While US government rhetoric is very supportive of the use of commercial technology for defence, acquisition professionals are incentivised not to deviate from the Federal Acquisition Regulation (FAR). The outcome is that commercial technology contracting and acquisition is slowed considerably, with these challenges having several implications for cooperation on Pillar II of AUKUS.
By not enabling the Department of Defence (DoD) to quickly obtain commercial technology the US becomes increasingly vulnerable militarily to a rapidly innovating China. While on the one hand the official statements of President Donald Trump, Secretary of Defence Pete Hegseth, and other high-level administration officials advocate the use of alternative acquisition authorities to quickly obtain commercial technology, the Trump administration’s policy of severely reducing the federal workforce has encouraged significant risk aversion among contracting officers. The outcome is that commercial technology contracting and acquisition is slowed considerably, despite rapid acquisition authorities available to obtain precisely this commercial technology.
For Australia, these challenges have several implications for cooperation on Pillar II of AUKUS. The stated goal in the partnership of achieving “advanced capabilities” appears to be diminished since adoption of commercial technology by US DoD is itself limited.
The governments of China, Iran, North Korea, and Russia utilise what the Chinese term “military-civil fusion,” signifying that the government, including the military and intelligence agencies, have complete and total access to all technological innovations. In the US, official policy requires that all that can be privatised must be privatised. This policy is implemented in law and policy in the US and remains virtually sacrosanct. The US government, including the DoD, is obliged to obtain goods and services from private firms. These goods and services are acquired in accord with acquisition authorities implemented and overseen by a workforce of 34,000 contracting officers, all but 4,000 of whom are civilian. DoD has created a labyrinth of rules, regulations, and confusing acquisition policies that encourage risk aversion and inertia. These are embodied in the 2,000-page Federal Acquisition Regulation (FAR), which, in Part 1.602-2, requires compliance by the contracting officer with the FAR. In addition, each agency of the federal government has elaborated its own regulations in addition to the FAR, which in the case of DoD is the DFARS.
There is general agreement on two crucial points regarding the FAR. First, contracting officers, who have gigantic responsibilities in ensuring good and proper use of “the people’s money,” utilise the FAR as a security blanket. Currently, performance incentives, such as they are, encourage avoiding mistakes rather than showing initiative or measuring effectiveness—in other words, employees are measured by whether they comply with the directives, regulations, and guidance for every process. Second, but for the largest firms, of which six alone were awarded US$160 billion, or 37 percent of the $431 billion contracted out by DoD in FY 2024, and are comfortable with the FAR, few want anything to do with the FAR.
The smaller and more innovative firms find that the FAR is too complicated, includes unacceptable elements, such as separate budgets, and takes too long. And, it is precisely the smaller firms, many of which are fuelled by venture capital and based in Silicon Valley, California, that are the main creators of commercial technology in the US. Commercial technology is key to the vast improvements in armed combat as demonstrated most recently in the conflicts in Ukraine, Gaza, and Yemen. In sum, the US is slow, particularly in contrast to China, in obtaining commercial technology. Currently there is a process underway to revise the FAR, but the extent of the revision remains to be seen.
All that has been stated above is common knowledge with increasingly frequent commentaries in the newsletters and journals addressing this challenge, particularly in the Pentagon’s daily roundup of national security relevant periodical publications, the Early Bird. In addition, the substack Defence Tech and Acquisition reports weekly on innovations in acquisitions. With the current Trump administration, the hype has greatly increased, as one article in Newsweek on 13 January 2025 stated, “Donald Trump’s Tech Bro Orbit” have entered the administration (the orbit includes, among others, Elon Musk, Vice President J.D. Vance, and Chairman of the Joint Chiefs of Staff, Lt. Gen. (USAF, Ret) Caine). President Trump issued an executive order on the topic of innovation for national defence, and Hegseth also issued a memo requiring the use of alternative acquisition authorities for software acquisition. A flurry of other memos from the top leadership of DoD has also emerged.
The emphasis on using alternative acquisition authorities, and particularly Other Transaction Authority (OTAs), follows the path of the Defence Innovation Unit (DIU). While the experience of the DIU may be good news for AUKUS, as it is cited specifically in the background discussions on Pillar II, it is an anomaly in the larger scope of DoD acquisitions. Created by Secretary of Defence Ash Carter in May 2016 to reach out to innovators, first in Silicon Valley and later in other centres of commercial technology innovation, the DIU is almost totally unique but for the Army Futures Command and three or four other innovators. The basis of its fame was the discovery by the famous (at least in the book by Shah and Kirchhoff) Laureen Daily, who found in Section 815 of the FY 2016 National Defence Authorisation Act (NDAA), an alternative acquisition authority; in this case OTAs, to establish contracts between a commercial firm, often a start-up, and a sector in the armed services and DoD more generally. And, most important for this article, the DIU recruited contracting officers with specific aspirations and training in the use of OTAs.
However, while the budget of the DIU was increased from $191 million in FY2023 to $983 million in FY2024, the overall budget for goods and services contracted out by DoD in FY2024 was $431 billion. That is, DIU, while a center for promoting innovation, is a very minor player in the overall scale of DoD contracting out. As the main alternative acquisition authority is clearly OTAs, the data from FY2023 shows that the total contracted out by DoD using OTAs was under $11 billion, which was less than three percent of the total contracted out. In short, while the DIU and the use of OTAs is encouraging, the vast majority of the 34,000 contracting officers stick with the FAR and consequently there is little innovation, and subsequently much delay.
In report after report the term “risk aversion” is used to characterise the orientation of contracting officers. The use of an OTA as acquisition authority is widely considered, in comparison to using the FAR, as opening up a contracting officer to accusations of some form of misbehaviour. It is thus telling that the use of OTAs is minimal. They were authorised for DoD in 1996 (The Defence Advanced Research Projects Agency (DARPA) received authority in 1989), the US Congress has repeatedly encouraged their use nineteen times between 1989 and 2023 in the annual NDAAs, and DoD has published two detailed guides on the use of OTAs. Even so, as OTAs are very open-ended and flexible the contracting officers will not take risks as they are concerned that by somehow not complying with all the rules and regulations included in the FAR, they will become vulnerable to being fired (a common phrase by employees of DoD is “No good deed goes unpunished”).
In 2024, the Defence Innovation Board, then chaired by Michael Bloomberg and including Admiral Mullen, commissioned and endorsed a major report on incentives for contracting officers in DoD, and concluded that there were none.
In the current Trump initiative to “right-size” the federal government the incentive structure is heavily oriented to, if anything, increasing the risk aversion of contracting officers. Hegseth has proposed to decrease the DoD civilian workforce by between five and eight percent. A rough guess by the professional staff of the Baroni Center for Government Contracting at George Mason University calculates that civilian contracting officer numbers will be diminished by 25 percent. Contracting officers are not included in the seven exempt categories for removal declared by the Trump administration, and are thus as likely to be fired as any other government employee.
Regardless of the hype in favor of innovation in DoD acquisitions, at the end of the day it is the contracting officers, and only the contracting officers, who have the authority to award contracts for the use of public monies by for-profit firms. And, with the actions of Elon Musk of the DOGE and Hegseth, there are even fewer, if there ever were any, incentives for contracting officers to utilise acquisition authorities such as OTAs.
In conclusion, while the rhetoric is very supportive of the use of alternative acquisition authorities, acquisition professionals, primarily contracting officers, have no incentive to do so. Rather, and to the contrary, they are incentivised to not deviate from the FAR. President Trump and members of his administration may know about commercial technology, and problems with current acquisition authorities, but apparently they are not aware of government employees and what incentivises them. As far as AUKUS is concerned, even if President Trump becomes convinced of its value, the benefits from US commercial technology to Pillar II of AUKUS appear very limited.
Thomas Bruneau is Distinguished Professor Emeritus of National Security Affairs at the Naval Postgraduate School, Monterey California. He joined the Department in 1987, became Chairman in 1989, and continued in that position until 1995. He became Director of the Center for Civil Military Relations in November 2000, a position he held until December 2004.
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