Big Primes Don’t Cry: Wes Bush Defends Defense Contractors

WASHINGTON: With the Pentagon opening an outreach office in Silicon Valley, traditional defense firms may be feeling left behind. But the much-maligned prime contractors play a vital role in innovation, said Northrop Grumman CEO Wes Bush this morning. In fact, he argued, the Defense Department often needs the traditional firms to act as a “translator,” helping it connect to commercial companies that are reluctant to deal with DoD directly.

“We need to be careful that we don’t inadvertently send a message that somehow commercial technology can solve all the problems. We know that’s not the case,” Bush told me after his public remarks. “There will always be a core part of defense R&D [best done by] the national labs and the defense industrial base.”

“All R&D is not created equal when it comes to national security,” Bush told the audience this morning at the Center for Strategic and International Studies.

“In today’s framework of very tight budgets, that ugly word sequester, and austerity that we’re all dealing with, there is a very understandable desire to find something that feels like a cheaper alternative to defense R&D,” Bush went on. Given the rapid innovation in the commercial world, “it is natural that appropriators and the acquisition community would look there for innovations to somehow transform what we’re doing in defense. But I’ll submit to you that commercial solutions — while an important ingredient much of what gets done — in and of themselves are not the answer for our national security and our technological superiority and therefore should not be used as an excuse for further reductions in R&D.”

That hardly means the military should ignore commercial innovation, Bush said. But commercial companies, especially small ones, often need help navigating a defense market they see as arcane, unrewarding, and unreliable. “They see a very small market space that usually doesn’t merit large investment, and they see it as a market space with a lot of volatility,” Bush said. “They can’t quite predict what the opportunities are going to be.”

Traditional defense firms can help these innovative outsiders sell to the defense world. “We want to take the uncertainty off the table,” Bush said. “We basically take the risk because we’re the party that knows how to deal with the defense marketplace… we become basically a risk translator.”

Conversely, he said, “we really want to make sure the other party is actually going to be there when we need them.” Defense companies have to support their product as long as it’s in service — by many forecasts, 70-80 years for weapons like the B-52 bomber, M113 armored transport, and DDG-51 destroyer — while commercial business will drop a product line like a rock as soon as it’s unprofitable.

“We can actually help make the technology transfers happen in a way that will work for all the parties,” Bush summed up for me. “Clearly there’s opportunities to leverage [commercial innovation]. Let’s recognize it for what it is and then let’s manage it.”

And, I asked, you’d nominate firms like Northrop Grumman to do that management? “Our industry is good at that, but there are parts of government that can do that as well,” he said.

One of those parts of government is DARPA, whose director also participated in this morning’s discussion at CSIS. “I loved what Wes Bush said about [commercial innovation]: It’s not a substitute, it’s something that we have to learn how to leverage,” Arati Prabhakar told me after the panel.

For example, Prabhakar went on, DARPA is currently running a program called “Persistent Close Air Support” to create a better digital connection between pilots and grunts on the ground. Step one was to give both parties Samsung Android devices.

“You could have built this DoD-unique thing to have a shared grid of reference, graphics, and GPS, but it turns out you can go buy one of those for really cheap right now. So that was a great place to start,” Prabhakar said. “But you don’t just hand a Marine an Android and say the problem is solved.. .We had to add to that encryption, we had to add the military radios, we had to work with the services and the special operators to figure out the CONOPS [concepts of operation].”

“I think we’re going to get to a future where we completely revolutionize close air support…and it all traces back to being able to leverage this commercial technology,” Prabhakar told me. But you need someone who knows the defense world’s unique requirements to translate it (to use Wes Bush’s term) “and to turn it into a military capability.”

“In my 15 years in Silicon Valley, I spent some time with some… wonderful people,” Prabhakar told the CSIS audience, “but zero of them lay awake at night trying to figure out how to defeat the Chinese IADS [Integrated Air Defense System]. They don’t know what IADS are.”

It’s helpful to hear an argument for the traditional defense firms having an irreplaceable role,” said Andrew Hunter, the former Pentagon director of rapid acquisition, who moderated this morning’s discussion.

“I thought that was a very interesting take actually, [that] the role of a big company like Northrop Grumman is to deal with the uncertainty,” Hunter told me when I asked him about Bush’s remarks.

“What I had been concerned about [was] are the big integrators big integrators simply because they know the process,” Hunter said — that is, because they’re the only ones who can handle the mind-numbing, soul-sucking bureaucracy. “He [Bush] framed it in a different way. It’s because they can handle the risk, they specialize in handling this uncertainty and maybe absorbing it.”

In this perspective, the big defense firms add value in two areas. First, their bigness lets them absorb the shocks and cyclical downturns that would drive a smaller company out of business. Second, their long experience of those cycles has trained them to plan long-term — and protect their investments in R&D, even during downturns — in a way that keeps technology progressing despite the ups and downs.

Bush isn’t being blithe about the current downturn in defense. The Budget Control Act cuts known as sequestration, he said, have had a “devastating” impact on not only defense firms — which have cut staff by roughly 20 percent, laying off many talented people — but also on civilian universities, which provide the basic research bedrock of American technological advantage.

There needs to be an end to the sequester,” Bush said. “We’re hurting on the defense side, and we’re also really hurting on the non-defense side, and I think both have to get addressed.”