The Pentagon’s New Offset Strategy Faces Major Hurdles

U.S. defense officials have become almost frantic about what they see as the need to find a way of offsetting the perceived loss of American military-technological preeminence over prospective adversaries. This new reality led then-Defense Secretary Hagel to observe recently that “Our military could arrive in a future combat theater facing an arsenal of advanced, disruptive technologies that thwart our technological advantages, limit our freedom of maneuver, and put American lives at risk.”

The Pentagon is now looking for a new offset strategy, the third since the end of World War Two. The first one, beginning in the mid-1950s was nuclear escalation as a means of offsetting the Soviet Union’s massive superiority in conventional forces. The second, triggered by Moscow’s attainment of nuclear parity with the United States and extending from the late 1970s until today, focused on exploiting a series of advanced technologies such as stealth and precision-guided munitions as well as new operational concepts such as AirLand Battle to undermine the Red Army juggernaut. The Soviet leadership faced the choice between accepting the risk of an unsuccessful conventional attack and responding to Western success with its own nuclear weapons. During the Cold War, such a step meant the inevitable annihilation of the Soviet Union.

The two previous, successful offset strategies never promised to win the war. They only sought to make it clear that Moscow couldn’t either and that any attempt it made to start a conventional war would inevitably lead to escalation. Strategically, they were based on a simple premise: success lay in making the Soviet Union uncertain about the outcome of any initial conventional attack. It was challenging operationally and quite expensive. However, the two offset strategies basically deterred war.

The Department of Defense recently announced a Defense Innovation Initiative (DII) intended to develop a new set of advanced capabilities that would constitute the core of a third offset strategy. As described by then-Secretary Hagel, “this new initiative is an ambitious department-wide effort to identify and invest in innovative ways to sustain and advance America’s military dominance for the 21^st century.” The centerpiece of the effort will be a new Long-Range Research and Development Planning Program that will help identify, develop, and field breakthroughs in the most cutting-edge technologies and systems, especially from the fields of robotics, autonomous systems, miniaturization, big data, and advanced manufacturing, including 3-D printing. This program also will look for new operational concepts, methods of analysis and war gaming and improvements to professional military education.

According to the Pentagon, two factors will be key to the ability to implement the third offset strategy and realize the deployment of advanced capabilities. The first is investments in innovation. The second is reform of the defense enterprise.

Unfortunately, the Pentagon faces major, probably insurmountable, hurdles in its pursuit of this third offset strategy. First, defense is no longer the engine of innovation it was during the Cold War. The source of innovation is the commercial world. This is particularly true with respect to the technologies that the DII has identified as cutting edge. DoD’s entire annual expenditure on reimbursable R&D, about $6 billion, is overshadowed by that of a single commercial company, Apple, which spent nearly $2 billion in the fourth quarter of 2014 alone.  Last year, Amazon spent $10 billion on R&D, including for an innovative methane fueled rocket engine.

Second, commercial companies are not necessarily interested in doing defense work; there isn’t enough money in it and the acquisition system imposes insuperable barriers to entry. In fact, commercial companies are exiting critical areas of defense work. Amazon has acquired a number of the leading U.S. robotics companies, many of which were started with defense science and technology funds, and refocused them solely on commercial projects.

Third, even if the Pentagon could access all this innovation, it is unlikely to be able to exploit it effectively. The defense acquisition system is too far gone for reforms to do more than achieve modest improvements in cost and schedule. This is particularly true in technology areas with very fast cycles. Over the past decade, the defense organizations that have had success in exploiting opportunities for innovation and speeding up the acquisition process – SOCOM, JIEDDO and the REF – have done so because they are able to go around the system. They combined the use of special contracting authorities with the ability to rapidly define requirements and to shift resources between R&D, procurement and operations and maintenance activities.

Finally, the Pentagon, really the nation, has a manufacturing problem. Assuming DoD could collaborate with commercial companies, identify and acquire cutting-edge technologies and figure out how to apply them to meet military requirements, the industrial base won’t be able to produce them in sufficient quantity for any serious conflict. The U.S. is de-industrializing. In World War Two, the Allies won largely as a consequence of being able to outproduce the Axis, which often had better technology. That will not be the case in a conflict with China, for example. We produce less than 80 million tons of steel a year; China makes around 800 million tons. Perhaps 3-D manufacturing will change this imbalance, but this is a commercially-driven technology which China and others can access as readily as can we.