Contradictory Acquisition Reforms Confuse Industry

Navy photo

This past year, I heard remarks evoking the entrepreneurial spirit of Andrew Jackson Higgins, who designed the Landing Craft Vehicle Personnel, which was instrumental to the success of the largest seaborne invasion in history in June 1944.

In reading a biography on Higgins, it is easy to understand why this senior leader evoked Higgins’ entrepreneurial spirit. During the history of Higgins Industries, he fought government bureaucratic challenges to design and mass-produce naval combat motorboats, which foundationally changed the strategy of modern warfare.

In addition, more than the accolades of World War II-era senior military commanders, what shimmers most off the pages of his biography is his fierce love and commitment to the Marines, sailors and soldiers who would deploy, employ and operate those combat motorboats, not just off the coast of Normandy but also in the diverse geographies of the Pacific theater.

Equally important, however, was the biography’s description of the challenges Higgins faced in doing business with the Department of War, which any modern-era executive would recognize.

Higgins watched a military service appropriate his intellectual property to advance the service’s internally designed watercraft, only to have to correct the flaws the government made to his designs. He persevered through boom-bust cycles in wartime contracting — including building a massive production facility in advance of a contract that never materialized — and navigated hiring and laying off skilled employees, even at the height of wartime production, based on contract availability. He also had to deal with severe material shortages, such as steel, and the associated escalating prices through his supply chain.

Over the last several years, the federal government has been laser-focused on rebuilding manufacturing capacity in the United States, and the Pentagon in particular has been focused on reducing schedule timelines, introducing more commercial-like acquisition practices and addressing concerns from operational end users who need more capacity, modern systems and platforms that can communicate at “machine speed” with each other, and the ability to supply, sustain and repair weapons, systems and platforms in austere expeditionary environments. These initiatives are important and should continue.

At the same time, it is prudent to ensure there is intellectual ballast in these acquisition reform efforts. There are several areas where the drive for reform is in danger of leading to suboptimal outcomes.

One of the most pressing areas is the pending legislative debate regarding government purpose rights, or GPR. Currently, both the House and Senate versions of the fiscal year 2027 National Defense Authorization Act carry provisions to make GPR the default for defense contract deliverables, even when the technology is developed commercially or through private investment.

Government purpose rights automatically give the Defense Department broad prerogatives to use technical data and computer software within the government without restriction. Furthermore, they allow the government to share this sensitive commercial and privately funded data with third parties to support any government activity, including in competitive procurements and to support the development of new products.

A better approach would be to focus on the implementation of an important provision from the fiscal year 2026 National Defense Authorization Act, which requires the department to focus on identifying specific instances where it lacks sufficient technical data and needs to negotiate with contractors to address the gap.

In addition, the provision from the pending 2027 NDAA to create a third-party mediation body and an Intellectual Property Ombudsman that can bring government and industry to the table to settle IP disputes quickly in good faith would also be a constructive step.

Another area of concern is protecting the significant reform efforts that have benefited all companies, but especially small- and medium-sized suppliers, by reducing government-driven requirements in the pre-award contract schedule.

One specific reform involves certified cost and pricing data. The 2026 NDAA increased the statutory threshold to $10 million for contracts entered into after June 30. This is in sharp contrast to a recent decision to expand the requirements for companies to produce cost data, even if not certified, when normally they would not be required.

This step, if implemented, would reverse the progress made in streamlining acquisition by seeking cost information for contract actions that previously could rely on price justification and competition. It would cover data for commercial contracts, Other Transactions and competitive contracts, including from nontraditional defense contractors, which are currently exempt from providing this information.

Between the pending government purpose rights provision and expectations for additional cost data, there is significant concern and confusion in the defense industrial base.

President Dwight D. Eisenhower referred to Higgins as “the man who won the war for us,” but Higgins Industries did not survive the post-war transition to a civilian economy. The company was plagued with corporate financial fragility, even at the height of wartime production, and at one point its credit was so poor that its suppliers had cash-on-delivery stipulations.

It is fortunate that Higgins Industries was privately held and that among the myriad of government regulators he did not have to contend with the Securities and Exchange Commission.

Higgins lived a large life and achieved extraordinary accomplishments on behalf of the service personnel he loved. Part of respecting his legacy must be drawing the right lessons from the epic battles he fought with the government on their behalf.

Jennifer Stewart is executive vice president for strategy and policy at the National Defense Industrial Association.

 

Topics: Industrial Base