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Thursday
May242012

Observations from the BENS Washington Forum – Part II – The Direction of the Department of Defense

Continuing on to reflect what happened at the 23rd Annual Business Executives for National Security (BENS) Washington Forum, I wanted to spend some time on the interesting comments made by the Deputy Secretary of Defense, Dr. Ashton Carter.  Dr. Carter focused his opening remarks on some well-known figures about budget targets for the next 5-10 years – none of which were anything that hasn’t already been covered at great length.  We’ve all heard the statement that “everything is on the table” (which I really do not buy…read on).  Dr. Carter made many comments on the DoD strategy to shape the overall force structure for 2020.  Amidst the strategic vision was the inevitable explanation about how the spending cuts are being guided.  The guidance from the White House and the Secretary of Defense, Mr. Leon Panetta was to first focus on the strategy of shaping the force with the necessary cuts being driven by that strategy, not the other way around.  Dr. Carter used the analogy of an ice sculpture to help everyone understand what he meant.  Instead, “focus on what the ice will become – a work of art – instead of the shavings from the block of ice.”  Very clever.    

While discussing buying philosophy and not surprising – especially coming from the former Under Secretary of Defense for Acquisition, Technology and Logistics – was the statement of:

“…keep up the relentless search for the better buy for the taxpayer.” and “this goal has never changed except how we achieve that goal over time.” 

This is hardly news for anyone.  It’s no surprise to hear a focus on cutting costs.  Of course, and not unexpected, was a series of comments about the changing field of competition in DoD contracting.  So here’s a series of statements made by Dr. Carter:

“The interests of the taxpayer and DoD are fundamentally aligned with the interests of industry.” 

I don’t have the exact quote, but Dr. Carter essentially stated that everyone (government, industry, the taxpayer) wants a long-term, sustainable relationship that is built to last.  Working together over a long period of time will foster innovation, better efficiencies and ultimately reduced costs.  Building on the theme of better buys for the taxpayer was this little gem. 

“The fundamental challenge is to keep industry doing what they do, but controlling (reducing) costs.”

Remarks made about controlling (reducing) costs led to a statement made about getting “more mainstream.” This more mainstream selling comment had a clear implication to diversify customer base and thereby to reduce costs to DoD.  This is something that many of you are already doing or considering.  There was a strong emphasis reiterated about exporting arms and other products outside the U.S.  This is good for competitiveness and good to strengthen allies so the U.S. doesn’t have to do so much.  This is pretty consistent with DoD encouraging private industry to sell their wares overseas more than before.  The motivation undoubtedly ties back to strengthening allies as already stated, but probably more likely focused on driving down costs for DoD as contractors sell more they drive costs down. 

Additionally, on the topic of competitive contracting, Dr. Carter made remarks about how DoD intends to leverage competition for profit and contracts, but not necessarily always in a head-to-head setting.  Oh really?  This is a bit contrary to other public rhetoric on “competition, competition and more competition!”  Curiouser and curiouser!  (Thanks, Lewis Carroll

One of the topics that I truly wanted to learn more about – and Dr. Carter was so kind to discuss – is what is going to happen with the overall force structure and what capabilities will be the emphasis for investment in the years to come.  No surprise here, but we will continue to see a very clear shift in forces to the Asia-Pacific region.  So here’s a highlight reel of Dr. Carter’s comments on DoD plans for the Asia-Pacific region:

  • DoD will shift U.S. Navy assets from the Atlantic to the Pacific to strike an approximate 60/40 split of assets in the Pacific vs. Atlantic 
  • Shipbuilding tempo will remain slow, but steady 
  • Guam will continue to build out its capacity for forward deployed assets in the Pacific 
  • The U.S. Air Force will reduce tactical air power and maintain overall bomber and tanker strength but shift overall numbers to the Pacific
  • U.S. Army and U.S. Marine Corps end strength will decrease overall, but shift to Asia-Pacific
  • There will be some more involvement with the U.S. Marine Corps in Australia

Beyond the Asia-Pacific developments are other more general strategic developments for the DoD as a whole.  It’s pretty clear based on Dr. Carter’s comments that they will protect new capabilities to maintain evolution of capabilities necessary for tomorrow.  The highlight reel features:

  • Maintaining conventional strike capabilities
  • Fast attack submarine modifications and upgrades
  • A new bomber (albeit a program with a greatly slowed down rate of development)
  • C4ISR investments
  • Electronic warfare
  • Cyber
  • Unmanned systems
  • Space systems

What? You didn’t see a particular capability in the list above.  Brace yourself because that’s an area that will experience more cuts than the others.    

Dr. Carter made another telling comment on DoD cyber spending.  He said:

“I’d spend more on cyber if I knew how.” 

I have no doubt that many of you will be delighted to oblige Dr. Carter.  IT companies, if you didn’t jump for joy at hearing this check your pulse.  I just hope if you go into cardiac arrest, the 911 call dispatcher doesn’t do this.  Anyway, back to our regular programming.

Another breath of fresh air centered on the ever looming closer sequestration courtesy of the Budget Control Act.  Dr. Carter responded to what was apparently an endless string of questions about his plans for the very real possibility of sequestration.  He said, and I quote “Sequestration would be disastrous…I will not plan for assisted suicide.” 

Wow.  Assisted suicide?!  Honestly, I think Dr. Carter had the courage to say what many are thinking.  I don’t disagree with the possible impact to our national security (aside from our national spending problems).  Sadly, in our era of kicking the can down the road and living in an election year I fear that we may be looking at such a doomsday scenario.   

What are the big takeaways for me?

  • If you support DoD today you had better be adjusting your business to support a Asia-Pacific focused DoD…moving offices, hiring people and adjusting products and services to deal with a different environment (not Iraq and Afghanistan)
  • Sharpen that pencil (yeah, I know)
  • Diversify out from DoD (read federal civilian and commercial work) to help drive down your costs and to not depend on DoD business so much
  • Take a hard look at what the force will look like in 2020 (what does that ice sculpture look like) and be there

Think about that last item…what the force will look like in 2020…and consider a quote from hockey legend Wayne Gretzky.   

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

So is your business a good hockey player or a great one?  Are you moving to where the puck is going to be? 

If you can develop a great strategy built with an understanding of where the puck is going to be and how you can adjust to changes in the puck’s path you will be successful.  This is our challenge.  To get anticipate where the puck is going to be before anyone else knows.  If nothing else I hope this blog post helps you to think about where you think you need to be to get ahead of that puck. 

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