To expand the US Navy’s fleet, we must contract

There is no substitute for fleet capacity. But generating it depends on healthy partnerships between the government and industry. After decades of corporate consolidation, the pendulum now swings toward consensus that the U.S. defense-industrial base must once again expand.

Recent efforts by the Defense Department and Congress reflect this new course and a desire to attract new companies that have not historically contributed to the defense mission. While these strategic frameworks are valuable for shaping the department’s vision, translating them into action also requires adjusting the underlying tactical and administrative processes that bind ideas and obligations. That means turning attention to how the Navy contracts for supplies and services.

To many, contracting remains a perceived acquisition obstacle: The Federal Acquisition Regulation, or FAR — canonically referred to as the contracting bible — includes the phrase “shall not,” “may not” and “will not” 1,379 times.

Nevertheless, four contracting policy alterations can complement the broader acquisition change taking place and accelerate delivery of fleet capability and capacity.

1. Tailor flow-down requirements to make it more attractive for nontraditional defense companies to operate within the defense market. Currently, defense acquisition constructs include oversight provisions that flow down from prime contractors to their multitiered chain of subcontractors and vendors. Primes and subs are then subjected to the same regulatory constraints. Complicating matters, primes tend to assign more flow-down requirements than necessary to limit their own risk exposure.

This practice dissuades nontraditional companies — like tech startups — from bidding on prime contracts or partnering with larger defense firms because they are unable or unwilling to comply.

Programmatically, existing acquisition governance gives program managers latitude to tailor in regulatory requirements that are either not applicable or burdensome. In contrast, contracting regulations are more stringent. The DOD recently addressed this — partially — by restricting flow-down requirements to those companies that provide commercial products or services.

But why stop there?

The government could take this a step further by granting contracting officers and prime contractors leeway to pick and choose when and to which subcontractors — regardless of commerciality — such conditions should flow downstream. Another option is to expand the adaptive acquisition framework to permit a blend of FAR-based and statutory strategies under a single contract vehicle.

These approaches would assuage primes’ compliance concerns, incentivize market investment and capitalize on widespread participation within the defense-industrial base.

2. Codify pathways to more consistently transition capabilities procured using unconventional acquisition authorities. Whereas FAR-based contracting prevails in traditional programs, the DOD is increasingly using other transaction authorities, or OTA — a less rigid procurement agreement structure — to foster innovation and adaptability, as well as encourage participation by nontraditional companies.

However, problems arise when the prototyping phase ends and there is no on-ramp to an enduring program of record where stable funding resides. These nontraditional companies (and their products or services) could be orphaned.

From a contracting perspective, OTA-to-OTA pathways exist, while transition guidance based on an OTA-to-FAR route remains ambiguous. Consequently, because these firms often lack the institutional knowledge to navigate such ambiguities, they are more likely to leave frustrated.

This problem is especially acute for small businesses, which lack the independent research and development budgets of their larger, established counterparts. In the end, the DOD risks losing the very industry capability and talent it was trying to harness in the first place. Therefore, formal direction governing ways to transition OTA efforts to programs of record would better link them to established portfolios with existing funding streams. This would increase acquisition transparency and predictability, as well as entice nontraditional companies to join — and importantly remain in — the industrial base.

3. Automate parts of the contracting process to recognize efficiencies and create speed without sacrificing thoroughness or quality. More than 160,000 civilian and uniformed members comprise the defense acquisition workforce, 7,700 of which are assigned to contracting positions within the Department of the Navy, per the service’s acquisition talent management office.

According to the Federal Procurement Data System, in fiscal 2023 alone, Navy contracting officers negotiated, evaluated and executed approximately $150 billion across more than 216,000 contract actions. New contracting methods, evolving acquisition authorities and heightened urgency have increased corresponding workloads for these critical service enablers.

However, just as the Navy cannot instantly develop ship captains, neither can it grow experienced contracting officers overnight. To ease this workforce strain, leaders should explore ways to automate parts of the contracting process — such as drafting and reviewing documents, selecting clauses, tabulating figures or ensuring regulatory compliance — to realize manpower and analytical efficiencies among the service-enabling competencies.

Automation would deliver numerous benefits. Artificial intelligence and machine learning can accomplish many of these human analytical functions faster and more thoroughly. This could free contracting officer bandwidth to maintain a wider aperture on the overall process, and reduce the types of errors and rework that inject contracting delays and stifle overall delivery timelines.

Additionally, administrative efficiencies gained through automation could yield more consistent contracting workloads over time, thereby overcoming the use-it-or-lose-it mentality at the end of a fiscal year, when a rush to obligate funds creates a tidal wave of contracting actions.

Lastly, leaning into existing technologies better aligns with the direction of the workforce as the government seeks to attract and retain a new generation of workers who have had access to such automation their entire lives.

4. Align contracting and acquisition culture. The DOD is making a concerted effort to change acquisition culture; its governing directive uses language like “deliver performance at the speed of relevance,” “develop a culture of innovation” and “be responsive.” Such sentiments are largely absent from contracting governance and contracting officer training.

And while the DOD has shortened its 19-page acquisition instruction to make it usable, the FAR and its defense supplement — at a whopping 3,496 pages combined — remain a doorstop.

Arming contracting officers with new tools could repair this cultural disconnect. One approach would be to author a contracting guidebook, which could better articulate how-to guidance for contracting officers and complement other modern acquisition references.

By design, the Navy’s approach to contracting is methodical and iterative, emphasizing fairness and best value. But the ability to compete in today’s threat environment remains, in large part, a function of our acquisition and contracting agility.

For the fleet to expand, it must — as the double meaning suggests — contract.