By Chris Thatcher | December 20, 2016 Estimated reading time 4 minutes, 48 seconds.
Innovation is the buzzword du jour in defence and aerospace circles.
It’s a predominant theme at most conferences and features in the public speeches and presentations of many politicians, government and military officials.
Whether it’s an initiative like the U.S. Department of Defense’s Defense Innovation Unit Experimental (DIUx)–an effort to better connect the department with Silicon Valley and other technology hubs–or the Canadian government’s innovation agenda, procurement officials on both sides of the Canada-U.S. border are seeking new ways to attract and collaborate with commercial technology developers.
But if North American militaries want to capitalize on leading edge commercial innovation, they will need a procurement system that doesn’t counteract those efforts, Phil Jesper, executive vice-president and chief operating officer for government systems at Rockwell Collins, argued in a presentation to the 2016 Canadian Aerospace Summit.
“I believe the crux of the issue is not access to leading edge technology, rather it is a problem of too burdensome an acquisition system that prevents the timely and efficient acquisition of commercial technology and innovation,” he said.
Regulatory changes since the mid-1990s have helped create a DoD acquisition framework that recognizes the value of commercial investment and technology for military applications, which has allowed companies such as Rockwell Collins to eliminate redundancies between their commercial and defence businesses. The cockpit displays originally developed for the Boeing 787 and later modified to fit the U.S. Air Force KC-46 Pegasus tanker illustrate the model, he said.
But the system only works well when products are classified as “commercial of a type” that require just minor modifications to meet military needs.
When products are classified “military,” which is often the case, they become “subject to overly burdensome acquisition rules, contractual flow-downs, cost-based accounting systems,” said Jesper. “The government becomes responsible for managing the product line themselves, including things such as obsolescence management, continued investment in innovation and insertion of that technology into commercial product lines.”
In essence, he argued, the process forces companies to establish a separate, low volume production line for their military item.
“How many innovative commercial companies would view this as an attractive business position?” he asked.
Though Jesper’s focus was primarily on the U.S. DoD, he said Canada’s Department of National Defence would also face challenges acquiring “commercial innovation in a cost-effective and efficient manner” if structural problems with the procurement system are not addressed.
He suggested regulations must recognize a well-understood definition for commercial items, which will need to be modified to satisfy military needs, and allow them to be purchased in a commercial fashion.
In particular, he critiqued the current demand by some defence customers for intellectual property (IP) without due financial compensation. While there are legitimate circumstances under which IP might be required–such as for navy ships conducting systems repair at sea–the present requirement for technical data is hampering the acquisition process.
“The current IP environment is creating barriers to the acquisition of commercial technologies,” said Jesper. “Companies are being asked to invest in off-the-shelf products, to bring those products to market for our customers, and to turn over our intellectual property so that our customers can then hand that IP to competitors and compete on production of that very equipment.”
He proposed several steps that might help resolve IP disagreements, beginning with the contract language.
“Define the problem you are trying to solve first…[t]hen write the contractual language that specifies the level of IP that you need. High-level maintenance data is very different from low-level maintenance data,” he said. “But whatever rights you ask for, you should not expect to get them free of charge…You are asking industry to forego some future revenue stream.”
Consequently, governments must budget for data rights and educate their acquisition workforce so that there are no discrepancies between what senior leaders say and what contract officers and attorneys ultimately insist on acquiring.
“A fair and equitable solution will require give and take on both sides of the intellectual property issue,” said Jesper, adding that both sides are actually on the same side when it comes to delivering life-saving technology to support the warfighter.
“Once we all agree on that objective, I have found that industry and defence customers are willing to meet each other at centre ice,” he said in deference to his Canadian audience.
