The Pentagon’s acquisition process is broken

Former Rep. Mike Gallagher (R-WI) recently warned that the United States “has two years to prevent World War III” with China. Gallagher noted that Pete Hegseth, President-elect Donald Trump’s nominee for defense secretary, will confront “a deteriorating balance of power in the Indo-Pacific.” To ensure peace, Hegseth and his team must “go to war on day one — not with China, Russia or Iran but with the Pentagon bureaucracy.”

Gallagher hit the nail on the head. There is no doubt that the Department of Defense remains plagued by waste. As Elon Musk and Vivek Ramaswamy, the two leaders of the recently announced semi-official Department of Government Efficiency, have pointed out, “The Pentagon recently failed its seventh consecutive audit.” No successful business can operate in such a manner, and no nation that refuses to address such glaring inefficiency can successfully defend itself.

A great deal of the money squandered can be traced to an acquisition process that not only misuses taxpayer funds but hinders our nation’s ability to wage war. In their 2023 book, The Art of Military Innovation, defense analysts Edward Luttwak and Eitan Shamir highlight some of the more egregious examples of waste, including the “costliest of all contemporary weapon acquisitions, the F-35 jet fighter family,” whose development started in 1996 but didn’t go operational until 2015-2019. Yes, you read that right. This weapon system, plagued by delays and cost overruns, took more than 20 years to go fully operational. Even then, “it flew with unresolved software problems … and many inadequacies remained to be corrected,” the authors note. 

Some of these inadequacies remain to this day. As of May 2024, the estimated price tag for the operating and sustaining costs of the F-35 program is more than $2 trillion. Despite this staggering figure, the Government Accountability Office projected that the F-35 will see declining use. In terms of performance, American taxpayers are paying more and getting less.

The problems plaguing the acquisition process are both long-standing and systemic. In a July 2024 U.S. House Oversight Committee hearing, several defense budget experts called for the process to be both streamlined and updated. Mackenzie Eaglen, a senior fellow at the American Enterprise Institute, said the current process is a “Soviet-style purchasing system mostly unfit for the digital age.” Eaglen noted that one contributing factor behind cost overruns is “inefficient program management and an inability to implement best practices.”  

Indeed, there’s widespread and bipartisan agreement that the present course is unsustainable. Fortunately, there are solutions.

In October 2024, Palantir Technologies published “Defense Reformation,” a self-described “blueprint for the resurrection of the American Industrial Base.” Authored by Shyam Sankar, the company’s chief technology officer, the document warns that the U.S. is in an “undeclared state of emergency” and offers several recommendations.

In the years following the end of the Cold War, there was a decoupling of commercial innovation from defense. To remedy this, Sankar calls for addressing the DoD’s “fixation on cost-plus contracting, control and tedious regulation.” Cost-plus contracting is a barrier to innovation. He notes that “cost-reimbursed independent research and development is an indulgence” and calls for companies to invest their own capital — and for the government to incentivize them to do so.

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This dovetails with what Luttwak and Shamir observe in their book, comparing the speed of nimble Israeli defense acquisitions to the far more lethargic American version.

Topline: The incoming Pentagon team must cut red tape and embrace risk. This may seem counterintuitive, but it is essential. Absent risk, there’s no reward, and in a contest with China, there’s no prize for second place.

Sean Durns is a Washington, D.C.,-based foreign affairs analyst. His views are his own.