DoD won’t be able to out-compete China in central planning

That’s one of the things that our new CEO, former deputy secretary David Norquist talks about. We’re competing against a country that’s really good at central planning. We’re not going to out central plan them. We’re not going to out-government them. It’s going to be our partnerships, our innovation, our industry and our ability to break down the barriers between those sectors that’s going to let us get ahead. The way I think about PIAs [partnership intermediary agreements] is they’re a way to break down those barriers.

That was Arun Seraphin, director of the Emerging Technologies Institute at NDIA and former long-time SASC professional staff member, hosting the ETI Emerging Tech Horizons podcast.

A couple thoughts to add. First, the thing central planners inevitably focus on is economies of scale and discount economies of scope — they want to “bulk buy” to get a low price while neglecting how diversity leads to innovation and competition, ultimately a better product at a lower price. This focus on economies of scale is endemic to DoD program discussions, and ironically is in part why DoD’s force structure has shrunk to a smaller number of exquisite systems. Certainly, China is much larger than the United States and so you can’t beat them on the economies of scale axis.

Second, the level of central planning in China’s military sector is not too different from the broader Chinese economy. By contrast, DoD has a highly bureaucratic planning structure whereas the commercial economy is much more market-oriented. One focuses on resource allocation. The other on voluntary exchange. This leads to the obvious frictions between industry, allies, and DoD that puts DoD at another disadvantage.

One root cause of this friction is DoD’s resource allocation system called the Planning, Programming, Budgeting, Execution (PPBE) process. Installed in the 1960s, PPBE has its intellectual roots in socialist economists. It was devised to be the tool of the central planner, regardless of whether it is actually used that way or not.

Certainly, people will say DoD hasn’t been “centrally planned” since Laird’s participatory management in the 1969-1971 timeframe. The services and components all build their program objectives memorandum from the bottom up. While fact-of-life changes to existing programs bubble up from the bottom, new programs are built via consensus and approved from the top of the service hierarchies. Remember, each military service is largely than the entire national security apparatus for most countries.