant when it comes to dependence on opposing countries, when it comes to our industrial defense base and our national security systems. Should our opponents choose to narrow the supply, it is really possible that the department will have difficulty finding, testing, and qualifying substitute sources, if they exist at all. The DOD report we wrote in response to Regulation 13806 was released in 2018 and highlighted reliance on overseas suppliers, including China, for critical materials such as rare earth elements and microelectronics.

For example, China also has a market share of 80% for rare earth elements. In addition to a significant market share in the manufacture of value-added goods such as electric motors and consumer electronics. Rare earth elements are an integral part of the US military as well as the national infrastructure and economy. They are used in a wide variety of applications from missile and space guidance systems to launch vehicles to electric vehicles and sophisticated medical instruments.

Expansion and strengthening of alliances and partnerships
In accordance with the second line of the NDS, strengthening alliances, we are actively working to improve the defense trade as a strategic instrument for promoting national progress use security interests. We have 37 initiatives across the DOD that focus on four main areas. Exploitability in early programs. Facilitation of the technical release capability. For example, the conquest of the market area vis-à-vis Russia. And increasing industrial capacity.

And in addition to strengthening our interoperability with allies and partners. Reforms in each of these areas will strengthen the foreign military sales process. This will strengthen the global competitiveness of the defense industry and improve our exportability in the supply chain. As we near Fiscal Year 2021, what we call modernizing the defense trade will help implement both the DOD and interagency processes to streamline the US and export technology faster to drive that interoperability forward, Since we don't fight alone when we fight. As well as to maintain our domestic industrial base.

Corporate Reform – The 5000 Series
To support the third line of the NDS, the reform. Our organization strives to enable an acquisition environment designed to provide combat capabilities at the speed of relevance defined by the bureaucracy. One of the most important achievements of my team was rewriting the so-called 5000 series. – The Overarching DOD Acquisition Policy, which focuses on what I call creative compliance. So that acquisition professionals can develop acquisition strategies that minimize risk.

The 5000 Rewrite achieves this goal by breaking a large policy document into six clear and separate paths, which we call the Adaptive Acquisition Framework or AAD. Each path is tailored to the unique characteristics of the skill acquired. The six avenues include urgent skills acquisition, intermediate skills acquisition, high skill acquisition, software acquisition, defense business systems acquisition, and services acquisition.

The software acquisition path is the newest path in the adaptive acquisition framework. Given that software is central to every major DOD mission and system, we need to acquire and deploy software at much greater speed, flexibility, and cybersecurity. The software paths are based on commercial principles that truly enable innovation and rapid deployment in response to conditions of uncertainty. We have rapidly changing user requirements. We have disruptive technology and threats on the battlefield. The policy adjusts and streamlines acquisitions and requirements, processes, reviews and documents to adopt a modern development practice like Agile and DevOps or DevSecOps.

It is a major departure from the normal way of doing business in the department by removing procedural bottlenecks and regulatory bureaucracy. The programs are really pushed towards the goal of delivering features in a much shorter cycle in a year or less while emphasizing and ensuring cybersecurity.

Cybersecurity is an integral part
One of the subordinate functional areas is cybersecurity. This is a fundamental aspect of any acquisition that cannot be traded for cost, schedule, or performance. To ensure that cybersecurity is also fundamental to our partners in the industry, the department has created the certification for the Cybersecurity Maturity Model, which we call the CMMC. It's scalable, verifiable, and repeatable. A cybersecurity standard that industry partners must obtain, depending on the cybersecurity level required in a particular contract.

This morning, the DFARS rule for the certification of cybersecurity models, and we live by the standards of the Defense Federal Acquisition Regulation, was published as a provisional rule in the US federal register. The public can comment on the rule for 60 days. And at the end of the 60 day period, the rule takes effect. Therefore, all DOD contracts must have some level of CMMC by October 21, 2025, a five-year period. Now I think about how we think about ISO quality. Same idea.

Risk Management Tools
The department started a pilot program of commercial risk management tools. The one we use is called Exigers DDIQ. To really help identify reputable vendors quickly and verify the sources of their supplies. We need to know who is in our supply chain, who is the beneficial owner. Not just that it's a shell company. Therefore, this tool is fed into the ADVANA analysis platform of our department. And we are able to provide supply chain lighting that is now critical to the execution of all US manufacturing legislatures through the department. To be able to ensure that we are increasing the capacity and throughput in our supply chain. To make sure we are not just helping the Department of Defense, we're working with all of our partners to source essential personal protective equipment and medical supplies in response to COVID-19.

Our improved understanding and speedy review of the supply chain has helped reduce the number of fraudulent contracts being awarded to opportunists. And there are many, many out there. Ensure the effective use of CARES Act funds received from Congress.

What do you think are your most important reforms, which were initiated today under your leadership?
One of them is the fact that we've made Acquisition a lot easier to understand and use. Instead of having this big book, read through it and use it like a pilot's checklist. We now have the acquisition process broken down into different parts that can be customized.

Of all of these pieces, I think the most important achievement is the software path. We basically said that our main weapon systems are hardware capable, but they are software defined. And we have to make sure that we continuously develop this software, from development through production to sustainability. It's all a continuum. And we are very pleased to be able to work with the congress to define some Pathfinder projects for a software Color of Money. Because we spent so much time managing it before. But very important administration to make sure we are legally compliant with the colors of money. This will be able to unleash our business processes to keep up with technical innovation.

What are the greatest challenges and opportunities for further reforms for you?
I think it really is a communication with the industry in order to understand the acquisition at the middle level, as we no longer need clearly defined requirements. We can basically try to define a skill and to recognize the art of the possible. To make sure the industry understands how to work with contract professionals to get a contract. And then also to teach our contract workers what our skills are and to really get them to innovate.

I always think that technical innovation is much sexier and easier than business innovation for all the obvious reasons. Because people are scared, they will break the law and go to jail or be pulled up on the news. Or get pulled up the hill for a hearing, which can be great fun. What we have to do is show that our acquisition professionals, our business professionals, can make a huge difference to the Warfighter. No kidding, they can get into the hands of war fighters much faster.

Many argue that it is not so much a question of maintaining our technological edge, but rather of the speed with which it can be identified and used. Would you agree with this assessment?
How do you quickly apply them to the warfare loopholes we have? My entire team works very closely with the Vice Chairman of the Joint Chiefs of Staff, General Hyten. Its job through the JROC is to define requirements for the warfighter.

My responsibility through our acquisition process is to get it there quickly. And the challenge is the valley of death that we have between developing cool technical things and applying them in a way that the warfighter can use. That is why we like to work on the art of the possible. How are we going? How can we enable this technical collaboration to meet the needs of the warfighter?

How would your organization improve collaboration between industry and government, especially at the start-up and small business level?
Most of our innovations come from small businesses. For us in the Ministry of Defense, this is absolutely important. So I believe no matter where you work and what your mission is, communication is what counts. I knew so early that my team could only communicate and meet with so many people. So I decided to use the industry associations as a force multiplier. To repeat and reinforce what messages we have. But just as important, if not more important for us, is to listen to what the industry needs.

So we bring about 15 people, and we're practically doing it now, just like we did quarterly personally in collaboration with three industry associations. They brought together around 15 CEOs. You develop the agenda. I bring our leads for service acquisition, I bring a number of A&S people, and we talk to the industry about their challenges. What they do Once a month, I also bring the large prime numbers to a company. With your senior management team, my senior management team, service acquisition representatives again, and we will talk about the problems.

What has changed in the way you prepare our acquisition professionals for these new business methods?
We used to lock her up for two or three weeks at Defense Acquisition University and set our fingers on the send button and talk in what I would call 30, 40 years old. We changed that. We have been completely virtual since March. But more importantly, we do a lot of podcasts instead of taking exactly what I think is dry, we interview the program directors with program managers and get them to tell stories about the acquisition problems they had. And how they took advantage of some of the authorities that we have. Because again I want this creative compliance. People are so concerned about getting it wrong that they'd rather not do anything. What doesn't help us.

So it is very different in terms of many real-time presentations. Lots of podcasts, lots of self-service work. We have also obtained licenses from TED Talks, which we call TEDx DAU. And so we have just ended our second round of TED defense takeover talks. And it's kind of a fringe acquisition.

How is the purchase of new weapon system technologies coordinated with the development of new doctrines or new operating concepts?
The NDS tells us that we are moving from violent extremist organizations to peer-pivot organizations. To-peer threats that we see around the second chain of islands with China. So we have to change our fighting ability. We are working very closely with the common staff and ministries as we develop this new doctrine. We do this at weekly meetings with the SecDef. For example dynamic use of force. We use ships, airplanes that just turn up a little more surprisingly in different places.

We listen to the voice of the customer, the warfighter, about what electronic warfare skills they need. What are the all-domain commands and controls they need now that we are truly an interoperable force? And we work closely with the joint staff through the JRC with General Hyten. I So it's about using this technology and applying it with many cycles, many iterations and back and forth if necessary.

Think, Andurils Model where a company develops a product at its own expense and then sells it to the DOD or DOD funds is development the future of defense tech procurement?
I think there is a lot of room for the Anduril model as well as for the traditional companies. I think we need a whole spectrum. Because one company is not going to build an aircraft carrier, fighter jet, or large satellite on its own. It's just too complex, too cumbersome. But smaller options I think are exactly what we want to see. We want to see these developments. We want to get them into the hands of the war fighter as soon as possible.

Here we are using other transaction authorities to achieve this. That's what DIU does. We use the middle acquisition stage to quickly deploy prototypes and new productions.

How does the DOD ensure operational security and its acquisitions when the diversity of corporate contributions to the national security ecosystem is so diverse?
OPSWC, as we call it, is incredibly important. On the one hand, one of my main focuses has been defense industry cybersecurity. That is why we introduced CMMC. It's like ISO stands for quality and cybersecurity.

So that was huge to make sure the corporate infrastructure is adequately protected. And scaling again. It is different when we buy combat equipment, boots or clothes than when we buy a fighter jet. You need a different level of security. But what we're doing with our new 5000 description was one of the functional areas of cybersecurity. We write in cybersecurity standards how to design new systems.

We also spend an enormous amount of time with NSA and Cybercom. With exquisite intelligence, we learn what opponents are trying to do with our weapon systems. And we're going back and hardening the systems that are already in use. We have, if you will, new KPPS for designing the cybersecurity of the new systems. And then of course we look at mergers and acquisitions.

I spend much of my time with the FIRRMA appointed Committee on Foreign Investment in the United States, CFIUS. But the bottom line is that if there is a national security threat, we can block the acquisition of transactions, and now with FIRRMA we can block the acquisition of real estate near critical national security points and also intervene in joint ventures.

Some students in our class who aspire to public service. Any thoughts on advice and recommendations on how to go about this?
I was in industry for 33 years before joining the government. And this government job is by far the most fascinating job I've ever had. I've been very fortunate to do some things in the industry that I'm proud of and I think they were meaningful, but there is just so much you can do in government.

So on a fundamental level I would say to connect with people. We have more Byzantine recruitment processes. I didn't even know there were USA jobs before I came to the federal government. But here we advertise all of our jobs. But you have to connect with people. And you need to talk about what you are interested in. Reach out to someone who is currently in government and talk a little about what generally interests them, what they want to do. Because you don't know what you don't know. But you have to start a conversation.

I'll tell you, you will never make much money working in government, but you will be so much more exposed, especially at junior levels, than you could be in the same amount of time in industry. And I would say a one to three year stay would be incredibly enriching for your background, regardless of what your career balance might be. I dream of winning back the people who may have served seven to ten years for a year or two and then getting into industry. I would just like to get a few logisticians from the southwest or a shipping company or Amazon to work with us. Because what we do at the Defense Logistics Agency is a feast for the eyes. It's just amazing. So I would say communication, communication, communication.

I grew up, my father was a lawyer, he served in the army during World War II. But we never talked about what it means to serve. And not only is it really amazing to be part of something that is much bigger than just you, it's also amazing how much influence you can have and how much you can see and learn.

Read the transcript of Ellen Lord's talk and watch the following video.

If you can't see the video, click here.

Lessons Learned

In the 5000 series, DODs are about acquisition policy – how they buy things

We have strengthened our supply chain, expanded our alliances and partnerships, and reformed the 5000 series
A path to purchase software has been added
Integrated cybersecurity compliance built into the acquisition

These reforms have made working with the government much easier to understand

So:

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