Integrating new technology into the military using Bar Napkin Math

BAR NAPKIN MATH

Department of Defense leaders, technology developers, self-proclaimed innovators, and many others are obsessed with the apparent lack of adoption and slow speed of integrating new technology into the military.

There are many reasons that Defense Department “innovators” can point to for this apparent lack of adoption, ranging from the budget process to how the military sets requirements for new weapons developments to a whole host of bureaucratic and cultural challenges embedded in the acquisition process.  

Many Department of Defense leaders and innovators incorrectly focus on increasing the transition rate of new technology into military operations. I will show, with simple bar napkin math, that increasing the technology transition rate is not fiscally feasible. The best path for the military is to continue to fund as much technology development as the budget allows and then conduct internal research and analysis to transition the technologies that will have the greatest “implementability” and “bang for the buck.” Based on my math, I believe that a sustainable technology transition rate for the military is between 1 and 10 percent. Also, the percentage of projects successfully fielding is even smaller depending on Department of Defense plans and resources, and advancements by America’s adversaries. 

To fiscally optimize the integration of new technology, the Defense Department needs to prioritize the efforts of some of its scientists, engineers, and innovative thinkers to focus on figuring out which new technology is going to deliver the best bang for the buck. This determination will take a lot of research and analysis and will not feel as awesome as delivering a perfect one-minute elevator pitch to a budget owner.

The challenges that new technologies face with integration into the Department of Defense are often blamed on the “technology valley of death,” a notional chasm where taxpayer-funded projects that did not transition into operational defense capabilities languish without going into production. Getting into the valley is easy. Businesses and their advocates in the government only need to stumble on the path that circumnavigates the labyrinth of bureaucracy to get projects funded. Interestingly, there is little talk about how expensive it is to integrate new technology into the Department of Defense.

In fact, the low number of technology adoption transitions is not the fault of the technologists or their government sponsors stumbling through the bureaucracy. In reality, the Defense Department budget guarantees that most technology development projects not tied to an existing program of record are destined for purgatory in the valley of Death. Luckily, department administrators have charted a narrow path to cross the valley. I believe that up to 10 percent of technology development projects (in a single budget cycle) can transition into a deployed and sustained military capability. The reality is that the defense budget cannot absorb the lifecycle costs incurred from a higher technology transition rate without degrading currently funded programs. 

The defense acquisition system does not need a major overhaul to increase technology transfers. The military does not need disrupters to buy weapons faster or to break the acquisition system used by the Department of Defense. The department needs its scientists, engineers, and innovative thinkers to assess the implementability and sustainability of a technology project. This assessment will determine a project’s value and allow for the worthiest projects to be transitioned and/or successfully fielded within the government’s allocated budget.

Truth Data, Definitions, and Assumptions

I believe that it is possible to support strategic planning with simple “bar napkin math” using publicly available information. I, of course, realize that Department of Defense acquisition budgets and technology transition are very complex topics, but if one were to make some reasonable assumptions, and use simple math, an overall strategy for integrating new technology can be clearly developed.

First, the numbers for my calculations will not be adjusted for inflation, except for the adjustments already included in the publicly available budget numbers. Second, in this discussion, technology transition will be defined as the moment that a developing technology receives a positive decision to become part of and/or its own program of record. Third, a program of record is defined as the moment a program receives procurement and/or operations and maintenance funding in the Fiscal Year Defense Plan and is particularly added as a line item in the Department of Defense budget. Fourth, the cost for a fully funded program of record, in this discussion, will be based on the project’s lifecycle costs, but this article will not address the lifecycle costs for disposal due to a lack of publicly available data.

Table 1 amalgamates publicly reported Department of Defense budget numbers found in the: FY20XX Department of Defense Agency Financial Report/Performance and Accountability Report. Numbers are in billions of dollars. 

I recognize that other military budget lines (military personnel and military construction) do contribute resources towards technology transition. Realistically, the majority of the personnel and construction budgets are expended on efforts that are not directly related to technology transition. For simplicity, I have omitted the military personnel and construction budget lines for assessing the percentage of new technologies that can transition within the department. 

The Office of the Secretary of Defense, Cost Assessment and Program Evaluation publishes an Operating and Support Cost-Estimating Guide. The table below amalgamates lifecycle cost estimates by percentage for select military systems.

Note3: The median values are: 7 percent for research & development; 30 percent for procurement; 61 percent for operations & sustainment; and add up to 98 percent (7+30+61 = 98). The missing 2 percent could be added proportionally or evenly spread into the costs, either way the outcome of the bar napkin math would not significantly change. The article will not account for the missing 2 percent of lifecycle costs.

To further simplify the bar napkin math, I assumed a project will need five years of technology maturation before its ready to become a program of record. I also assumed that the development costs of a project will be a constant percentage of the Department of Defense’s Research, Development, Test, and Evaluation budget for the year it was initially funded and the following four consecutive years (five years total for technology maturation). The cost percentage will not change with budget increases or decreases.

The technology transition rate and the development costs for the transitioned projects are linearly related. Consequently, transitioning 5 percent of the projects that started in FY2018 (can represent 10, 100, or any number of technology projects) will cost 1 percent of the total Research, Development, Test, and Evaluation budget over five years (FY2018 to FY2022). Looking at it another way, the technology maturation costs are determined by dividing the transition rate (5 percent) by the technology maturation period (five years). This results in a cost of 1 percent per year of the Research, Development, Test, and Evaluation budget. The total cost to fully develop the technologies equals 1 percent of the budget per year over the five-year maturation period added together. This linear relationship keeps the math simple and relevant.

The second to last assumption is to equally weigh the military systems and use the median lifecycle cost numbers from Table 2. I used the median values in the table because the lifecycle cost data is skewed (the median and average values are not symmetric) and the median values are often the best measure of central tendency in skewed cases.

The final assumption is that the eight military system types in Table 2 will account for 100 percent of the Research, Development, Test, and Evaluation budget expenditure. It is true that many technology development projects are not related to one of the eight military system types. However, for strategic planning purposes using 100 percent of the budget will indirectly account for all technology transitions and will not make a significant impact on the conclusions. A well-funded government report will significantly increase the accuracy of the data but likely have similar results.

The Bar Napkin Math for One Year of Technology Transitions

A technology transition rate of 30 percent or higher, in one year, is likely unsustainable as the procurement and operations and maintenance costs, according to my math, are approximately equal to an entire year of those budgets. The procurement costs could be executable by cutting some congressionally approved systems like aircraft. The bigger challenge is reprogramming $270.3 billion of the operations and maintenance budget over the next few years, without the current programs of record accepting painful resource cuts.

Compounding Technology Transition Costs Over Five Years

I also calculated the compounded costs of an annual technology transition rate of 5 percent and 10 percent starting with the FY2014 budget using the same bar napkin math. Projects starting in FY2014 will transition in FY2018, or every five years to allow for technology maturation.

Table 3: Top-Level Research & Development Budget Numbers FY2014 to FY2018

From Table 4, a 5 percent technology transition rate each year for five years will cost $93.2 billion in procurement dollars and $189.6 billion in operations and maintenance dollars. These costs come out to approximately 13 percent of the total procurement and operations and maintenance budget over those same five years (FY2018 to FY2022). Extrapolating this out, the Department of Defense would turn over nearly 100 percent of its systems every 38.5 years. This appears to be a very sustainable technology transition rate based on current service life estimates of military systems.

A 10 percent technology transition rate each year for five years will cost $186.4 billion in procurement dollars and $379.1 billion in operations and maintenance dollars (Table 5). These costs are approximately 26 percent (using the same math) of the total procurement and operations and maintenance budget over those same five years. Extrapolating this out, the Department of Defense would turn over nearly 100 percent of its systems every 19.2 years. A complete turnover of systems in the Defense Department every 19.2 years would be welcomed by many and is likely too slow for some innovators. In reality, this pace of turnover is unsustainable for many reasons, mainly that the current service life for most military systems is 20 to 40 years.

Not all research, development, test and evaluation activity is unplanned, as Department of Defense budget lines do account for some technology transition. This is typically research and development money spent by system program offices on fielded systems for things like upgrades that are “too desired to fail.” Procurement and sustainment dollars for these “desired” technology projects are also likely baked into the budget. Unfortunately, system program offices will also need to spend research and development dollars on unplanned upgrades or “fixes” that cause budget revamps or “unfunded requests” to happen. Finally, there are system program offices for development programs that are in the early stages of procurement and/or have not started procurement. These programs will also have planned and unplanned technology development projects but many of the procurement and sustainment dollars for these projects are usually minimally budgeted for, if at all, and are often estimates that may not be truly accurate.

Because “desired” technology development programs are already funded for transition, the remaining resources available for unplanned or innovative technology transitions are likely the “most valuable dollars” in the military’s acquisition budget. These “most valuable dollars” need to include a mix of the budget’s research, development, test, and evaluation, procurement, and operations and maintenance dollars. Additionally, recall that disposal costs were not considered in the math and I used a five-year technology maturation cycle. If disposal costs are added (likely exponentially higher due to recent environmental policies) and a shorter technology maturation timeframe is desired (one to three years versus five years), then a lower technology transition percentage rate will be realized by the military.

Innovators Need to Focus Beyond the Technology Valley of Death

This article might be sobering for a business trying to break into working with the Defense Department. Only a minimal number of new technologies will attain successfully fielded status along with the ultimate reward of a long-term procurement and sustainment contract. If successful fielding is not attainable with the Department of Defense, then businesses should focus their efforts on the private-sector application of the technology. Many technologies that did not initially transition into the military were still extremely successful in the commercial market and some did eventually transition to the Defense Department after achieving commercial success. Both technology push and technology pull have produced amazing outcomes for the military and the private sector. The military funded the development of the internet, Global Positioning System, self-driving cars, advanced drone technology, robotics, lasers, satellite technology, artificial intelligence, etc., and private businesses have profited from these technologies in immeasurable ways.

Fortuitously, the award of a Department of Defense research development contract directly offsets a company’s development costs, saving them from selling out to venture capitalists. 

I believe the Department of Defense cannot hamstring its technologists and needs to continue to fund as many research and development projects as possible, even if most of the technologies will not transition. During the early stages of a technology development project, the Department of Defense will likely not be able to accurately and/or methodically figure out a project’s value (bang for the buck). More importantly, the military needs to let its technologists mature the projects for two to five years with a “fail fast” mindset, while “desired” technology projects may be allowed a longer maturation schedule. Once technology development projects start to prove their legitimacy, the Defense Department needs its innovators to start doing the hard work of research and analysis to assess the projects implementability and sustainability. This assessment will determine a project’s value (bang for the buck) and allow for the worthiest projects to move forward towards successful fielding.

Ray Khan is a 28-year veteran of the U.S. Air Force. Duties performed include: engineer, program manager, tester, technologist, intelligence, information operations, search and rescue controller, electronic warfare operator, military diplomat, acquisitions professor, and innovator. Experience includes: two joint tours (Joint Warfare Analysis Center and Air Attaché to Oman); Defense Advanced Research Projects Agency intern; Director of Airborne Laser Program Engineering Division; Deputy department chair and senior military advisor at Defense Acquisition University, and Director of the AFWERX Las Vegas Hub and AFWERX Open Topic Phase II Lead.

Image: U.S. Air Force photo by Staff Sgt. Taylor Crul

 

Source: warontherocks.com