Key Points and Summary – The Department of Defense has a record budget but faces a crisis: its outdated acquisition process is failing.
-A former industry executive argues that inefficient contracts and poor collaboration are wasting billions and hindering military readiness at a critical time.
-This systemic failure to incentivize innovation and value puts the U.S. at a disadvantage in the face of peer competition from China.
-The solution lies in smarter, outcome-based contracts and true partnership, a goal the administration is now pushing through a series of reforms to ensure spending translates directly to increased lethality and deterrence.
How DoD Can Unlock Greater Value Through Increased Industry Engagement
The Department of Defense (DoD) faces a challenge that also marks its greatest opportunity since the end of the Cold War: how to spend record-high budgets to address urgent readiness, modernization, and sustainment challenges during a period of (very fair) heightened cost scrutiny. The path forward is daunting, but it is the challenge itself that provides the solution. DoD and the defense industry are not adversarial parties. On the contrary, they actually share untapped synergies embedded in these intersecting dynamics: historic budgets, transformative requirements, and a cost-aware environment.
The formula should be simple: historic budgets and urgent defense priorities + industry innovation and efficiency = increased readiness, modernization, and cost savings. Execution, however, demands substantive collaboration. These outcomes can be achieved through effective incentives, thoughtful acquisition strategies, clearly defined deliverables, and disciplined lifecycle management.
DOD must get more out of its partnerships with industry. In the area of IT there are clearly opportunities to acquire, implement, and manage these significant investments more effectively by working closely with industry to meet cost, schedule and performance milestones.
I would know. For over 16 years I sat across the table from the government negotiating and delivering billions of dollars in contract value as a Deloitte Consulting Principal. In this role I led engagements that identified hundreds of millions of dollars in potential cost savings for Defense business systems.
I have experienced firsthand that both parties come to the table with the intent to provide optimal value to our warfighters. But good intentions aren’t enough. They also bring to the table organizational and personal metrics that they are incentivized to achieve and the capability and capacity realities of their own organizations. If DOD and industry could discuss, understand, and address these throughout the acquisition and delivery cycle, they could be a force multiplier.
Without acknowledging them, though, these realities are anything but.
Rethinking the Industry Relationship
Two sayings come to mind in this context: “You get what you pay for,” and “Where you stand depends on where you sit.” The government understandably wants cost-effective, on-schedule innovation. Industry, for its part, wants to deliver value with manageable risk, fair margins, and predictable revenue streams. These goals are not mutually exclusive.
The government (and taxpayers) expect increased mission impact, value, and efficiency—especially when spending a trillion dollars. Yet industry can tend to gravitate toward costly bespoke solutions, seeing value in uniqueness. When a requirement looks tailored to a specific vendor or small pool of vendors, the assumption is that value will outweigh price in evaluation. This can sometimes be justified—exceptional solutions deserve a premium. But when the premium is associated with brand or incumbency, rather than performance, the government is often not the beneficiary.
Industry, meanwhile, often feels constrained by contract types and acquisition methods that fail to reward what it sees as innovation and value. They know that delivering their capabilities and value is not a handoff; it’s a partnership. Their success depends heavily on how well government teams acquire, receive, test, field, and maintain industry solutions. Poor lifecycle execution can undo the value of even the best industry proposal.
This is not about assigning blame. It’s about acknowledging that both sides benefit from transparency, clear and executable requirements, realistic acquisition strategies, and predictable markets.
Better Contracts for Mission Outcomes
We are squarely in the Davidson Window in the Indo-Pacific theater. Our Soldiers, Sailors, Airmen, Guardians, and Marines will depend on the capabilities DoD and industry acquire and field in the next few years. Now is the time to improve incentives, delivery partnerships, and acquisition approaches that result in the needed pace of lethality and operational readiness. It is equally time to hold industry more accountable for cost, schedule, and performance outcomes.
Everything starts with the contract. Better contracts begin with better pre-award collaboration. Structured early and transparent dialogue focused on mission needs can lead to acquisition strategies that reflect operational realities. When properly structured, outcome-based contracts shift focus from level-of-effort to measurable mission impact. Incentives should be tied to functionality, availability, operational readiness, or interoperability – not just billable hours.
Industry is not afraid of accountability. It seeks to mitigate risk, especially in areas prone to ambiguity, change, and unpredictability. The government has the tools to manage those risks. They can use contractual incentives to unlock unprecedented innovation, cost control, and impact to speed capacity to the warfighter.
Smarter Acquisition Strategy
The Trump Administration and DoD leaders recognize the urgent need for acquisition reform. A suite of recent Executive Orders, initiatives, and directives are aimed at increasing lethality, deterrence, and readiness for every dollar spent.
–EO 14265 modernizes defense acquisition by accelerating the use of commercial solutions, OTAs, and rapid capabilities models
-A comprehensive review of MDAP is aimed at modernizing defense acquisition and spurring innovation while targeting high-cost or behind-schedule programs for reform or cancellation
-The “Restoring Common Sense to Federal Procurement” EO mandates streamlining of acquisition regulations and prioritizing commercial-market solutions.
-Secretary Hegseth’s memo designates the Software Acquisition Pathway as the default for digital procurements—making way for agile, efficient tech delivery.
-The Department of the Navy’s Innovation Adoption Toolkit is speeding the adoption time of private-sector technologies by limiting the contracting process timeline and allowing smaller companies to bridge the startup “Valley of Death.”
Modular, interoperable, authorized, and secure solutions are critical for improving acquisition outcomes. Bespoke, proprietary, and non-traditional approaches may have value in specific contexts. However, they must be managed thoughtfully to align with broader DoD objectives. The Military Services must empower program managers with the tools, training, contract flexibility, and leadership support to co-create smart, accountable delivery frameworks with industry.
A Call to Action: Build the Right Environment, and Industry Will Deliver
The realities of peer competition, the Davidson Window, and ongoing operational demands in the Middle East implies the U.S. military must possess the means to dictate mission outcomes—not simply react. The mission now is to scale the use of contractual mechanisms and delivery models that allow the government to articulate mission requirements clearly, reward innovation, reduce delivery cycles, and expand interoperability and accountability.
The expertise exists in government and industry. The budget exists. The directives and intent exist. The only remaining variable is how well government and industry work together to deliver the lethality and readiness the DoD desires in today’s dynamic threat environment.
About the Author:
Jonathan Baba served as a Principal at Deloitte Consulting LLP for nearly two decades, where he helped launch the firm’s Navy and DoD practice. He led LMI’s defense market with a “Pentagon to the Pacific” strategy and was awarded the Washington Executive’s 2024 Pinnacle Award for DoD Executive of the year.
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