Podcast: Big questions in defense acquisition with Col. Bryon McClain

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Eric Lofgren: [00:00:00] I’m speaking with Colonel Brian McClain, an active duty instructor at the Dwight Eisenhower school. And before that he was the material leader for the rapid acquisition branch in the MILSATCOM directorate at the space and missile system center. Bryon, thanks for joining me on acquisition talk.

Bryon McClain: [00:00:14] Thanks, Eric. It’s really good

Eric Lofgren: [00:00:16] to be here.

Yeah. So you have a little disclaimer to give us.

Bryon McClain: [00:00:19] Yeah, so obviously right now I’m in an Academic setting. And so my views represent those from research and academics and do not represent the Eisenhower school, the us air force, or the department of defense in any way.

Thanks.

Eric Lofgren: [00:00:35] Great. So as he said, you’re professor right now? And. I wanted to ask you, what’s the hardest thing for you to convey to your students about defense acquisition or what do, what did they have the hardest time grasping or what did they get wrong? Most often?

Bryon McClain: [00:00:50] It’s an interesting question.

I’ve been thinking about this one.  It’s not so much what they get wrong most often. I’d say it’s really what the biggest focus is of our acquisition course  at the Eisenhower school.  we have a lot of courses for war college level students, but. We specifically focus in, I specifically teach in the acquisition course  and the challenge there is getting students to step away from what is the specific acquisition process.

And rather than ask that bigger question, why does this acquisition process exist? So that I’d say is definitely it. And I think you can see that in any time you’re talking with people involved in acquisition, everybody likes to discuss what’s wrong with the process. I don’t like this process because it makes me do this.

I don’t like this about the bureaucracy. But stepping back and trying to figure out why is this process the way it is, becomes quite a challenge. we’ve been trying to fix this problem since we started at the idea of acquisition in the first place.

Eric Lofgren: [00:01:52] Yeah.  Just thinking back on my career.

There was always an explanation for what you’re going to do. And my functional of course, was a cost estimator. So there was a very given story about, how do you fit into the overall acquisition process and then go do your analysis and, create your products. But then that was one of my problems, I knew what it was, but not exactly why they just said, okay, we need a realistic, cost estimate. So people aren’t underbidding and then we can inform the budget process and that just did not give it to me. that’s what started, I had to go back and just read the history because that’s how I always pull that thread.

So I’m glad. I think we’re on the same page there in terms of having that kind of. Knowing where things come from is just as important as knowing what the processes are. Because when you know where it comes from, you can also use in your mind, theories and models for how should it be, or should it be different or in what ways can it change?

Because there’s always a good reason for stuff. And you can’t just pull levers without really understanding where it picks back up somewhere else.

Bryon McClain: [00:02:54] And that’s a great point. And I think that links to your cost estimation paper, the theory that history of thought in defense acquisition, which is a fantastic paper because it unpacks some of the fundamental underlying assumptions as to why the process is the way it is specifically with PPE.

But you can stretch that. Farther because that also impacts why acquisition processes are the way they are understanding why understanding these underlying assumptions is the only way that we’re going to make any change in the future. If we don’t address an underlying assumption, we can try to make as many changes as we want, but we’re not going to get the output that we expect from the system.

Eric Lofgren: [00:03:36] Yeah. And some of it, it just seems like understanding. kind of mentality at the time and what was fashionable and intellectual thought. So like when you go back to the fifties and sixties, it was very plain that they were actually trying to take, neoclassical economics and force fit that into the real world, use their models.

And then say, this is how we should reorganize defense. And  it just seems like it’s one of those multifunctional. Kinds of views because you have to have these different pieces of economics, of, sociology of history of technology and systems engineering.

So it’s definitely an interesting, it’s one of those things though, I found myself going down a rabbit hole and then you get a little bit depressed. Cause you’re just like, there’s no way I can know all this stuff. It’s just impossible,

Bryon McClain: [00:04:19] yeah that’s, that is a challenge. And that the challenge in our curriculum.

So over the course of the semester that we’re teaching, we try to integrate some of these ideas of bureaucratic theory, military innovation theory. And then we look at those and apply those when you’re studying the requirements process, the budget process and the acquisition process. So it’s much more trying to be a political economic case study if you will, or laboratory exercise than it is an in-depth study of the process.

Defense acquisition university is fantastic. If you need to know the current process and that’s who we go to make sure we’re up to date on the current process. But again, we’re being a war college level. The Eisenhower school is concerned about making sure we have students that are ready to take on those senior leader jobs.

They’re coming in at the senior ranks and we want them to be prepared. This specific process is going to change between the time that they leave our school and the next few years that are out there. But if they start to understand what’s behind the process, they may be in a better chance to understand what they’re trying to get out of it.

And how to leverage the bureaucracy to help the war fighter, which ultimately everybody in active duty and our civilian counterparts and our contractor partners are all in that same boat, trying to help the war fighter

Eric Lofgren: [00:05:40] so when you look at your own career or your intellectual thought, what kinds of threads have you been pulling? On. With respect to defense acquisition, because you were saying, you want to have a way of focusing your thoughts and having a way of structuring acquisition.

So how do you pull that thread?

Bryon McClain: [00:05:59] So the biggest thing actually jumped out to me. When I came to Eisenhower as a student, I stumbled on this thing called principal agent theory  And ever since I stumbled on it. Suddenly put into focus kind of my past career. And I felt like I understood a lot more about what was going on and what I’ve been encountering and principal agent theory.

When you really start to look at it, it’s a very simple relationship between. It’s two individuals where one person is an expert in a certain field and one person needs help in something. And so they have this, the principal has this person, who’s an expert, or the agent worked for them.  And the question then becomes, how do I make sure that the agent who is smarter than I am, how do I make sure that they do what I want them to do?

How do I make sure that they make the right calls? Obviously a very simple case. A principal agent relationship is a financial manager. I’m no expert in finances in investments. I may be okay at being a program manager, but investments is a different story. So I hire an investment manager to manage my portfolio.

How do I make sure that they’re. Investing in stock that has the best return and not investing in stock, that they know someone or that they’re getting a kickback for, or a company that they have stock in and that they’re clouding their decisions. And so obviously the simple answer there is we set up a contract between two people and we set incentives in the contract so that whatever they get a per simile percentage of a return.

So therefore. If they get me a big return, they’re going to get a little bit of a return based off of that. So they’re always going to be incentivized to get me a return. Now I say using the financial manager experienced as a program manager  and I’m sure somewhere out there’s an ethics person going, Oh my gosh, what’s he talking about?

Obviously I don’t have my own financial manager and I don’t play in the stock market, but it’s, that kind of is to me, just really one of those key examples. Taking that a step further. That is the relationship that we have in the defense industry program. Managers have a contract with companies. Those companies have incentives, fixed price, contracts, cost, plus contracts.

They all have incentives, and we hope that they do their best work for the government. The challenge of all of this and the thing that really got me understanding all of this is the fact that.  This then means that you start to have trade-offs you have opportunity costs. I already mentioned the fact that the agent has more information than the principal.

If I want to  level the playing field, I can spend time learning, researching, becoming smarter, but that’s time I could be spending doing something else. So there’s an opportunity cost. I can also create some form of a monitoring mechanism. In the government contracting world. Everybody knows that when you do cost plus contracts, it comes with a huge overhead of cost accounting systems.

Those cost accounting systems are a way of managing information and pulling information from the contractor so that we, the government can review their performance and make sure that they’re performing in our best interest.  But what I came to understand that this is the relationship we have with the defense contractor.

We just think was I have a cost plus contract because it’s an early development and I have high risks. So that’s what I looked through my table and I make my decision. And we don’t make that complex calculation of what’s the size of my program office, how much management oversight can I put forth?

What are the right incentives? What do I actually need to be incentivizing? Do these incentives that I’m putting in my contract, incentivize what I actually need and the fact that there was an actual theory out there.  I felt I felt

kind of shocking because I’d never learned it. And I’ve been doing acquisition for 20 years.

So that to me was just this huge thread that I’ve been, it’s been a rabbit hole, almost that I’ve been in for the last three years. I’ve been here at Eisenhower.

Eric Lofgren: [00:09:53] I’m glad you, when you were bringing up the cost plus and fixed prices as like forms of incentive there, you brought up the cost accounting as a barrier.

And I wanted to ask you this because. In the theory of agency, one of those big ideas is how do you assign risk? And so when I use an outcomes-based contract or a fixed price contract, for example, the risk is on the supplier, and then in a behavior-based or cost plus contract the principal, or in this case, the government.

It takes most of the risk. And then it seems to be like the government wants to bring in new entrance. They want to take a little bit more risk with respect to innovation. And so they should be wanting to do more risk taking on their side. So cost plus contracts. But then as you said, you have all this cost accounting regulation that goes with it in order to.

That the government can oversee where the expenditures are happening, making sure they’re not making too big of a profit, able to manage risk by work breakdown structure, for example. And so it seems like almost like negates the whole purpose of the cost plus contract. And now all these kinds of innovation hubs are actually focusing on fixed price outcomes-based contracts where more of the risk again is being put back on the contractors and they’re forced to have.

Know, private funding. And a lot of times private funding is subsidizing a lot of that work. So how do you see this issue and should, on the early stages should cost plus kind of be easier to use for these kinds of new entrance?

Bryon McClain: [00:11:22] I think the challenge that we’re looking at here is the huge cost accounting systems, and they do create quite an overhead on companies. They’re all about leveling the information playing field. So the question to me comes one simple approach would be, are there other information tools that we could use to level that playing field?

Are there other ways that the government can feel confident in where the funding is going and getting the information that they’re getting and look at the contract type?   Think one of the challenges actually, we talk about cost plus fixed price. Is we like to talk about them as they’re mutually exclusive.

I’m either going to do a fixed price contract or a cost plus contract. And if you look at the far, which is something I stumbled on early on the far actually says that you should make your contract appropriate to the specific need. So maybe a better answer is if we look at small cost plus or cost plus a line items in a contract and portions of it that are fixed price, try to do a little bit of both.

So that you’re tailoring what work needs to be, where there are some efforts that are very heavily commercial that should be put in as fixed price. And there are some things that maybe need to be more of a cost plus perspective, and maybe that’s. A different approach to what we’re looking at. Unfortunately it creates more work in the system  because any time you’re doing this mix, it, the contract becomes much more complex that said there’s also a different discussion about risk that I think we should get into later.

Eric Lofgren: [00:12:52] Yeah. I was going to bring up the man. I feel like I always bring up Oliver Williamson, but he almost brought up the exact same point because he was saying you, you can either put more controls on onto a contract, for example, earned value management or, these cost accounting systems.

Or you can use incentives right. In the contract structure. And of course, as you said, like fixed price and cost, plus there’s really a continuum, like how you use incentives. There’s going to be a continuum between those two things. So you don’t always have to be on one post or the other posts, but then Oliver Williamson basically arrived at well, why is no one talking about partitioning these contracts, and. One of the issues, of course, was you have more management, overhead associated with that, but to the degree that they’re smaller, more routine and there’s less discretion in them it might be less, you might be able to turn the crank on them a little bit easier. There’s less, risking in that, in terms of you don’t have this one major contract for so many years.

On the, did you have anything on the task partition? Because I think that’s ultimately what you’re almost saying you have to look at a major effort and not just do one big thing for the whole thing, but almost partition it in certain ways to tailor it.

Bryon McClain: [00:13:58] I think that’s really the answer that you’re looking at there.

Because. When you try to put, and we’ve all experienced this in our own life, right? There is never one solution for all of the problems. The more refined, the more tailored you get the better off your end results going to be for your specific problem. And if you look at federal acquisition regulation and you look even at what’s coming out with the adaptive acquisition framework, they keep pushing this idea of tailor, everything tailor the acquisition strategy, tailor everything that you’re doing based off of the specific situation, because each situation is different.

and that to me is why this looping this all the way back to the theory of agency. What is the information that I’m trying to understand, right? How am I trying to bridge this information gap? What incentives can I use so that maybe I don’t need information because that’s the other piece of this.

If I use different incentives, if I work on incentives, maybe that will help.  And then there’s always the element of trust. if you look at the updated theory of agency they started talking about bounded self-interest, which highlights that trust and fairness between the two parties has an element.

And if someone is feeling cheated, they’re more likely to be a little more negative than if somebody feels like there is trust and cooperation. They’re more likely to actually support and. follower best for the principal. So I think all of these things are out there. The problem with contracting fundamentally is there is no easy, simple solution, and that’s to take us to a different conversation.

I think that’s why OTAs are becoming something that people keep looking at. Because OT is trying to be much more tailored to these unique situations and without being the big standard far contract type, you get rid of those baggage’s and you’re allowed to tailor this agreement or contract to specifically what you need based off specific incentives.

Eric Lofgren: [00:15:58] And I guess getting back to education, right? Some of it is almost like once you go to the more tailored situations, you need a more trained workforce to make those decisions because it’s not pre-canned for you. And to an extent,

Bryon McClain: [00:16:11] no, and you’re spot on. And that’s one of the biggest challenges.

The more flexibility that I want to give to people, the more knowledge that they have to have, and the more trust I have to have. That to me was the other element of the theory of agency that jumped out at me. It’s so easy to look at it from the point of the contractor and the government, but I then realized it’s between the program manager and their staff it’s between the program manager and the program executive officer the acquisition chain, because as a program manager, I’m acting on behalf of the program, executive officer who has their own concerns.

And I have my own information. As a program manager, I may know more about a program than they do. I may see an issue that I want to try to solve my own way without there. Advice or help. Or I may jump to them and say, Hey, I need your help on this, but there is a relationship right there, there is an information asymmetry between the two individuals and there are incentives because that program executive, officer’s the one who’s ultimately going to decide whether or not I’m doing a good job and they’re going to decide what’s my next promotion opportunity.

So I’m going to listen to what they have to say. So while I am a principal, as a program manager to the contractor, I’m an agent to the program, executive officer who is also an agent too. The secretary of the air force and the S service, they acquisition executive, who is also though they in themselves are agents to Congress.

So you can suddenly start following this trail and recognize that at every stage, there is an information asymmetry between two people. There is some level of incentives. There is some form of oversight, some form of contract between them and. That just blows this whole situation up to a really big challenge as you start trying to match everything.

And so from that long discussion, back to what we were talking about of tailoring contracts and workforce knowledge and training, you can have a different management style with somebody who has a lot of experience, a lot of training and a lot of capability than you may have with somebody who doesn’t.

And that’s where the process enters the room and becomes the Bible.

Eric Lofgren: [00:18:29] I almost look at it from a game theory, but not really just using that as an analogy, because in a game theory, it’s like when you have one-off kinds of situations, usually get into these bad outcomes, but then when you have these infinite horizon games or whatever, repeated games, people can usually get to the right place.

And when I think about that in acquisition, it’s almost like. If I have these one major ten-year SDD contracts, everything’s built in there. And if you can partition those and break things down, lower risk for each individual action, you can get more people, the types of experiences earlier in their career.

And then you can start building that trust up the chain of command through the nested, as you said, agency and principle like through the bureaucracy. And then that will provide the information feedback. So I want to bring it back to what you were talking about, and you can comment on that if you wanted, but I thought it was really interesting what you said.

Okay. It cost accounting is used as like that information train between the contract and the government so that the government can measure and make sure that they’re doing what’s in the principal’s best interests. And then if it’s not cost accounting, then what is it? I guess my reaction is cost accounting.

Isn’t the best information flow because how does the government know whether. A certain fabrication takes a thousand hours or a hundred hours or whatever, when it’s isolated and doesn’t have these alternatives to see other ways of going about it. And then that forces government to do these should cost things and they bring in these consultants and then the consultants are supposedly more knowledgeable about the manufacturing processes and the people doing it.

And you get these ones like who is actually the expert here.  Yeah. Did you have anything to comment on that?

Bryon McClain: [00:20:10] I think you’re spot on, we do this in depth, cost accounting for our cost plus contracts with EVM, because it’s a way to break down this problem, but you were the one I think it was your paper that I was reading that really highlighted.

Where did some of these ideas come from systems analysis. So enter systems analysis, the idea that. We can optimize. We can understand the end state. All I need is a good, solid set of requirements that we’ll just plan it all the way out. And now I can do a nice cost accounting method and I can track progress of the program.

And that works beautifully in a system where there is risk. But it falls apart where there’s uncertainty. And that to me is another rabbit hole that I dove down while my time at Eisenhower is thinking that there is a difference between risk and uncertainty and from what I’ve come to understand risk.

Is a, something that we can quantify in terms of a dollar value. And we always talk about risk in terms of, there’s some form of an impact and there’s some form of a cost and a probability, and a probability, thank you for grabbing that last piece. Yeah. And, but uncertainty, the probability is really hard to guess. We can start to figure it out, but. But that probability just doesn’t really exist. So how do I cost something if I don’t have a good probability because of all of our expected values, all of our risk frameworks take that probability and impact match it together. And so that I think is where this starts to break down.

If I’m developing a new weapon system over a 20 year timeframe.  Maybe only 10 years initially, but it ends up being very long, right? How much uncertainty he is actually baked into that development plan does that cost accounting plan and the more uncertainty you have, the less useful, the cost information that you’re getting back really becomes.

And I think that’s getting to your point is, does this cost accounting information that we’re getting, is that actually useful? I think you could make an argument. It may not be

Eric Lofgren: [00:22:11] right. I think in some of that reminds me of.  Nassim Taleb’s black Swan because it’s okay, when I have these risks, supposedly I might know the impact and the probability of some things, but it always seems to be that one thing that people didn’t expect to happen that actually happens.

And it has this huge impact. So we don’t know what the probability is. Potentially. It’s like close to zero, but not zero, but there’s so many of these things that could be impacting even with their. Close to zero probabilities. One of them might actually show up and they might have these huge impacts that we weren’t, we didn’t understand or couldn’t have foreseen.

yeah, I wanted to ask you that because the theory of agency.  How does that kind of does this theory of agency resolve that in terms of when outcomes are not either, you can’t really measure outcomes in a specific way very well, or you can’t really know them in advance there’s uncertainty as to what will happen?

Like how does that impact the theory of agency with respect to, applications acquisition?

Bryon McClain: [00:23:07] Yeah. So very much so.

And when you start applying the theory of agency and into an uncertain environment, the instant recommendation is you have to focus on behavior. So then the question becomes, how do I focus on behavior?

How do I incentivize contractor behavior? How do I monitor contractor behavior? And I think the challenge there is I’m not a hundred percent sure. And I don’t think we’ve quite figured that out yet. I think cost accounting in my humble opinion, EVM cost accounting. That is an attempt to monitor the contractor’s behavior.

And it’s an attempt to do it with numbers so that we can actually understand what we’re looking at. And as much as I may say, Oh, I don’t know about it at the same time, we need to have that oversight. And I don’t think anybody would argue not to have that level of oversight, but we need to really start to understand where our assumptions are at play as well.

When it comes to things like level of effort, understanding  workforce there’s so many various things that can get rolled up into that cost accounting data. Understanding what’s getting rolled up. And what are some of those charges is very important. Being able to match that to schedule sometimes becomes difficult because of the uncertainty, but we have to monitor the behavior.

And that’s literally what principal agent theory says. You have to focus on the behavior, which unfortunately is what we do with contractor  deliverables. CDRLs.   The data requirements that we have, the cost accounting data, the requirements we have, all of that stuff is our attempt at monitoring behavior, which would make sense for a cost plus contract, which you’re applying to uncertainty.

So the theories are all there, but then I think the next step back is how much are we actively recognizing these theories that are in place when we’re applying them in contracting actions? When we’re developing acquisition strategies as program managers. And that’s the piece that came to me that I realized.

I should have been understanding these theories earlier on. And as I move forward, I intend 100% to keep these in the back of my head.

Eric Lofgren: [00:25:09] Yeah. I hear you. The cost accounting. It just seems like it wants to be something, universal and like objective and true, but then it turns out cost accounting it’s completely subjectively based because you have to know what went behind that.

If I had just have a fixed requirement, no one else is working on it. Who knows what that costs and schedule. Should have been. And that’s like the ultimate question. And you can only get there. It seems  by just trying out like different alternatives and seeing, so it seems I want to get your reaction to this.

Like, how does relational contracting, fit into this agency theory? Or is relational contracting actually like a form of behavioral contracts because you have these open-ended contracts. Regulated by trust. But I think the real point is you need to have these feedback loops and EVM tries to be a feedback loop I have ten year contract for development.

And then I need something in between to update budgets and update, trade off from the group, from the government, which retains its decision rights over any kinds of changes. And then it seems like in the behavioral relational contracting, it’s almost like you want. You like almost constrained the cost and the schedule and just   show me something, whether it’s at a component or a system level an MVP.

And then if I feel like you’re doing a good job relative to the other options I have available, and the other things I’m working on, then I will either continue or not continue. So the feedback is in seeing  what came out rather than seeing the performance to a plan.

Bryon McClain: [00:26:36] Yes, I think that is exactly what they’re talking about in terms of behavioral behavior based contracting.

Having that close knit relationship now to have that close knit relationship means that you have to have elements of trust. You have to have information sharing and you have to have a program office that is capable of monitoring. You have to be able to, when you’re talking to the contractor, you have to understand what they’re saying.

So there’s a level of knowledge, technical knowledge. There’s a level of program management knowledge. All of that sort of stuff comes into play. I think in small cases, these work really well. But the other challenge that is always in the back of my head is who do I work for? And all program managers fundamentally are working for the American people, which we’re being oversaw by Congress on their behalf.

And so there’s that element of making sure that whatever contract style we try to do. You don’t end up in the Washington post as an example of what not to do. So relational contracting. I like the idea, but like I said earlier on there won’t be one thing that fits all. So keeping these small, keeping them focused, keeping them with highly trained individuals, leading them.

I think that’s a great strategy.

Eric Lofgren: [00:27:52] Yeah, definitely. I think the risk aversion is, you know, and wants to be that example. And, ultimately someone has to be that example and potentially that same person could turn it around and learn from that example and deliver greatness and potentially where you just don’t give them the chance to learn from mistakes.

Bryon McClain: [00:28:09] Yeah, that’s always a challenge in the government, as we talk about wanting to be able to take risks and. When you say you want to take risk, what does that really mean? What is the actual thing that you are risking in a relationship internal contracting in general? That should be okay if you have that good relationship.

but what is your risk and on actually understanding, am I taking a risk or am I just not there? And sometimes you also get into a situation. Where maybe you are picking up. So there’s a lot of movement in program managers. If you pick up a contract, that’s a relational contract that may have been running smoothly, but you don’t have a level of technical knowledge on the specific topics.

And that allows the contractor, some wiggle room, then who do you blame? Exactly. And I think that starts to unravel part of why we always end up with a process to begin with. Is because when there are mistakes, we always like to find somebody to blame and process helps us control the various levels. It helps us control the various people.

it’s a default to process whether it’s good or bad, we default to process.

Eric Lofgren: [00:29:19] I wanted to move on to the role of unintended consequences. So when we have like acquisition policy that comes out. It’s a complex system and it’s just really hard to understand what is exactly going to happen.

So does acquisition policy often underestimate the role of unintended consequences?

Bryon McClain: [00:29:36] I think we always underestimate the role of unintended consequences, frankly.  But I’m glad you brought up unintended consequences. So I’ve mentioned early on about the air force Institute of technology C5 case study.

I think that’s a great example of unintended consequences that play fundamentally is to C5 was in production. The air force, all of our cost models were all about weight. And so if you want to have an aircraft and your affordability, lifecycle affordability, all of the sustainment costs, all of those future costs that you won’t experience until you’ve bought the asset.

They’re all based off of weight. The more, I can keep that weight down the lower those long-term costs are going to be, and those were our cost models at the time. So the air force wrote a very strong contract with Lockheed Martin on the C5 all about. And one of the strong elements was weight and there was a severe penalty for going over weight in terms of how much money we were going to take away from Lockheed Martin.

So Lockheed Martin was incentivized to reduce weight. Development being what it is with uncertainty. The aircraft came in surprise overweight. The solution that the air force thought was well, this is going to impact our longterm costs. And so we were using current weight as a proxy metric for long-term costs.

The Lockheed Martin solution was to look at the wing spar and realize that there was a lot of weight there because they had over-designed it. So they reduce some of that. Over-designed by  creating some holes in the wing spar. And that in theory didn’t break it, it still matched it, but it may have made it a little bit easier to break.

Sure enough, after we’ve accepted delivery, many years down the stress fracture start showing up in the wing spar and we end up replacing those at cost to the government. And so that to me is a specific example of unintended consequences. We wanted to keep our costs down in the longterm. We wanted to keep our costs down in the long-term by putting a proxy metric.

Based off of weight and the end result of that was increased costs in the longterm. And okay. That example to me is you’re just when your metrics aren’t aligned, when your incentives aren’t aligned, you’re going to get unintended consequences. Now talking a bit at the acquisition system, using that example, the acquisition system itself is so many moving parts.

So many moving pieces. So many inputs from various people have various levers to control. What metrics are we measuring for success? If you say that there’s a problem with defense acquisition, what is the specific problem? And what are your metrics to measure that specific problem and how are your changes in incentives going to directly impact that?

And I would imagine if we look back, most of the answers are much more nebulous, very hard to find a specific problem. We find elements of problems. But now when we start making our changes, because we’re not truly understanding the problems and the incentives, we’re getting these unintended consequences.

So very long explanation to a very simple question, but they haven’t,

Eric Lofgren: [00:32:47] I was just thinking on the  example that you gave, people will always just say  well, we just need better performance metrics. Like they just chose the wrong one. We need a better one. And I just always wonder like, how? Because for any complex program. Like the F 35 or any program, and really is going to have like multiple dimensions of different ways to specify measurements of that. And a lot of times it just gets to, okay we got to make the requirement more general or something.  But that also, so that it encompasses more, but then at the same time, There’s a lot of wiggle room in there for other unintended consequences.

it doesn’t include everything. So like, how do you think about performance metrics or, I guess that gets back to the contracting front in terms of, how do we specify these outcomes? But any reactions there?

Bryon McClain: [00:33:32] Yeah. So I’m going to jump right back to your analysis your maybe not analysis, isn’t the right word, but rebuke of systems analysis.

You start talking about performance metrics, your talking about how the system is going to perform when we’ve procured it. And systems analysis says, yeah, we should be able to identify all of that ahead of time. But reality tells us that there is uncertainty. We don’t know everything. If we knew how the system was going to work, it would already be built.

But we don’t know how it’s going to work. That’s why we’re going through the design phase. And so some of these performance specifications that we think we’re going to measure and that we think are really, these are going to be critical. Maybe we’re wrong. Frankly. I think this to me is why, and I’m going to do a hard right turn here to agile and some of what we’ve learned from software acquisition,  the software community has figured out.

We don’t always know what we want upfront and iteration and playing around is the greatest thing that we can do. To actually start developing these metrics and understanding what you want. And I love this slide that’s out there. I don’t know who created it, but it has the development of a car using standard requirements up top.

And it has the development from skateboard to scooter to, open air convertible and bottom, basically highlighting that. If you iterate on your requirements, you’ll get. To understand better what your user really wants, where as if you don’t, you may put your metrics in the wrong place. so that to me is a key element of all of this, and I’m get getting a confused look.

So I’m assuming you probably haven’t heard of heard of this chart that I’m referencing and

Eric Lofgren: [00:35:18] have to find it. I haven’t seen it, but we’ll try to, if we find it, we’ll put up for the audience. But. Yeah. I think one of the challenges there is that we get into these weird dual loops of okay.

Let’s just say that it’s true. We need more kind of evidence-based, experiments to inform these decisions but then you also bring up the. Important point that you need information to be able to evaluate that, and it’s not really clear, like it’s cost accounting.

It is, a social network of individuals with technical talent. Who’s overlapping responsibilities keeps each other and in check. Is that kind of it? Not really sure. But it seems like you, you can’t even get started on that loop until you crack a nut that comes from like the role of oversight in terms of.

Can I get started on something to discover, to learn in order to inform a more concrete plan? Definitely by the time you like have fully built in tested something, you should know a lot about what’s the production cost and what’s the operations and sustainment costs. But, pretending to know that, before milestone B is quite hard.

What do you think about  this kind of interaction between. The department of defense and Congress and the relevant, oversight agencies. How do you think about that role of oversight?

Bryon McClain: [00:36:32] It’s critical. That’s fundamentally the job of Congress and I think that’s fundamental to the element of trust.

And so I actually strongly believe in oversight. I also strongly believe that we have to figure out how to have that communication. I think ABMS is something that. Congress that the DOD, the acquisition world, we should all be putting all of our effort into, because ABMS is an attempt to do something differently.

It’s an attempt to say, Hey, I know we’re not going to have this fully done with systems analysis upfront a hundred percent, but we’ve got a clear need. And we want that need to be modular. We want that need to be state-of-the-art with what state of the art is going to be in the future when we’re ready.

So we’re trying to do something amazing, but we haven’t figured out how to say that in such a way that oversight is happy. And you, we have to have that oversight because like I said that’s that link of trust, that stat link of making sure that public funds are being spent appropriately. There are plenty of examples of mistakes with government funds.

And I don’t think any of us want those. So let’s keep that connection going.  How do we work with professional staffers? How do we get them to understand what the DOD is doing in such a way that they can report to their leadership? And so that members of Congress feel confident in that the air force is actually spending money and not wasting money.

So I think that’s a fantastic test case  to try and get there. I think the other key element of that is what you highlighted experimentation, finding failures, learning from those failures and moving on.  And you had Dan ward on the podcast as one of his big recommendations. And I think it’s fantastic.

One, how can we try small things, learn from those small things, celebrate what we learned and move forward. That’s where I’d love to see us go in the future, but it requires, this is a big challenge. It requires us breaking off of that systems analysis mentality as a more of a gospel than it should be.

Eric Lofgren: [00:38:43] Yeah, definitely. I couldn’t agree with you more. I’m a little bit dismayed that it seems like ABMS is becoming. A little bit toxic to people and, there’s potentially a lot of reasons that people can say, maybe they did go too far. They were too encompassing. Maybe they didn’t actually do it.

Dan ward was saying, potentially there’s some issues with process control or however it is with ABMs. But I think ultimately there were smart people. Involved there. And they were trying to do the principles that Roper and others were advertising for many years. And, so I think there needs to be some kind of, getting together and just saying look like, we need to figure this out.

Maybe aBMS is not the answer to Jessie too.  And that’s okay, but we need to stand behind them and not use them as an example for everyone else who tries to do something similar that. I shouldn’t even go try that because the risk is way too high and the impact of my career might be too high.

So, you know, It would be nice to see a little bit,  as you said, ABMS is a good example there of this oversight issue and how you know how to bring the sides together. And really, I think it’s a important, opportunity to bring the sides together and really understand what’s going on and whether they restart ABMs or do something different.

I don’t really have a concern, I think what they were doing and what they’re trying to do was very admirable. And so I just felt a little dismayed when people started to jumping off the boat.

Bryon McClain: [00:40:06] Yeah. The key, there is no matter what happens in the future, we can learn from ABMS.

So to me, as long as we learn something from it, it’s a success.  That I think is the way to frame the discussion. Now, obviously for the war fighter in the field, they need capability. And so if they don’t get a capability, they are going to be frustrated by that. But from the acquisition standpoint, if we can take a little longer this time to make it better in the future, That may be a trade off.

We’d have to make the other thing I think to think about with ABMS. One of the great opportunities at Eisenhower school is interaction with The congressional research service every now and then thinking out, stepping outside of the program management world and seeing a broader perspective. And every time I’ve talked to somebody from CRS, they’re always great to highlight this perspective that they don’t understand why the DOD doesn’t just sit down and talk.

And that’s what they hear rumbling through the halls from the, from their clients, the staff members and the Congress members. There’s a communication challenge that we have, and that’s because any hierarchical organization, what I focus on as a program manager, I may want to be full and open with the legislative branch, but I don’t know what my decisions, how they impact the broader air force.

And so we, because of this, we try to pull all of our communication up and funnel it through legislative affairs. And so you don’t have this. Level of trust and open discussion with staff members, which in turn negatively impacts some other stuff. On the flip side, I don’t know that I want to be the program manager that gets the chief staff of the air force’s program canceled because I’m talking about what’s going on in my program.

Staff Members go, Oh we’ll take this other money from over here and help you out. And that happens to be from the number one priority from chief SAP. So you have this. Internal bureaucratic  dynamic that makes it challenging to have that open discussion. But. I will tell you if there were a way that we could figure out that discussion to make that happen better.

I think that would go a long way to reinvigorating that trust element. Yeah, it

Eric Lofgren: [00:42:21] reminds me, I can understand from the military leadership point of view, like you don’t want to have a Rickover who’s going directly to Congress and look at these, artifacts of tests that I’ve done that.

You should be able to support me. And then Congress goes and supports him independently. And now, the rest of the Bureau of Naval personnel and everyone else is like getting really pissed off at them.

Bryon McClain: [00:42:41] And that’s the fundamental challenge that we have a B so everything. That’s why I always go back to it depends.

But I think that to me is the most important thing for us to understand in the acquisition world. I started off using the word why. the reason that we have challenging communication, I can track back and go this makes sense. So now if I want to try and thread that needle, if I can understand the challenges that my boss is dealing with, that my bosses are dealing with.

If I can understand the challenge that legislative is dealing with, if I can try to. Frame my answer in such a way that it helps them do their job better than the process can move a little bit better. And that to me is why it’s so critical to spend the time that we have spend the time when you’re at war college at these academic level situations, trying to build up that intellectual capital.

So you have some of these tools that you can use as you move forward.

Eric Lofgren: [00:43:37] I I think you’re getting back to a whole mission command principle that I think exists a little bit more on the military side. I’ve never served, we definitely need something closer to that mentality on the acquisition side.

And to the extent that, you allow the top to delegate those decisions. I think you need more communication, right? And so you need these, different structures for communication because. You can teach people all the what’s, but then you need to have everyone on the same page as to why.

And then where are we going? So you have this coordinated front as opposed. So like everyone should know that the chiefs, his priority program is X and I have my priorities. you should know like, I’m not like never going to go try to Rob from this guy, Peter, to pay Paul even if you are advocating.

But I think that’s a really interesting view because one of my, assumptions was like, okay, the budget process we have today, we budget to programs. And sometimes it’s clear who’s doing that but sometimes it’s  obfuscated in terms of what’s the actual organizational structure and who’s doing that thing.

So sometimes like a Columbia class submarine, when I see that program element, I can pretty easily in my mind be like, okay, I know that’s going to be somewhere in NAVSEA.   and then I can follow that down to the PEO and the program office. But for other programs, that’s not the case.

So that’s why when I think about if you reclassify the budget, According to more organizational structure, which of course was how it existed pre 1960s. Then Congress would know okay, who’s in control of this thing and then they can have it more easily reach out. But then, do the services really want that kind of transparency and crosstalk at that level?

Because again,  at that level, you don’t really know what’s going on at the higher levels and you might contradict so, so there’s definitely that’s a good point and, a trade off, any kind of budget structure or any other kind of oversight structure we have, there’s never going to be like a perfect swing and you’re always going to have these kinds of trade-offs.

Bryon McClain: [00:45:30] And I’ll go the program based structure. When you’re looking, when you’re very much program centric, it makes it easier to make an argument. I have a clear threat or a capability need that I need this specific asset for. And so that becomes easier to argue. How much money does a specific organization need or a specific Bureau need?

How are they spending that money?  it becomes a little harder to argue. And as there is this element of being able to argue for funding that is critical. So that again, that goes back to this push and pull this trade-off of what am I trying to get out? What am I not getting at? And how does it all fit together?

So there.  It becomes very challenging. You did mention mission command earlier and I would very much agree that kind of idea works well, but mission command only works well when you have those layers of trust with the people below you. And so that you know that what you say is going to happen.

That to me, links back to this whole theory of agency, which is, if you don’t have a lot of trust, then you’re dealing with information and incentives and contract and process and all of those, all of that add on if you’re able to reduce those because you have high trust. That’s great. And that’s how you can go faster.

And I would argue that. The small innovation successes in the small agencies that seem to be doing amazing thing in the DOD. They’re able to do that because they have trust and that trust allows them to limit some of that oversight.

Eric Lofgren: [00:47:00] one of the interesting things about the requirements, I agree with you.

It makes it easier to argue for one thing or another, but ultimately,  I’m not really sure how much. Oversight it really provides because a lot of times the military will state it. This is an absolutely military requirement needs to be by this date and these parameters. And then it comes as this big package and do the people in Congress, necessarily have the knowledge to dissect that? Or is it like, once you authorize one of these things.  The program manager can essentially say I need that full thing or else you get nothing and it’s on you.

Like I stated my requirement and I stated what the cost was and if you’re going to remove budget from it. Congress or whoever it is, you will accept all responsibility for the damage that comes with. But then it just doesn’t make sense to me because like time and time again, we see that okay, when I had the V 22, for example, it was supposed to replace  the Chinooks, but then.

It was so late. Like they just figured it out. Like it turned out that requirement wasn’t really a requirement. And I was able like the performance change and the schedule change and within same thing with F 35, it’s like, well, I

needed it at this time. Some of the combat capabilities.

Yeah. Delayed. So did you really need it at that time? So yeah, it makes it hard for Congress to understand these trade-offs in my view. I feel like it’s not the perfect, what we have today is not necessarily the perfect way to, to build that trust. And so I want to use this to kind of transition into another question here that’s related, because again With these requirements, we always assume that technology innovation will sustain the military strategy.

So it’s always like when we learn about PPBE right, the strategy comes first and it’s supposed to be forward thinking and pull basically the innovation along and. I think that kind of made sense, maybe it made sense with the ballistic missiles like, okay, I have a nuclear warhead, I need something to throw it over to the Soviets.

It’s pretty fast. And, ballistic missile makes sense. And it actually turns out that people like turned down the ballistic missile and then it was technology pushed. It was just like all of these elements are here, so let’s start yeah. Doing it. I think the DOD wrongly presumes that.

That the innovation will follow and sustain the strategy rather than leading and disrupting it. And so all of these structures are in a way that you don’t, it doesn’t pull these opportunities, that, that it could have. So how do you see that? How’d you react to that?

Bryon McClain: [00:49:24] You just opened a fantastic can of worms.

One of the things that we spend a lot of time actually studying here at Eisenhower is military innovation and. One of the things that you’re talking about there, the ICBM case was studied by a number of people. Although one of my favorite articles is a Harvey Sapolsky’s article on the ICBM and studying what happened with that and those relationships.

And you could almost argue, and I would say he argues the fact that what really spurred that innovation, that technolog y pull Was not, Oh, we need to figure out a better way to get the warhead over was in fact, a fear of losing mission to the other services. And  Owen Cote and himself have this theory of inter-service rivalry as a key element of military innovation services.

Our ultimate aren’t preneurial entities. That are competing for funding and having that little bit of that competition, letting a little bit of mission overlap between them and letting them fight for those missions helps keep us thinking of new ways of doing business. And it’s one of the keys to disruptive innovation within the services.

And if you look at ICBM’s general, LeMay was very much a bomber pilot, a hundred percent for the bombers. And the way ICBM’s got started was the chief staff of the air force general white. Made some very savvy political moves. He sent general Schriever out to what is now Los Angeles air force base, and put him essentially reporting up to him directly and said, go off and figure out this Atlas thing.

And then he pulled LeMay up as the vice chief of staff so that he could have control over LeMay, keep LeMay from being too crazy. They got the ball rolling. And then this ICBM became a thing and is now a critical element of the nuclear triad, but obviously there’s multiple theories out there. So the military innovation theories are a fantastic study.

Barry Posen has the theory of civil military relationships he got from studying, especially like world war II and how. It takes a civilian push to really get militaries, to do things differently because of their more entrenched perspective and a Steven Rosen has a theory of intra service innovation where innovation actually comes from Mavericks, aligning within a service meeting up with a higher ranking service members and creating kind of pathways to promotion. And you almost create a group of people throughout time that want this innovation and that’s how you get innovation in there.

So I do think that military’s innovate.  I think the way they innovate though, is a little bit different. It’s a more of a challenge because fundamentally we have these platform communities and platform communities tend to go towards sustaining innovation. So we have a fighter and we have a jet fighter and what, if we could have a jet fighter with stealth, that would be great.

If we could have precision weapons on these jet fighters, that would be great. And we just keep that moving forward and getting better at doing that thing. But this idea of remotely piloted vehicles or unmanned vehicles that’s an impact to the community. And so maybe that’s a little more challenging.

I think if you look at the air force history, I think we’ve really started to take in that idea. And we are really leveraging unmanned aerial vehicles now, and remotely piloted vehicles they’re really coming in, but. That took some push to get us there. And I think some push from outside, some push from inside.

So you can see these theories out there of innovation, but it’s, it is not a, there is no simple answer to that problem that you’re bringing up.

Eric Lofgren: [00:53:23] I really liked the point that you brought up with the inter-service rivalry and there was also intra service rivalry too, because the Bureau of ordinance and the Bureau of aeronautics, we’re actually competing on missile development in the Navy.

But it seems like, for example, with the ICBM example, you had all the services they wanted. They knew that the next technological edge is like where things will go. And that will actually if you can win that, then you actually increase your budget or your know your position within the department of defense.

And so of course, Bernie Schriever, who was a bomber guy at WDD the Western development division. He. Transitioned and he saw the future. And I think, sometimes see who see the future or just, hallucinating it’s sometimes they’re right on, but he was making also a career bet himself.

Cause he, there was a great Jack Neufield book on him and he just, all space is like the next frontier and he wanted to be part of it. And I think that kind of mentality pushes the services towards those types of things. And they were actually willing to sacrifice a lot of.  Present capability to go get the ICBM’s because they knew it was so important.

And I think we’re flip that switch or that script now,  Actually I think those competitions don’t really even apply because they’re almost just each service gets a similar amount of money, but.

Like the way you win money is by having these big existing platforms and just like feed them and feed them. And it’s actually hard to get money to go do the next thing. Let’s just say JADC2 is the next paradigm that we need a lot of investment in and, the services should be willing to give up, procurements and other things currently to go get there.

And that would have followed how. What was happening back in the fifties with ballistic missiles, but like this, the structures have just flipped and is different now in terms of oversight, in terms of acquisition processes and the incentives are just different. And so it seems like instead of all the surfaces racing to get there, even though they kind of are with JADC2, it’s not necessarily an organizationally winning, game in terms of budget and position and status.

Bryon McClain: [00:55:23] I think you see some of that with cyber, there was definitely some positioning early on about 10 years ago between the various services to try and who could take the lead in this cyber mission. And it turned out everybody has a piece of it.  Sapolsky will argue that the Goldwater Nichols, while it was good for interoperability, Definitely tamped down some of this interservice competition and by tamping down this inner service competition that may impact negatively impact innovation.

So it’s very much an argument that has been made in the academic circles. Now, I think the other element to that is obviously the relationship of all of this with the defense industry. And keeping, how does this military innovation stuff go forward with that innovation. Defense industry is very much going to respond to what the military wants, because we’re really there.

It’s a monopsony world. We’re really their customer. And so they’re going to try and keep themselves on that route, which. Taking that kind of pulling that thread.  And there’s a great book. Peter Dombrowski and Eugene Goltz wrote it buying military transformation and they presented this theory that says, if you’re looking for a sustaining innovation, the existing defense industry is where you need to be because they are the best.

They know how to talk to the military. They know how to provide the product that you need. They have all the capabilities, they’re all set. But if you’re looking for disruptive innovation, something that does something totally different, that’s where you’re going to have some challenge because you need to go to a non-defense industry and they don’t have all of those existing relationships.

And so it’s just going to be more difficult. And they wrote that book, looking at the theory of net centric warfare. And how do we take net centric warfare and actually. Make that into the systems that we use today. So there’s a lot of moving pieces here, which gets back to our earlier discussion about how, when you’re trying to change things, see how you end up with unintended consequences, because everything seems to connect to everything else.

Which to me goes right back to my question of why

Eric Lofgren: [00:57:35] yeah. Get back on that. But first, before we leave the requirements, we have this set of requirements and that’s how like the military needs X and okay. There might be a budget for Y, but we should prioritize that and still state what the real military requirement is and cost that out.

And then the fiscal realities will be what they are and we had to prioritize within, but it seems like, the actual budgets go through this, these like surges and then declines. And it’s very cyclical. And just, since, the start of the global war on terror, you had the ramp upand then the sequestration in the early 2010s.

And then it went back up right over the Trump administration. And it seemed like a lot of the technology push, like it’s in these instances where we have unexpected growth in the budget, like everyone in 2015 was like, okay, we’re not going to be at, 700 and something Billion a couple of years later.

But when you get that unexpected plus up, you have all these extra wedges for technology push now, right? Oh, now I can start doing some of these cool, emerging tech things. They weren’t really a requirement, but they’re okay, now they’re a requirement. But if I didn’t have the extra money, they wouldn’t have been a requirement.

And then, now we’re in a place that we’ve seen some cool things start out. We’ve mentioned ABMS, but there’s just like a ton of these kind of interesting, smaller innovative programs that were trying to reach out to this, disruptive innovation, the non-traditional contractors, and we’re now in a place where.

Potentially we’re over-programmed right. We’re expecting the budgets to be higher or what the program plan in the POM was, is higher than what it’ll actually be. And we’re going to get into this kind of squeeze. And so now we’re going to we’re going to see what trade-offs are made and who wins out on that, whether it’s the status quo or whether you’re actually going to see a transition to the emerging stuff.

How do you think about like how this will shake out with the declining budgets in the future? In terms of the commercial tech reach out.

Bryon McClain: [00:59:25] So I think I’ll answer that by referencing one of my favorite recent articles, which was many lines of defense, and that came from goltz and sapolsky.  Really, they pretty much lay out their thesis is if you want to figure out what’s going to happen in the defense acquisition world, you have to look at who are the actors interest groups that play for a specific problem and what are their interests? And we all like to categorize the interest groups with the military industrial congressional complex, right?

Some people just say the military industrial complex, but that’s all, there’s everybody that’s out there. You have the bureaucracy side, you have the legislative side, you have the industry side. And for any specific issue that you’re going to look at. Each one of those three have interested parties and maybe conceivably competing, interested parties.

If you want to look for the future, you’ve got to analyze that problem with those parties and look at where things align and who’s going to have the most power. So as we move forward into this budget, drawdown, the question then is going to become, what are we looking at? What are we losing? Who is going to be.

The losers and who’s going to have the power. I think unfortunately, that system may have a preference for existing systems with an existing political base, with an existing company, with an existing service user. New ideas, new disruptive things. They’re going to have a little bit more challenging because they may not have that existing group, that existing base to help support them. At the same time, because there is so much of a push of innovation.

There is so much of us looking at doing things differently. There may create a power base around these innovation hubs that pushes us to focus there and pushes us to wave off some of the legacy systems, obviously with everything it’s going to be trades. And so there’s risks that the country, as a whole is going to look at taking.

If we reduce some legacy systems sooner than planned. You may have a reduced capability near term and a disruptive, cool new technology in the future. If you invest in focus too much in legacy, you may not have anything in the future. So these are going to be the trade-offs. I think the future, I’m definitely not one to speculate the future.

And I think the one thing that I’ve learned in reading taleb and looking at some of these other articles and this study, my academic study is all been trying to predict the future is going to be really challenging. You’re better off trying to look near-term and what’s happening now and just see what the forces are that are acting on it.

Eric Lofgren: [01:02:14] Yeah, definitely.  Saw this thing and dont need to react to it, but it was a kind of just looking at the lobby leaders from the defense industry and general Atomics spent about $10.7 million. And of course, Congress in the . budget. They put back like the air force requested zero MQ nines, and they put back in, I think it was 16, four.

I don’t know exactly how much it was, but close to $600 million for the procurement of these things. And it’s like, when you look at that, I spent $10 million and I got $600 program out of it. It’s pretty, it’s a pretty good rate of return. But I just want to move on to I think you had a great, like kind of political economy view of the acquisition system and you have been pushing around this idea and trying to see how it works.

Something called the unified framework for acquisition. And so you have a great, like a bunch of great um, kind of

images, and hopefully we’ll be able to put those up, but can you this is a podcast. We don’t have those images right in front of us, how would you break that down for our audience?

What’s your thinking and framework for this unified framework of acquisition.

Bryon McClain: [01:03:17] I’ve been trying to figure this out. And I think the fundamental thing that has really come to me is an, Oh, I’m sure it’s come out through this podcast. How just challenging it is to understand defense acquisition. And we’ve looked at it from all sorts of levels.

We’ve looked at all sorts of elements and we never seem to truly understand the whole picture. And frankly, I don’t think we ever will, But I started putting together. Okay. What is the framework? And to me, obviously, everything revolves right now around a weapon system. We’ve had the discussion about maybe it shouldn’t, but.

I’ll tell you right now it does. And you have the acquisition process. You have the budget process, PPBE, you have the JCIDS process for requirements, joint capabilities, integration, and development system. And that to me is the core of the defense acquisition systems. In fact the book answer would be, those are our three decision support systems, but that’s how we get things.

But really when you step back  and I love this, a great quote from Holley in 1964, that buy from his book buying material aircraft. It presents one thesis above all the procurement process is a weapon of war, no less significant than guns. And that to me is really the essence of what we do. It is a security process   But it’s not only in a security process. So Thomas McNaugher in 1987 wrote a piece studying history and he said, you know what? Acquisitions is really a technical and a political process. And it’s both at the exact same time, always. So you will never be able to separate technical. You’ll never be able to separate political.

And so now I’m dealing with something that is a security process, a technical process, and a political process. And that becomes very complex. but the challenge, it just keeps growing from there. So there’s also Linda Weiss, 2014 wrote a book called America, Inc. And she looked at very academically, looked at the US government and how we have a lot of this innovation and our transformative capacity.

And there’s really three things that I see.  It’s a technology and commercialization enterprise. And if you look at what we’re doing in the air force, that to me makes perfect sense. We love technology and all of our push for technologies. There’s stuff that gets spinoff from that.

And you can go through the host of examples. Everybody’s favorite is the internet from DARPA, right? But that’s just one of many GPS is another great example. There’s a lot of technology that, gets commercial use. She also highlighted that there’s these geopolitical drivers, which I think are really important because if you think back to world war II, we did amazing things in world war II.

We did amazing things because the political process went down and the security process went up. There is a direct threat. We’re going to go solve it. And guess what? There was a little bit of war profiteering. Yep. It happened. But of course it was going to happen. It happened because we lowered our political oversight.

If there’s no direct threat, then we can be a little bit higher in our political environment. So we have a lot more political oversight right now. We’re also having a lot less of fraud because you have good oversight and we can take the time to do the oversight, so there’s definitely a trade off there, but her third point that I love the most is she highlights this anti statist constraint. And when she’s using that word, which he’s highlighting is the fact that fundamentally America is capitalist. We love laissez-faire economics. We love to keep government only focusing  Excuse me.

They’re only focusing in markets and market failures and trying not to pick winners and losers. We’re trying to keep this level of separation between that industry, which is private and public government. And so what that means is that all of the relationships between this technical and political process, they have to follow this constraint.

So that’s then where I look at the Sapolsky_and_Gholtz argument that adds on this. Yeah. The technical process is really owned by industry, the political process by Congress, the security process by the bureaucracy. And then I start to think about it. That means that each one of those three groups, I need to worry about their interests, but I can’t study their interest the same.

Political scientists are going to be studying Congress and how Congress works . market business theorists are going to study industry. And then military studies are really more focused on the military and the bureaucracy. So when I start thinking about these various people, I may want go to a  public university that has a good political science program about good public policy program.

But I may not really understand market theory. And there’s very few people that start to draw these lines those that, do you see their name pop up over and over, right? Gholtz and Sapolsky_are just going to pop up anytime you do any of this research. Why? Because there are a few of the people that actually bridged that line between public policy and defense industry.

But that’s one of those challenges  Then I further complicate this whole world because now I’m starting to bring up this idea that this principal agent theory connects everybody. So while the bureaucracy is an agent to Congress, has the principle there also, the bureaucracy is also the principle to the industry, which is the agent, but industry is made up of employees and those employees are constituents.

As constituents and American taxpayers, they are principles to their agent of Congress. And Congress is the principal to the bureaucracy. So we have this loop that goes around it. And the ultimate conclusion that I really drew from all of this. Is the fact that you really want to understand defense acquisitions.

You’re bringing in systems engineering, expertise, economics, political science, international relations, and military security studies. And once you really master all five of those, then you may have a handle on how to deal with weapons system acquisition, which suddenly became a giant thing to try and.

chew in one mouthful. But to me, that is just where I started looking at this going, okay. Now I feel like I’m starting to get a handle on what’s out there.  And it took me three years just to going through our curriculum to start to. Put this together it’s really, I cannot press enough on how complex and how many various moving pieces there are in the defense acquisition world, which fundamentally why, if you look at the history, why nothing ever seems to change.

I would argue it’s because I don’t think I can come up with a framework to try and study it, but I can’t come up with any form of a framework to try and predict future outcomes. So there’s my overview of this.

Eric Lofgren: [01:10:16] in my own personal experience, just I’ve I like had a mission years ago. I was just like, okay, I’m going to devote every evening I’m not going to go see my friends.

I’m going to like, read all these like history books and try to figure it out. There’s no other way. I don’t think like you personally could have come up with your understanding if someone gave you that, that framework.  it’s hard to.

Digest or like comprehend it, what it really means until you just go through that work yourself. And there’s no way I would’ve been, ready to think about or talk about these things on like a podcast, unless I just had five years of just nothing, but just reading the history  And I still feel like I just know nothing, but you said something that was interesting in there that Cause again. I don’t know. I just feel a lot of times I’m just like uncertain. Like I say, these things that like, okay, I feel confident in this, but really I’m not confident in it at all. Because as you said, there’s so many different circumstances.

If I make a recommendation. Am I really getting at the heart of the thing or are these other aspects I haven’t looked at that will go against it? And actually the recommendation is really bad. So I think it’s good to have that kind of humility. And I probably need a little bit more of it, but you know,

in my own personal views, I’m a lot more, uncertain about how I think. But you said something interesting in there about.  The anti-state ism between politics and the industry, but then also with the w with the bureaucracy, because they’re intermediating that, but you said that from a policy standpoint, we don’t like picking winners and losers.

We just like, setting the regulations and making sure there’s no kinds of issues with respect to that. But you’re hearing from all these people in the innovate quote-unquote innovation side, like government needs to pick winners, right? There’s only so much money you got to if you want new entrance to come in and scale, like there’s no way around just making those decisions.

Cause it’s not like you’re, unless you say I’m decentralizing all decisions and you have complete, property rights over this budget. There’s no way, like you can get around the bureaucracy and individuals at a centralized level picking a winner. So what do you think about that?

Bryon McClain: [01:12:14] So first off your point about a touch of humility, right? Like I hear what you’re saying there. And this whole thing that I talked about.  to me. This is standing on the shoulders of giants. I am by no means an academic. This is me is trying to study, learn from a bunch of really smart people, take their ideas and put them together and something that I can use.

Eric Lofgren: [01:12:35] that’s actually the way I approach it because. When I was reading some of these guys like Frederick Mosher and armen alchian, and even James Forrestal had some interesting things before he went crazy.

But I was just like, I can’t find it anywhere. No one is talking about this. So I felt like I had a personal duty to be like, all I got to let people know that these interesting ideas, they’re not my ideas. It’s just that there are so many interesting things that like need to be back in the conversation.

I think that’s where I was coming from. Like again, standing on the shoulders of giant, I’m just like Armen Alchian, just, let’s just do what that guy said.

Bryon McClain: [01:13:07] And I think you’re spot on, because there’s so much good research out there, but the key is have we pulled it all together? And I think that is what’s really critical.

But you did ask a very specific question, right? Picking winners and losers. So let me get right to that. Another book out there that I haven’t referenced yet. Mariana Mazzucato and she theorizes, she said, maybe not pick winners and losers, but pick a market, put money out there, create a market and let it develop from there.

And I love that strategy and I’m going to pick on agility prime, because I think they’re doing that right now.   Electric, vertical takeoff and lift vehicles. Fantastic thing potentially. But I don’t know. Is it ever going to be cost-effective? I don’t know. So Uber is experimenting with this idea.

I know there’s other companies that are interested in their go, Hey, wouldn’t it be cool if I could, instead of getting in the taxi lane at the airport, especially in Newark or JFK, what if I just walked down and got in this autonomous air vehicle that was electric. Picked me up flew me right into downtown New York, dropped me off.

Boom. There I am. Wouldn’t that be a fantastic capability? And I think there could be a market for there, but that’s a very risky investment. The military. Wouldn’t it be amazing if we had atonomous electric vehicles parked right outside of battlefield, that if we had a casualty, you get somebody in there, push a button and it returns them to the nearest field hospital.

Don’t have to worry about helicopters coming in and out. They’re just sitting there parked, ready to go, and I don’t need pilots or any of that. It just goes, that could be a very cool capability as well. So agility prime says, Hey, what if we, as the government put out some seed money and try and test out this idea.

And we partner with commercial companies who can take this idea and run with it as well. Because if the technology works, we all benefit. What are my military requirements? I don’t know yet. So we’re gonna try, we’re gonna, Put it out there, put out the competition, try and get companies out there.

We’re going to fund a little bit of money to develop the technology and we’re going to be out there as a potential customer. So now here I am as an investor and I see a potential market and I see both the military and the civilian market that’s out there, but I don’t have to put in all of my money because the government is helping to cover some of that uncertainty.

So we’re all sharing this uncertainty. And I think that is how we can maintain this anti statist belief, which it’s ingrained in all of us. It is born in us from day one. And I think we see the fruits of it every day. So a lot of us are hesitant to try and start doing much more of a planned approach.

then I don’t think people want to go down that path. But if we put money for the supply development and we put money in a market, then that naturally will allow a market to pick the winners and losers for us, but in a technology area that we need. And if you look at Mazzucato, who I referenced early on, that’s really what she’s saying is the government has so much money.

If you focused and tailored that money. You could either a) help suppliers get over that hump or B) you could create a market, thus incentivizing suppliers to jump in on it, put in their investment because they see that market that’s out there. Another example, one of the examples she uses is solar panels and electric cars.

The government created subsidies that helped get the market over The very young time where it was still a little bit more expensive. And as we know, the more time we spend investing, we’re going to try and do things better. We’re going to get things cheaper. So the supplier cost comes down. The supplier cost comes down to a point that it actually intersects a real demand curve that is out there.

And now we have cost-effective and a market has started based off of government investment, but without picking a specific company. And I think that to me is the key.

Eric Lofgren: [01:17:13] so I think the regular way about it would have been like, The military says, okay, there’s this eVTOL thing out there.

What can I do with it? All right. And eVTOL evac. So I want to evacuate soldiers from the battlefield. For example, now build my requirement around that. Now I would just go out and do a brief, like prototype competition, select the winner. And then, $10 billion later. I get my program right.

But you’re saying no, if I’m thinking about eVTOLs, there’s one respect. Like we don’t know what the requirement is, but then there’s another respect of I could have said it was eVTOL evac, but eVTOL could give me so many different capabilities. It’s hard to know.

Like maybe the evac thing is a little bit more complicated and then I could do that later. And there’s other priorities that I could have accomplished earlier. And I just can’t specify that upfront. So I need some kind of. Mission funding or some kind of I’m creating a market, but it can’t be just one program platform, budget line item activity.

That’s not going to create the market. So you need something a little bit more general where the government can go in and contract with various firms, interact with the commercial economy as well. And not be like the, when I’m choosing the winner for this thing, I’m just like a participant. I just think it’s an interesting way.

I haven’t thought about that, but that’s a good way to think of looking at the winners and losers. It seems with the micro electronics, if the government, like you can think about all the different sectors, but when government doesn’t do this, whether it’s subsidies or just direct contracts companies might have an incentive to offshore that.

And then the government on the backend now with like micro electronics and Rare earth and the light, now they just have to go back in and start funneling money into these things again, because it comes up as a problem on the back end. So if you actually stimulate the market in a different way, as you were suggesting upfront, then you already have this domestic, a stronger domestic base from which you can rely on in the future.

Bryon McClain: [01:19:04] And I think the DOD is making strides to trying to think about that trusted capital marketplace. We’re trying to figure out, if we pay for it, we can keep companies focused in the U S and we can help grow this technology.  So coming up with unique ideas with doing this, they’re all going to be small because you can’t build a huge program around something that you don’t know about.

And again, I’m going to go right back to Dan ward, who would want to build a huge program out of that much uncertainty. We shouldn’t, we should be, keep it small. See if we have a failure, learn from it and move from there. So I think agility prime actually encompasses all of that idea. I think it’s a fantastic, great strategy.

It’s not going to work for everything. So the next destroyer we need, that’s probably not the right call because the destroyer is going to have very different needs and as much more of a sustaining capability, but for something different, if we want to focus in the market, I think it’s a great strategy.

And I also like the idea that we’re leveraging commercial work because commercial research they’re going to come up with different ways of doing things. There are going to be military unique requirements. But if I start with existing commercial technology, I instantly lower the uncertainty and then create a manageable risk program moving forward, which I think makes the most sense.

Eric Lofgren: [01:20:25] well there’s one aspect of should that be a civilian function? If it’s like for eVTOL, for example, like the air force. Maybe the air force isn’t the right place to be like, actually, but they do have the test ranges, so maybe they are the right place in the eVTOL case, certainly some of that seems like it could be civilian and then the military comes on later.

Bryon McClain: [01:20:44] Yeah, I agree with you. I don’t know that eVTOL fits with the air force. I don’t even know that the mission that I hypothesized makes sense for the military, but here’s what I do know by putting in this investment.

One of two things is going to happen. One, we may have the ability to learn something in the civilian market that will benefit Americans. That would be fantastic. We may come up with something that benefits the military. That would be fantastic, but. There’s a lot of uncertainty and I don’t want to sink a whole bunch of money into that much uncertainty.

So I think the cool thing about this strategy is I’m trying to figure something out without sinking a whole bunch of money into it. And that is, I think was critical. It has a huge potential for a payoff. So my calculation says, this is a win for the government. Even if nothing comes out of it.

And I think that’s an important thing to keep in mind. Even if we decide that this doesn’t have anything, commercial was just too much too difficult and military just doesn’t have a need. I bet you there’ll be some form of a spin-off technology that comes off from this two years, four years down the road, and it will be hard to link, but there’ll still be benefit no matter what.

Eric Lofgren: [01:21:57] Yeah, it seems like there’s a big, almost like market research function in that. So as you do these types of investments and you’re interacting with the commercial market, you actually learn what’s going on and you’re more savvy about what, or how do people price things? What are the technology and availability and the alternatives.

And then that can actually help you drive some of these requirements rather than I state the requirement. And then I go out and do the market research, which is like a very different thing, but. I would almost, I pushed back a little bit because it almost seems like you do have to put significant amounts.

So like agility prime, for example, I don’t know exactly what it is, but I’m saying it’s going to be in the low tens of millions of dollars that they’ve invested in that. And like that might put, push the needle a little bit, like at some point you’re going to have to make those bigger investments   As we’re talking about with the ballistic missiles they were like, we’re going to make this market. And we’re going to pour some money onto it, but that can be really hard for leaders to make that trade-off because it’s  what am I going to get for that? It’s not like necessarily super clear.

And then I have to trade off existing things that I know exactly what that platform is. And so that can be, a pretty hard place to go to.

Bryon McClain: [01:23:04] I’m not disagreeing that there’s definitely high costs involved. But when you’re looking at trying to try out a capability, $10 million is nothing compared to billions of dollars of the way we do standard acquisition program, which is I don’t actually get to know if that’s going to work until you provide me a developed product.

Billions of dollars later. Instead we’re saying, I think there might be something here. So yeah, we are spending more money upfront and it’s not small peanuts. This is the government funding, but by us putting in this money, we actually have a potential to see if there’s something here sooner.

Rather than later. And I think that’s a key  specifically for new technology or disruptive innovation. Again, I wouldn’t advocate this for sustaining innovation, for things that are using the existing platform, community updates to the existing platforms that it wouldn’t make sense, but if you’re looking at new things, if you’re looking to try something different, That’s where I think it works.

And especially anywhere that we can leverage commercial development, commercial investment, because then we’re not just the only ones with skin in the game. We’re not the only ones putting in the money. We all reap the rewards.

Eric Lofgren: [01:24:18] And the ideas, right? So it’s not, they’re reacting to the preconceptions of the military, that private funding results in a very different structure of outcomes and technology relative to what the military probably would have chosen

Bryon McClain: [01:24:30] and different ideas.

Diversity is the key to innovation. That to me is one of the most understated points that are out there. So get as many different backgrounds, as many different people that can bring all of their various ideas together. Because no one person has the right answer, but everybody has a piece of the right answer.

Eric Lofgren: [01:24:50] Yeah. And bringing back up Dan ward again, he loves it as a point that he makes quite a bit. And I think it’s very true.

Bryon McClain: [01:24:57] Yeah, I was I wasn’t necessarily going to jump right back on the Dan ward bandwagon, but I’m always on it. I’ve been reading his stuff for a long time. He makes wonderful arguments and he’s much more articulate than I am.

So I think he, the way he phrases it, but yeah, and his book lift, which was one of my recent reads, it just really hammers that point about diversity home. In a brilliant and just way that makes it seem so obvious and so natural.  So I had to have to jump on that. So

Eric Lofgren: [01:25:28] before we wrap up, I just wanted to get a quick opinion from you here.

When we think about acquisition reform,  should we really focus on like the rules and regulations, which seems like a lot of reform, what it does or should we focus on the workforce culture and there’s already enough wiggle room there in the rules and the regs.

Bryon McClain: [01:25:43] That’s a great question.

There’s a lot of people, so had visits up to kessel run and the team up there would argue that they did amazing things with the existing regulations. So you could almost argue, yeah, maybe it’s workforce culture, but I would almost argue it’s above workforce culture, it’s leadership decisions.

And I think the importance there is. leaders will set a culture based off of the decisions they make. And as much as we want to say risk, we want people to take risk. That’s all well and good until somebody has a failure and they get punished. Then you tell the leader, then you tell the workforce, don’t worry about it.

If somebody has a failure and we celebrate it and we say, this person took this risk and it didn’t work out. But look at what they did. Look at what we learned from it. Look at the goodness that we got. Then you can start to actually enable people because people will be, people will behave based off of their in incentives.

And sometimes we don’t even realize how we’re incentivizing people. So I would argue in terms of acquisition reform, I think what Ms. Lord was pushing with the adaptive acquisition framework. I think that really did a great job opening this up, and now we need to work with Congress and we need to work beyond then to help take that and run with it.

Eric Lofgren: [01:27:01] Yeah, definitely.  As we finish up here, what was the last book that you read related to defense acquisition? And then what’s also your favorite book on acquisition.

Bryon McClain: [01:27:09] I’d probably have to say one of my favorite books was lift by Dan ward. Just because. Being a aviation type of guy being in the air force.

Anytime you talk about aviation, I get interested. And that topic of aviation I thought was fantastic. I thought it was really well-written. I used it in one of my classes. Students really enjoyed it. I think that’s a great book.  But one of the books that I’m reading is bureaucracy by James Q. Wilson. And it’s an older textbook on looking at how bureaucracies function, but fundamentally the acquisition world is a giant bureaucracy. We must look at it as a bureaucracy and treated as the bureaucracy. And if you want to study bureaucracy.

So that’s where I’m at. I also mentioned the Linda Weiss book, which really gave me a different perspective of the relationship that’s out there.

Eric Lofgren: [01:27:56] Anything else you’d like to close with?

Bryon McClain: [01:27:58] I think that covers it. I think probably the biggest key for the podcast is to make sure we include a bibliography for all the really smart people that I’ve been referencing, because everything that I’ve been saying isn’t it is really just the amalgamation of really smart people.

Eric Lofgren: [01:28:12] On the show notes, we’ll definitely put up the list of all of the books. There’s probably more than a dozen, two dozen that, that you put up there. So the interested individual can go and read that bibliography. Colonel Bryon McClain. Thanks for joining me on acquisition talk.

Bryon McClain: [01:28:27] Thanks Eric. It’s been a lot of fun.