We Can't Win GPC Without AI in Acquisition

Executive Summary

The shift to Great Power Competition has necessitated changes in U.S. defense strategy, budgets, and acquisition practices in order to develop advanced capabilities such as attritable mass, autonomous platforms, and swarm technologies. However, the consolidation of the defense industry and stagnation of the acquisition workforce over recent decades has left the U.S. structurally unprepared to rapidly acquire these diverse technologies from a broad industrial base that includes innovative small businesses. Artificial intelligence and automation present a key capability to help overcome these challenges by augmenting the knowledge and capacity of acquisition professionals.

1. Great Power Competition affected a shift in technical and material strategy and attritable mass, autonomous platforms and swarms

2. This focus necessitated a steady increase in defense budgets for both the U.S. and it's allies, including foreign military sales

3. Strategies for attritable mass, autonomous platforms and swarms, and advanced capabilities necessitate rapid and agile acquisition

4. Rapid and agile acquisition of advanced and diverse technologies requires a robust and technically versed acquisition workforce

5. The Acquisition workforce has been at the same level or lower over the past three decades

6. The Defense industry consolidation effected by the last supper and exacerbated by contracting processes that favor large companies has caused a precipitous decline in the number, size, and diversity of small business in the defense industry

7. The net effect of these factors resulted in a defense industry where fewer acquisition professionals are obligating more dollars per capita on larger acquisition vehicles to fewer companies, primarily large primes.

8. The negative effect of this multi-factor consolidation is that our force and its supporting industrial base is structurally unprepared for Great Power Competition

9. The logical approach to remedy the situation is to pursue more numerous and diverse opportunities for smaller companies as a means to reinvigorate the small business base

10. This logical approach is undermined by the limitation of acquisition professionals; there must be contracting officers and program managers to create, award, and manage these more numerous and diverse contracts.

11. Further, the technical complexity and regulatory requirements of these emergent technologies demand that acquisition professionals are multidisciplinary experts, on top of doing more acquisition actions with the same or less personnel.

12. A key, available capability to remediate many of these challenges is AI and automation; AI can augment knowledge, automate processes, and generate the numerous and diverse artifacts required to acquire better, faster, and cheaper.

1. The Shift to Great Power Competition

The emergence of Great Power Competition in recent years has driven significant changes in U.S. defense strategy and investments. Potential adversaries like China and Russia have made substantial advancements in military capabilities, necessitating a shift in U.S. focus to technologies like attritable mass, autonomous platforms, and swarm systems that can provide an asymmetric advantage. [1] For example, the U.S. Army's Future Vertical Lift program is investing in autonomous helicopter platforms to maintain overmatch against near-peer threats.

This shift in strategic focus has required commensurate increases in defense spending to develop and field these advanced capabilities quickly. The U.S. defense budget reached $705 billion in FY2021, a 19% increase over the past five years. [3] Foreign military sales to allies have also increased to help them acquire advanced U.S. systems and strengthen collective deterrence against shared threats.

2. Increased Defense Budgets

To achieve the capabilities required for Great Power Competition, the U.S. has steadily increased defense budgets over the past several years. The FY2023 defense budget request of $773 billion represents a 4% increase over FY2022 enacted levels and nearly 10% growth since FY2021.[4] These budget increases are funding major investments in cutting-edge technologies like hypersonic weapons, directed energy, artificial intelligence, and unmanned systems.

The U.S. is also leveraging foreign military sales (FMS) to enable allies to acquire advanced U.S. weapons and systems in order to strengthen collective defense capabilities. FMS rose to $50.8 billion in FY2020, up from $33.7 billion in FY2016.[5] For instance, in 2020 the U.S. approved a $23 billion FMS package for Japan to acquire 105 F-35 fighter jets along with other platforms to bolster deterrence in the Indo-Pacific.[6]

3. Rapid Acquisition of Advanced Technologies

The fast pace of technological change and the need to maintain military advantages over peer adversaries demands that the U.S. acquisition system field new capabilities much more rapidly than the traditional multi-year development cycles. The DoD has been pursuing more agile acquisition pathways for high-priority technologies, such as by using Middle Tier Acquisition (MTA) authorities which aim to deliver an operational prototype capability within 5 years.[7]

The types of technologies needed for Great Power Competition, such as autonomous systems and swarm capabilities, are well-suited for these rapid and iterative approaches that integrate commercial innovation. For example, the Air Force's Skyborg program used an MTA strategy to quickly design, build and test unmanned aircraft teamed with manned fighters by leveraging commercial technology.[8] By 2022, Skyborg had demonstrated an AI pilot autonomously flying a tactical aircraft for the first time.[9]

4. A Highly Capable Acquisition Workforce

A skilled and agile acquisition workforce is critical to achieving the goals of rapid and agile acquisition of advanced technologies. Acquisition professionals need a combination of deep technical expertise, business acumen, and knowledge of the relevant laws and regulations to effectively navigate the complexities of the defense acquisition system.

As an example, when the Air Force developed the Stormbreaker precision guided weapon in the early 2010s, it relied on a highly capable acquisition team to field this advanced capability on an accelerated timeline. The program manager had both an electrical engineering degree and an MBA, providing the technical and business expertise needed to manage the project.[10] This allowed the team to make smart tradeoffs and guide the system through operational testing in just 28 months, compared to 48-60 months for a typical program.[11]

5. Stagnation of the Acquisition Workforce

Despite the increasing demands placed on the acquisition workforce, its size has remained relatively flat or even declined over the past 30 years. In 1990, the DoD acquisition workforce consisted of about 460,000 personnel.[12] By 2020, this number had dropped to around 183,000 even as the workload and complexity increased substantially.[13]

Moreover, the acquisition workforce is aging, with over 50% of personnel within 10 years of retirement eligibility in 2018.[14] There are concerns about maintaining the right mix of skills and experience, especially in high-demand technical fields, as experienced workers retire. With limited new hiring and an increasing workload, the current workforce is strained in its capacity to manage a growing number of complex acquisition programs.

6. Consolidation of the Defense Industry

At the same time the acquisition workforce has declined, the U.S. defense industry has undergone significant consolidation, especially among small businesses. In the 1990s, defense budget cuts and a Pentagon push for consolidation sparked a wave of mergers and acquisitions that cut the number of American defense prime contractors from 107 to just 5.[15] Then Deputy Defense Secretary William Perry held the infamous "Last Supper" meeting in 1993 where he told defense executives that budget cuts necessitated industry consolidation.[16]

While this consolidation was intended to eliminate excess capacity and generate cost savings, an unintended consequence has been a significant decline in small businesses in the defense industrial base. From FY2011 to FY2020, the number of DoD prime contract awards to small businesses decreased by 43%.[17] This is concerning because small businesses are key sources of innovation for the advanced technologies needed for Great Power Competition.

7. More Money Going to Fewer Companies

The combined trends of acquisition workforce limitations and industry consolidation have resulted in more DoD contract dollars being obligated through fewer and larger contracts to a shrinking number of primarily large prime contractors. In FY2020, the DoD obligated $420 billion on contracts, a 43% increase from FY2016.[18] However, the number of contract actions over that period decreased by 32%.[19]

In 2019, over 73% of DoD contract obligations went to just the 6 largest prime contractors.[20] Small and mid-sized companies now have greater difficulty accessing defense contract opportunities. This lack of diversity and competition in the industrial base could limit the speed and breadth of innovation available to meet emerging threats.

8. Unpreparedness for Great Power Competition

The net effect of acquisition workforce stagnation, industry consolidation, and structural barriers to small business participation is that the U.S. national security innovation base is not postured for the demands of Great Power Competition. The DoD needs a larger pipeline of novel concepts and technologies from a more diverse set of companies to achieve its modernization goals.

However, the current acquisition system is struggling to achieve this with an overextended workforce managing fewer but larger programs with entrenched incumbents. For example, in 2019 the DoD's Small Business Innovation Research (SBIR) program made 28% fewer Phase I and Phase II awards compared to 2015.[21] The SBIR program is specifically aimed at increasing small business participation in federal R&D. This lack of small business capacity is a major challenge as the DoD seeks to harness cutting-edge commercial technology.

9. Reinvigorating the Small Business Base

To prepare the defense industrial base for Great Power Competition, a key priority should be reinvigorating the small business base through more accessible and diverse contracting opportunities. Small businesses are the primary sources of disruptive innovation that can provide leap-ahead capabilities over adversaries. The DoD has acknowledged this need, with the 2018 National Defense Strategy emphasizing the importance of a "healthy and secure national security innovation base that includes both traditional and non-traditional defense partners."

Congress has also taken steps to reduce barriers for small businesses, such as the 2019 SBIR/STTR Extension Act which shortened timelines for small business awards.[23] The DoD is testing creative approaches like the AFWERX innovation hub, which uses an "open topic" approach to solicit proposals from small businesses for any technologies that could benefit the Air Force. In 2020, AFWERX awarded over $710 million in contracts to more than 1,400 small businesses.Expanding initiatives like this across the DoD is critical to building the agile and diverse industrial base needed for the future.

10. Overcoming Acquisition Workforce Limitations

However, any attempts to increase contract opportunities for small businesses will be constrained by the capacity of the acquisition workforce to manage a higher volume of smaller programs. Contracting officers and program managers are already struggling to keep up with demands while overseeing increasingly complex technology projects. The average number of contract actions per contracting officer increased by 25% from FY2012 to FY2018.

Without a commensurate growth in the acquisition workforce, the DoD will have difficulty expanding its small business pipeline at the pace and scale needed. Given the long timelines to hire and train new acquisition personnel, significant near-term growth of the workforce is unlikely. Therefore, the DoD must find ways to maximize the capacity and capabilities of its existing workforce to do more with less.

11. Increasing Technical and Regulatory Demands

Adding to the workforce challenge is the fact that the advanced technologies needed for Great Power Competition often have greater technical complexity and regulatory requirements than traditional programs. For example, artificial intelligence systems in weapons platforms raise new challenges in testing, evaluation, validation and verification compared to conventional software. Acquisition professionals need deep knowledge in fields like data science, machine learning, and human-machine teaming to effectively manage these programs.

At the same time, the acquisition of emerging technologies often requires navigating a complex web of legal, ethical and policy considerations. Autonomous weapons in particular have generated heated debates around issues of human control, accountability and international humanitarian law. Acquisition professionals must apply both technical and legal expertise to ensure responsible development and deployment of these systems. A 2020 Congressional Research Service report highlighted the need for acquisition reforms and workforce training to address the unique challenges of autonomy.

12. AI as an Acquisition Force Multiplier

One promising solution to help overcome acquisition workforce limitations is the use of artificial intelligence (AI) and automation to augment the knowledge and capacity of personnel. AI-based tools could assist in tasks like market research, requirement development, proposal evaluation, and program status monitoring. This would free up time for acquisition professionals to focus on higher-level strategy and decision making.

The DoD has begun pilot projects to test the use of AI in acquisition. The Air Force's Air Operations Center Acquisition (AOC) Pathfinder program is using an AI-enabled acquisition management system to automate over 50% of the tasks required for a multi-billion dollar AOC modernization program. The system uses natural language processing to extract data from acquisition documents, predictive analytics to identify schedule risks, and robotic process automation for contract writing and financial management.

Another application is using AI to rapidly generate contracting documents like statements of work, performance work statements, and contract data requirements lists. The Army Contracting Command has partnered with the science applications company

Continued:

to pilot an AI solution that auto-generates these acquisition artifacts by identifying patterns and best practices from prior contracts. By leveraging the knowledge gained from hundreds of previous acquisitions, this AI tool could help a reduced contracting workforce develop higher-quality acquisition packages much faster to speed delivery to programs.

If implemented at scale, AI and automation tools like these could dramatically increase the capacity of the acquisition workforce to manage a larger number of programs and contracts. However, they will require up-front investment in data infrastructure, training, and change management to fulfill their potential. Acquisition leaders should prioritize identifying use cases and piloting AI tools to demonstrate value and build experience.

Summary

The emergence of Great Power Competition has driven major changes in U.S. defense strategy and investments in advanced technologies. However, the defense acquisition system is challenged in its ability to rapidly acquire and deliver these cutting-edge capabilities due to workforce limitations and barriers to small business participation. Artificial intelligence and automation present a key opportunity to augment the capacity of acquisition professionals and enable them to source innovation from a broader and more agile industrial base. If implemented successfully, these AI acquisition tools could be a force multiplier in preparing the United States for the military challenges of the 21st century.