Disruption in Air Force procurement: an opportunity for Defence innovation?
While the military and disruptive technologies have long had a close relationship, the actual procurement process is notoriously long and complex and has been slow to change. It often takes months, sometimes years, to finalise a procurement contract. But the US Air Force has recently transformed the process and opened up the field to start-ups and small businesses and enabled them to sign up in just a day.
Defence and R&D budgets have been shrinking and the civilian commercial sector (Google, Apple, Amazon etc.) are developing technologies such as drones and unmanned vehicles that would once just have been the preserve of the military. Coupled with the wider challenges posed by the information revolution and connectivity turning into the Internet of Battlefield Things, Governments have realised that they need to broaden who they work with.
Governments have been collaborating with non-military suppliers, but the Air Force realised that if it could remove the barriers, it could reach right out to innovators and contract them to solve problems for them. They consequently tore up the rules and entirely re-wrote the script and modelled new pitch days after commercial investment pitch competitions.
Ahead of a pitch, the Air Force now posts online problems it is facing. Start-ups have 30 days to submit proposals and short pitch decks. The Air Force reviews the proposals within two weeks and invites companies in to pitch live to Air Force experts. Within one day, the Air Force selects initial winners and awards same-day payments via credit card – up to $158,000 a time – rather than making them wait a minimum of 60 days. These old payment terms usually precluded smaller companies from pitching for any project before. Now they can make payroll and concentrate on the task in hand. In addition to this, the Air Force has managed to get the contract for this process down to one page.
At the first Pitch Day in March, held in New York City, the Air Force awarded 51 contracts, each in 15 minutes or less, valued at a total of $8.75m. It took some companies just three minutes to sign up! Over the following 10 days, over $75m was awarded for 242 contracts.
The Air Force has two more pitches in the pipeline and the Navy and Army are said to be adopting these procedures too.
It will be interesting to see how this affects Defence procurement in the future. Initially these start-ups will be merely nibbling at the edges of the multi-billion dollar establishment, but this is an exciting development that could and should quickly spread through other governments and sectors. The big players all have extensive R&D teams and resources, but they were not included in this pitch.
The UK financial technology, known as fintech, example perhaps indicates where these developments might lead. Fintech disruptors were initially dismissed by the big banks as insignificant small-fry, but they quickly began to worry about the initial successes of the challengers and began scrambling to innovate and fight back – often copying ideas.
But fintechs, while good at disrupting, realised that they need to reach wider customer bases and make a profit and they now see that as possible by collaborating with banks. At the same time, banks gain the innovation, so both win.
The complexity of most Defence projects, due to the sheer size and complexity of the solutions required to get the job done, means that there will always be a need and a place for large-scale procurement. But change is inevitable and any transformation and disruption to the buying process that could and should ultimately be available to any company along with collaboration and a wider-pool for innovation should only be a good thing and lead to faster, better solutions while cutting costs.
How could this affect communicators? Defence industry communications teams are already adept at pushing innovation stories, but procurement overruns frequently dent reputations. Horizon scanning helps avoid pitfalls and perhaps they could leverage the learning from fintech to plan now for almost inevitable change, in close step with their commercial colleagues to highlight how they are keeping ahead of the game.
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