On Tuesday, May 26, 2015, Northrop Grumman Chairman, Chief Executive Officer and President Wes Bush addressed the Center for Strategic & International Studies (CSIS) in Washington, D.C. Below are his remarks.

Rethinking R&D for the DoD

I’m delighted to be here with you today. Thank you John (Hamre, CSIS President and CEO) for your gracious invitation and introduction.

CSIS has for years been central to the discussion and debates of the most important strategic and security questions of our age. One would be hard pressed to identify more important security topics than innovation, research and development.

This is because ours is an innovation-based world, an innovation-based economy, and our national security rests on a foundation of innovation.

Consider the challenges facing us today:

  • Fiscal austerity;
  • A sluggish recovery;
  • A resurgence of terrorism;
  • A resurgence of Russian hegemony;
  • An expansive China;
  • An erratic North Korea and an ambitious and expansive Iran; and
  • Cyber attacks that seem to mount in number and severity by the day.

Innovation, and by association, research and development, is a core enabler for solutions to all those problems.

It certainly was to the challenges that have faced us in decades past and it will be to future challenges as well. As the President’s National Security Strategy, published in February, states: innovation "empowers American leadership with a competitive edge that secures our military advantage."

But, innovation doesn’t simply happen – our efforts at R&D must be carefully managed and cultivated. Particularly under today’s fiscal restraints.

And part of that careful management is the recognition that, for purposes of national security, all R&D is NOT created equal.

To explain how this is so, let me offer my view of what might be called the innovation eco-system. And, as with everything else in this city, let me start with funding.

It’s a pretty bleak picture.

Federal support for R&D funding comes primarily from the discretionary part of the budget, which is at the lowest point as a fraction of GDP since the 1950s:

  • In the 1960s, the US spent about 1% of GDP on defense-related R&D
  • Defense R&D spending declined to about 0.7% of GDP during the 1980s and stood around a half of a percent of GDP during the past decade
  • By the end of this decade, under current forecasts, we expect it to drop to about a third of a percent of GDP

These levels are frightening. They are simply insufficient to support the advances in technology our future military will need.

And this resourcing deficit comes at a time when the pace of technology has never been faster. Let me illustrate:

  • In 1974, the first model of the F-16 included 135 thousand lines of code
  • In 2006, the first model of the F-35 included 6.8 million lines of code
  • Today, the latest model of the F-35 includes 24 million lines of code

There is an old test pilot’s axiom that says, "You’ve never been lost until you’ve been lost at mach 5." The pace of technology is moving at mach 5, and we had better make sure we don’t get lost.

In fact, the pace of technology has been much in our favor since the end of WWII. This is why we must be careful to embrace and leverage that pace, not attempt to constrain it.

All through the Cold War our defense RDT&E was adequate to the task of keeping us ahead of our adversaries. And that investment paid huge dividends.

As an example, no other nation could have created the B-2 Spirit bomber:

  • New materials and technologies needed to be developed
  • Computers and software needed to be created just to design the complex curves necessary to make it stealthy
  • Originally, the B-2 could hit eight independent targets on a single mission, invisibly and with precision. Today’s current model can hit 80 – a ten-fold increase

That was an effort that only defense R&D could have brought forth. Which brings me back to what I said a moment ago: All R&D is NOT created equal when it comes to national security.

In these days of tight budgets, sequestration, and austerity, there is an understandable desire to find cheaper alternatives to defense R&D.

Because the commercial world is just as innovation-dependent as the defense world, it is natural that appropriators and the acquisition community would look there for innovations to translate into defense community solutions.

But I submit that commercial solutions, in and of themselves, are NOT the answer to our national security need for technological superiority:

  • Commercial technology, being inherently broadly available, offers no national security advantages by definition
  • Many national security needs simply cannot be met with commercial technology
  • For example, the auto industry has no interest in stealth
  • Nor does the commercial world have any interest in developing technologies for advanced hypersonics, electronic jamming, offensive cyber capabilities, or advanced missiles

There are just too many differences between the commercial world and the national security community for their R&D efforts to be interchangeable.

But perhaps the biggest difference between those two worlds is the basic business model of each.

Commercial technology follows the money wherever it leads. If the numbers say that a technology is no longer profitable, it is simply discontinued.

That is what has happened anytime you looked for on-line support for something you bought a while ago and discovered that your model was "no longer supported."

This is understandable given the fundamentals of the commercial business model.

But the defense industry business model requires it to stand by the customer regardless of the intrinsic value of the technology. The youngest B-52 is a half century old, but our industry still needs to support it.

All this is not to say that the commercial world has no utility to the defense community. It most certainly does. But only as leverage, not as a substitute we can depend on.

And the defense community can certainly learn a thing or two from the commercial world about such negatives as risk aversion and drawn-out acquisition times.

So our nation needs to value and enable innovation in a broad way – to help drive our economy and to support our security

I believe there are a few surprises in the list of necessary actions to achieve that objective, but let me list some of the most obvious:

First, there is a clear need to renew our government’s commitment to scientific discovery.

There needs to be an end to sequestration’s deep cuts to discretionary spending caps;

There must be sustained, real, meaningful growth in funding for basic research by our federal government.

We need to make permanent a strengthened federal R&D tax credit to encourage more innovation investment here in America.

We need to continue our efforts to increase the STEM workforce through science and math teacher recruitment, student development and college-level program design.

Our national visa program needs to be reformed to keep the thousands of international STEM students we educate here in America following their graduation, instead of being forced to return to their home nations.

Costly, burdensome and unnecessary regulations need to be reformed to free up researchers to do what they do best – innovate.

We need to reaffirm merit-based peer review as the primary mechanism our major federal agencies employ in making competitive research grants.

We need to stimulate further improvements in advanced manufacturing.

And we need to focus on innovating for affordability.

That’s quite a long list of actions, I’ll admit. But I am encouraged by a trend I see re-emerging that will help us move forward. And that trend is strengthening partnerships.

Partnerships are vital between all parties that comprise the innovation infrastructure of the defense community:

  • Partnerships between academia, industry and government;
  • Partnerships committed to basic research, applied research, and product development; and
  • Partnerships that address government policy roadblocks

These partnerships were instrumental during the R&D, production and deployment of the 2nd Offset technologies:

  • GPS;
  • Satellites;
  • Computer networking; and
  • Stealth

Ultimately, many of those technologies spilled into the commercial world creating or expanding entire industries, and generating astonishing human benefit.

The relationship between the commercial world and the defense community has long been symbiotic. But between the two, the clear net technology exporter has always been the defense community.

Now, we stand on the cusp of a new effort with a 3rd Offset:

  • Unmanned technologies;
  • Robotics;
  • Miniaturization;
  • Advanced manufacturing; and
  • And many other exciting innovations.

As with the 2nd Offset, this next effort stands to create great benefits for our citizens, even in addition to greater national security.

If carefully managed, it could revitalize the defense community’s aging workforce with a new generation of eager young talent.

And, as with the 2nd Offset, this next effort will thrive or stumble on the strength of the partnerships between the parties that will have to work together.

The good news is that DoD recognizes this. As Frank Kendall, the Pentagon’s acquisition chief, said in a recent interview, he is particularly worried "about the industrial base and what deep cuts in production and R&D are going to do."

To me, R&D is a partnership issue; and it is clear that Frank embraces the partnership model.

Marrying the tried-and-true to the truly exotic is what American innovators do best. Translating those efforts into solutions to enormous security challenges is the reason we have a defense industrial base.

No other community can do it better. And this is what makes this community of partners such a national asset.

The United States is still the leader in overall R&D spending and competitiveness. But that is changing fast.

The 2014 Global Innovation Index ranked the US sixth, behind countries like Switzerland and the UK.

While China ranked a distant 29th, it is closing fast. Measured in Purchasing Power Parity (PPP), Battelle forecasts that China’s total R&D funding will surpass the US by 2022. It already surpassed Japan as number two in 2011.

Furthermore, we can no longer dismiss Chinese research as inferior in quality. Chinese researchers are increasingly publishing in top rated journals and may soon dominate research in a number of fields.

China’s R&D budget has grown faster than its GDP growth. Whereas the economy grew at an average of nine percent in 2009-13, its R&D spending grew twice that rate – 18 percent – in the same period.

In contrast, over that same period, total US R&D spending grew annually by an average of only 1 percent while defense R&D declined by an average of seven percent each year.

There are many pundits who have concluded that America is in decline. But national decline is a choice, not a fate. And if we are in decline, it is within our power to arrest that slide through different choices.

In this, the age of innovation, technology, and human intellectual capital, one of the most important choices we can make is to do those things that support and advance R&D and innovation.

The great technological advances of past, present and future are expressions in metal, circuitry, and in bits of human ingenuity, human perseverance, and human vision.

They are not so much credits to engineering as they are credits to engineers – and scientists, and mathematicians, and public policymakers, and business people.

As such, technological and scientific innovation is founded upon distinctly human characteristics – vision, inspiration, hope, ego, moral impulses, even love of country and family.

They are the qualities that move free nations, industries, and companies forward.

And because these are human qualities, they cannot be mandated, directed or imposed. They can, however, be cultivated and incentivized. And perhaps that is the most important way to support research, development, and the freedom to innovate.

It is in all our best interests to cultivate these talents and skills, and to ensure the continuing strength of our great research institutions – private and public, commercial and non-commercial.

And to continue supporting these strengths by valuing our innovation ecosystem built on partnerships.

I am excited about the future we CAN create working together.

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