The US cannot compete with China if our military doesn’t invest in R&D

The Department of Defense (DOD) last month declared that 20 Chinese companies, including telecommunications firm Huawei and video surveillance company Hikvision, are a threat to U.S. national security because of their relationship with the Chinese military. DOD emphasized that Chinese president Xi Jinping’s military-civilian fusion strategy of exploiting high-technology is the blueprint for “China’s global ‘return’ to military preeminence.” 

China is relentlessly harnessing artificial intelligence, neuroscience and quantum communication to support military research and development and ubiquitous spying on its citizens and adversaries. The Trump administration has taken steps to strengthen our defense against China, but the U.S. will not outcompete China without dominating this century’s revolution in technology.

China’s ruthless communist autocracy imposes its will on China’s businesses through dictatorial fiat. The U.S. is poised to win the competition to develop and deploy high-technology under the power of free markets and innovative defense acquisition policies. The key to ensuring American success is for DOD and private industry to turbo-boost their collaboration. 

U.S. private industry now spends more on research and development (R&D) than the U.S. military, which, according to the most recently released budget, calls for increasing research, development, testing and evaluation of spending by 8.7 percent to $104 billion.  DOD is less influential today as a purchaser of high-technology than in the past. Defense dominates fewer U.S. industries. In 1965, DOD accounted for over 75 percent of all U.S. semiconductor purchases. By 2012, all governments worldwide represented less than 2 percent of the semiconductor market.

In order to excel in the high-technology domain, DOD must attract companies to participate in the defense marketplace or risk losing its military advantage. DOD needs to incentivize private industry to invest its own resources into military-relevant R&D. Private industry, in turn, will benefit from access to DOD capital, expertise and facilities. 

When encountering challenges working with DOD, companies naturally diversify their revenue streams. Some companies choose not to compete for defense contracts because of excessive and constantly changing regulations, increased costs, auditing requirements, and instability of funding caused by sequestration, continuing resolutions and lapses in appropriations. 

The COVID-19 pandemic has highlighted the importance of maintaining a domestic manufacturing base and being able to speed up the acquisition process, both of which are critical to the drive for technological superiority. The U.S. must strengthen supply chains to ensure fast, reliable access to critical parts, especially in the event of a national emergency. Even the most technologically advanced capabilities will prove ineffective if we do not have the domestic manufacturing capabilities to manufacture, operate and maintain these systems. 

My former boss, Gen. David Petraeus, emphasizes that strategic leaders need to get the big ideas right. Harnessing the revolution in technology requires eliminating, wherever possible, bureaucratic red tape, shortening contract cycle times and streamlining the entire process to enable the most efficient and expansive commercial purchases. 

First, DOD should require companies to provide data on cost and pricing only on products developed with DOD funds. Requiring such data universally risks driving companies out of the defense market and into less bureaucratic and often more lucrative commercial markets.

Second, DOD should expand the use of other transaction authorities to allow more flexibility in negotiating intellectual property for prototype, research and production projects. 

Third, seeking to attract companies to the defense marketplace, DOD should adjust its policies to be a better business partner to industry, or risk industry leaders opting for more promising markets. DOD should incentivize private industry to invest its own resources into defense-related manufacturing capabilities and R&D. DOD should cut regulations that drive up costs and delay cycle-times; protect the intellectual property rights of industry, or pay for such rights; and focus on best value to DOD and not on the profit margins of industry.

Congress should carry on oversight but resist adding more regulations and requirements to an overburdened system. Fewer regulations, but more consistently applied by an empowered defense acquisition workforce with the authority to make tailored decisions for acquisitions on a case-by-case basis, would increase efficiency and protect the government’s interests.  

Xi has made it clear that having the most advanced science and technology is critical to achieving his goal of building the world’s most powerful military by 2049. For the sake of our economic competitiveness and national security, it is up to our elected representatives to unleash the full potential of U.S. private industry as the force multiplier on which the future of our defense sector so deeply relies. 

Daniel N. Hoffman is a retired clandestine services officer and former chief of station with the Central Intelligence Agency. His combined 30 years of government service included high-level overseas and domestic positions at the CIA. Follow him on Twitter @DanielHoffmanDC.